The Federal Trade Commission adopted a new policy Friday that will “crack down” on companies taking advantage of their gig workers, according to an FTC press release. The policy aims to protect gig workers from deception about pay or benefits, diminished bargaining power, and a highly competitive market.
Gig work is an umbrella term for any independent contractor, online worker, or temporary worker who enters into a contract with an on-demand employer for any gig that might arise—hence the name. That spans from Uber and Lyft drivers to freelance writers, to household cleaning services, to Grubhub delivery drivers and Amazon Flex workers.
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“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. “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.”
According to the policy report, 16 percent of Americans earn money through a gig company. Another report cited states that “more than half of gig workers say the money they earn is essential or important for meeting their needs” (in the early days, Uber often pitched itself as a good way to make money on the side.) A third report cited notes that many gig workers come from communities of color. The report predicts that the gig economy alone will generate $455 billion in annual sales in 2023.
On-demand companies that hire gig workers often misrepresent how much freedom a worker will have, leading to misconceptions about the job, the report states. “These companies often categorize their workers as independent contractors,” it reads. “Yet in practice these firms may tightly prescribe and control their workers’ tasks in ways that run counter to the promise of independence and an alternative to traditional jobs.”
“This tension has contributed to litigation across the country over allegations that gig workers are being misclassified as independent contractors rather than employees,” it continues.
Because of that misclassification, gig workers have almost no bargaining power, and often no legal protections to organize, which allows companies to take advantage of them however they please.
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A highly competitive gig market also leads to reduced choice of employment for workers, potentially forcing them into dangerous or coercive situations. The policy report states that any unsubstantiated claims made by companies about pay or benefits may violate the FTC Act and trigger civil penalties. Any additional deceptive claims about the terms of employment, it states, might also violate the Act.
The policy hopes to also combat unlawful restrictions that employers might place on workers. “Gig companies using artificial intelligence or other advanced technologies to govern workers’ pay, performance, and work assignments are still required to keep promises they make to workers,” the press release states. The policy will also police unfair competition made by employers that would harm workers.
