Regulators around the world are coming for the gig economy

Workers fight back.
Workers fight back.
Image: REUTERS/Fabrizio Bensch
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California’s landmark Assembly Bill 5, which makes it harder for workers to be classified as independent contractors rather than employees, has started to make waves across the state. This past week, a county judge in San Diego noted “the handwriting is on the wall” and ordered the grocery-delivery service Instacart to reclassify 2,000 local workers as employees.

Far from California, there are other recent signals that the vise is tightening for gig-economy companies.

This week, Foodora delivery drivers became the first app-based workforce to unionize in Canada. The Ontario Labour Relations Board ruled Tuesday that Foodora food couriers are dependent contractors, a classification that falls between independent contractors and employees—and gives them the ability to unionize, according to labor officials. “This decision shows that the tide is turning towards justice for thousands of gig workers in Ontario and soon these workers will have the right to their union,” Jan Simpson, national president of the Canadian Union of Postal Workers, said in a statement.

Foodora is based in Berlin and operates in 15 countries. The labor board ruling in Canada comes after Foodora workers in Norway—who are largely part-time employees—formed their first union after a six-week strike in September. The 600 employees involved were demanding higher pay as well as guaranteed compensation for workers’ use of bikes, uniforms, and smartphones.

In Japan, where 3 million workers are estimated to be working as freelancers, UberEats workers unionized last October, with the chairman of the union calling for “safer and more stable working conditions for all platform workers.” Uber said it would locally introduce an injury-compensation program, cover insurance fees, and pay up to 10 million yen ($93,000) in case of death. 

The recent uprising of app-based workers has been brewing for the past couple of years, says Kate Bronfenbrenner, director of labor education research at Cornell University’s School of Industrial and Labor Relations, where she researches unions in the global economy. She says workers tend to mobilize in areas where legislation is more progressive or where there’s already high union density, often with higher percentages of workers of color.

“AB5 happened because there was all this activity out there,” Bronfenbrenner says. “And so many times, unions think, ‘If we just wait for labor law, we have to wait for labor law reform before we can organize,'” she says.

But they don’t necessarily have to wait. The Foodora workers in Ontario, for example, held a union vote last August. (The results were sealed pending the labor relations board ruling and have not yet been disclosed.) 

Meanwhile, back in California…

AB5 is heralded as a big win for California workers by labor advocates, as it could push on-demand companies to provide benefits like a minimum wage and workers’ compensation. But that would be costly to the companies, many of which are still losing money.

Uber, Lyft, and Doordash have pledged $90 million for a ballot initiative this coming November to win an exemption from the legislation. Their alternative, the companies say, would preserve worker flexibility while forcing concessions on minimum wage standards, health benefits, and collective-bargaining rights.

While the ballot fight plays out, California courts are taking their cues from the legislature that passed AB5, from the governor who signed it, and from the state supreme court’s 2018 decision in Dynamex Operations West, Inc. v. Superior Court, which set precedent for how employers should determine whether workers are really contractors or full-time employees.

“The policy of California is unapologetically pro-employee (in the several senses of that word),” San Diego Superior Court judge Timothy Taylor wrote in his ruling in the Instacart case. “While there is room for debate on the wisdom of this policy, and while other states have chosen another course, it is noteworthy that all three branches of California have now spoken on this issue.”

Instacart has long faced questions about its labor model. Last year, the company was found cutting into workers’ wages by using customer tips to subsidize the fees paid to drivers. It was a tipping structure used also by DoorDash and Amazon until widespread criticism pressured the companies to modify how they handled tips. In a February blog post on Medium, Instacart CEO Apoorva Mehta said the company will revamp its pay structure. 

Uber, meanwhile, has been making changes to its app that underscore the view that its drivers are contractors and not employees. For instance, in California, a “marketplace fee” charged to riders is not shown to drivers, suggesting a separation between drivers and the relationship between Uber and its customers. (In other states, the fee is visible on drivers’ receipts.)

Over the years, Uber has shown a willingness to engage in regulatory battles—but it isn’t always successful. For example, its drivers have already been recognized as employees by UK and French courts