by on 
By Jeremy Pilaar*
Earlier this month, Uber and Lyft drivers across the United States and the world went on strike. Despite facing immense barriers to organizing, thousands closed their apps and took to the streets to demand fair pay and benefits. The actions were long overdue. The companies are collectively valued at over $80 billion. Yet more than half of American Uber and Lyft drivers earn below their state’s minimum wage. Only a third of what passengers pay ends up in drivers’ pockets.
The unrest was the latest consequence of a growing trend toward precarious work. As I explain in a recent article in the Journal of Law and Policy, the rise of atypical employment has wreaked havoc on labor markets around the globe. Most developed countries’ worker protections were enacted in the mid-twentieth century, when a majority of laborers enjoyed stable jobs with good pay and benefits. Since the 1980s, however, the nature of work has transformed. Part-time, temporary, contract, and independent jobs have come to make up a significant proportion of overall employment. As non-standard work has proliferated, it has jeopardized millions of families’ income security.
The gig economy presents a particularly stark challenge to traditional social safeguards. Companies like Uber and Lyft classify their workers as independent contractors rather than employees. This renders gig workers ineligible for a wide range of government protections, including the minimum wage, unemployment insurance, and workers’ compensation.
Surprisingly, my research shows that these gaps persist regardless of how hard a country has previously tried to decouple living standards from market participation. While France, for instance, has historically featured some of the world’s most robust labor rights and welfare institutions, the country’s failure to update its laws has left the drivers who ensure Uber’s success almost as insecure as in the laissez-faire United States. This indicates that the gig economy embodies a particularly forceful assault on established employment and social policies.
Fortunately, my findings also suggest there is reason for hope. Comparative legal theory has heretofore emphasized that the United States is more consumerist than it is producerist—privileging low consumer prices over producers’ welfare. Yet an unusual pattern has emerged in recent years: against all odds, gig workers and their advocates have been pushing American law in a distinctly producerist direction. State labor commissioners have deemed rideshare drivers employees rather than independent contractors; state and local legislators have imposed regulations aimed at fostering competitive parity between Uber and traditional taxi services; and the private bar has mounted an increasingly vigorous challenge to the company’s employment practices.
Why the gig economy has produced a more powerful legal backlash than the ascent of other forms non-standard work is still unclear. The mobile apps that gig economy juggernauts rely on may make their business models uniquely visible. It may also be that gig workers face financial insecurity and safety net exclusions so severe that they have little choice but to aggressively assert their rights before courts and legislatures. Whatever the reason, their efforts are starting to bear fruit.
There is no question that gig workers and their advocates continue to face strong headwinds. Uber and Lyft command armies of lobbyists that have helped enact laws favorable to them throughout the country. The Trump administration has also advanced the companies’ cause. In April, the U.S. Department of Labor issued a legally flawed “opinion letter” arguing that workers at an unnamed “virtual marketplace company” were independent contractors—suggesting the same should be true for ridesharing applications. The National Labor Relations Board published a similar memo last week, concluding that Uber drivers are independent contractors exempt from federal protections for union organizing and other collective action.
Nevertheless, courts are beginning to side with non-standard workers. In April 2018, the California Supreme Court issued a landmark ruling in Dynamex Operations West, Inc. v. Superior Court, which ushered in a more worker-friendly test to determine if a person is an employee or an independent contractor. While the old test looked to a convoluted set of factors to determine whether the employer exerted control over the worker, the new inquiry asks whether the worker performed a job that falls within the “usual course” of the hiring entity’s business. Just as importantly, the Court shifted the burden of proving that a worker should be classified as an independent contractor to the employer.
Dynamex makes it much more difficult for gig economy companies to claim that their workers are independent contractors for the purpose of minimum wage and benefit laws. The idea that Uber drivers do anything other than forward the platform’s mission of efficient transportation would likely strike most people as ludicrous. Indeed, as the New York Times reported when Dynamex came out, the “decision could eventually require companies like Uber, many of which are based in California, to follow minimum wage and overtime laws and to pay workers’ compensation and unemployment insurance and payroll taxes, potentially upending their business models.”
Though Dynamex has so far spawned relatively few lawsuits—no doubt because the California Legislature has yet to weigh in on the decision—its effects are already being felt. Two weeks ago, the Ninth Circuit Court of Appeals entrenched the decision by holding that Dynamex retroactively subjects employers to liability for misclassifying their employees. As veteran labor and employment lawyer Michael Rubin underscored, the cases the court cited in support of its opinion “make clear that gig economy companies like Uber and Lyft face an uphill battle in asserting that their business is their app, rather than providing rides to customers.”
Public law enforcers have also begun investigating major gig economy players for potential legal violations. For instance, shortly after Dynamex came out, San Francisco City Attorney Dennis Herrera subpoenaed Uber and Lyft for driver classification, pay, and benefits records. The accompanying press release cited “the California Supreme Court’s decision that companies must affirmatively prove a worker is an ‘independent contractor’ before denying that person wages and benefits guaranteed to California employees.” Herrera stressed that “[t]he California Supreme Court has spoken on the definition of ‘employee’ in a way that directly affects San Francisco’s worker protection laws” and that his office will not “turn a blind eye if companies in San Francisco deny workers their pay and benefits.”
Finally, analysts should not underestimate the progress that this month’s strikes represent in and of themselves. As employment law scholar Veena Dubal eloquently put it, the actions were “a huge, unprecedented victory for service workers in the on-demand economy. Politicians (including presidential candidates), consumers (even those in wealthy Silicon Valley suburbs!), civil rights advocates, labor organizers, and drivers around the world stood together in coordinated, organized direct action”—an unimaginable outcome just a few years ago.
Consumers and policymakers have begun to recognize the need to treat the people who power the gig economy with dignity. The laws that could make that vision a reality may be closer at hand than we think.
* Jeremy Pilaar is the SFALP Fellow and Lecturer in Law at Yale Law School.