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Stand back, the FTC is here to police gig work

If only the US government had, like, a Dept of Labor or something

The US Federal Trade Commission on Thursday fired its first warning shot at companies that exploit gig workers.

The FTC is concerned that gig workers – who typically log into an app to be assigned paid tasks, such as delivering food – haven't been treated fairly by businesses. Perish the thought.

Gig workers, classified mostly as independent contractors rather than employees, allow companies to avoid paying for employee benefits, which is great for corporate profit but harmful to the people that generate those profits.

"No matter how gig companies choose to classify them, gig workers are consumers entitled to protection under the laws we enforce," said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, in a statement.

"We are fully committed to coordinating our consumer protection and competition enforcement efforts within the FTC as well as working with other agencies across the government to ensure gig workers are treated fairly."

It's a telling quote because it signals that, whichever way app-directed people are classed, they are users of a software product, typically, and that puts them under the FTC's shadow, or so the agency's logic goes.

Wage to go, dude

According to a 2020 study from the Economic Policy Institute, a labor-oriented think tank, "about one in seven gig workers (14 percent) earned less than the federal minimum wage on an hourly basis."

The study also found "three out of every five gig workers (62 percent) lost earnings because of 'technical difficulties clocking in or out,' compared with 19 percent of W-2 service-sector workers."

Misclassifying employees as independent contractors has long been a cost-saving strategy in traditional industries. But Uber about a decade ago popularized the gig work arrangement in the tech sector by showing it could work at scale.

The arrangement – described as "wage theft" when litigated – has since been embraced by a variety of online service companies and continues to be a matter of contention in court.

California enacted AB 5 in 2019 to classify gig workers as employees. When a federal judge refused to block the law, Uber and Postmates appealed. Simultaneously, gig work companies spent some $20 million to promote the passage of California Proposition 22, which exempted gig workers from AB 5. But a judge declared the voter-endorsed state proposition invalid.

In March, Washington State lawmakers passed a bill allowing gig workers to be classified as independent contractors while also giving them some benefits. Meanwhile, voters in Massachusetts this summer rejected a similar ballot measure backed by Uber and Lyft.

These issues are still being hashed out in New York. And earlier this week, Uber agreed to pay $100 million in back taxes in New Jersey for misclassifying drivers as independent contractors.

The status of gig workers is currently being considered by the US Ninth Circuit Court of Appeals (Lydia Olson, et al v. State of California, et al). And the appeals court decision looks likely to end up in the US Supreme Court whichever way the appellate ruling goes.

The Chamber of Progress, a business-oriented advocacy group, argues that Americans want to participate in gig work for the flexibility, not for wages and benefits alone. The FTC says 16 percent of Americans report income from an online gig platform.

Millions of Americans choose gig work because of its flexibility and how it's helping them make ends meet in the face of inflation

“The thrust of the FTC’s policy statement is that gig work is inherently unfair, but millions of Americans choose gig work because of its flexibility and how it's helping them make ends meet in the face of inflation," said Chamber of Progress CEO Adam Kovacevich, in a statement.

“While going after tech might score political points, the FTC risks harming millions of gig workers by flirting with employment law proposals that even the Department of Labor hasn’t touched.”

Companies using gig workers have sold freedom from benefits and from job security as freedom to set your own schedule, which they then try to influence with algorithmically-driven incentives to ensure worker availability that matches customer demand. The EPI argues, "'gig work' is a misnomer that helps companies propagate the myth that these workers have more independence and control over their work than they actually do."

The FTC's policy statement addresses the pretense of gig work freedom and flexibility directly. "Gig companies that classify their workers as independent contractors may seek to retain control over their workforce while simultaneously shifting costs and risks onto workers," the FTC document says, indicating that the watchdog intends to hold companies accountable for misstating the scope of gig work and the rules applied to it.

The agency, today chaired by Big Tech arch-critic Lina Khan, said it intends to look for: deceptive or unfair pay practices; undisclosed costs or terms of work; and unfair or deceptive practices by an automated boss – e.g. algorithmic abuse. It also says it will keep an eye out for unfair contractual terms, unfair competition, wage fixing, and market monopolization.

Prepare the popcorn for the show to come. ®

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