The legal status of gig workers in the USA and EU are both complex matter related to the laws. When I start talking to my little AI assistant , it told me these facts about both USA & EU view of the gig workers.

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Okay, let’s break down the complex legal landscape for gig workers in the United States (USA) and the European Union (EU). The core legal issue in both jurisdictions revolves around worker classification: are gig workers independent contractors (self-employed) or employees? This classification determines their access to rights, protections, and benefits.

Legal Issues for Gig Workers in the USA

The US system is characterized by a fragmented legal framework, with significant variations between federal law, state laws, and even different government agencies’ interpretations.

The Core Problem for Gig Workers: Employee vs. Independent Contractor Classification

• Default Platform Position: Most gig platforms (like Uber, Lyft, DoorDash, Instacart) classify their workers as independent contractors. This model minimizes their labor costs as they are not obligated to provide benefits or protections mandated for employees.
• Legal Tests: There isn’t one single, universally applied test. Different laws and agencies use different criteria:
  • Internal Revenue Service (IRS): Uses common law rules focusing on behavioral control, financial control, and the nature of the relationship (written contracts, benefits, permanency). Primarily for tax purposes.
  • Fair Labor Standards Act (FLSA): Uses the “economic realities” test to determine employment status for minimum wage and overtime purposes. It looks at factors like the degree of control the employer has, the worker’s opportunity for profit or loss, the worker’s investment, the permanence of the relationship, the skill required, and the extent to which the work is integral to the employer’s business. The Department of Labor (DOL) issues guidance and rules on this, which can change with administrations. As of early 2024, a new DOL rule took effect making it generally harder for companies to classify workers as independent contractors under the FLSA, emphasizing the “economic realities” and totality of circumstances.
  • National Labor Relations Act (NLRA): Governs unionization and collective bargaining. The National Labor Relations Board (NLRB) uses a common-law agency test, often focusing heavily on the degree of control. Independent contractors do not have the right to unionize under the NLRA. NLRB interpretations also shift with administrations.
  • State Laws: Many states have their own tests. The most notable is the “ABC Test,” used in states like California (via AB5, though modified by Prop 22 for certain app-based drivers), Massachusetts, and New Jersey. To classify a worker as an independent contractor under the ABC test, a business must prove all three of the following:
    • (A) The worker is free from the control and direction of the hiring entity in connection with the performance of the work.
    • (B) The worker performs work that is outside the usual course of the hiring entity’s business. (This is often the hardest prong for gig platforms to meet).
    • (C) The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

Consequences of Independent Contractor Classification of the Gig Workers:

• No Minimum Wage/Overtime: Not covered by FLSA protections.
• No Employer-Sponsored Benefits: No health insurance, retirement plans (like 401k), paid sick leave, or paid vacation mandated by employer relationship.
• No Unemployment Insurance: Typically ineligible for state unemployment benefits if they lose work (though temporary federal programs during COVID-19 made exceptions).
• No Workers’ Compensation: Not covered for workplace injuries.
• No Protection Against Discrimination (Often): Title VII of the Civil Rights Act primarily protects employees, though some states offer broader protections.
• No Right to Unionize: Cannot collectively bargain under the NLRA.
• Self-Employment Taxes: Must pay both the employer and employee shares of Social Security and Medicare taxes.
• Bear Business Expenses: Responsible for their own equipment (car, phone), insurance, maintenance, fuel, etc.

Key Legal and Legislative Battles of Gig Workers:

• California’s AB5 and Proposition 22: AB5 codified the strict ABC test, reclassifying many gig workers as employees. Gig companies funded Proposition 22, a ballot initiative that carved out app-based transportation and delivery drivers, classifying them as contractors but providing some alternative benefits (like a healthcare stipend and minimum earnings guarantee, different from state minimum wage). The legality of Prop 22 itself has faced court challenges.
• Ongoing Litigation: Numerous lawsuits across states challenging worker classification under various laws (FLSA, state wage laws).
• Federal Regulatory Changes: DOL and NLRB rules and interpretations change, creating uncertainty.

Legal Issues for Gig Workers in the European Union (EU)

The EU has traditionally seen more worker-protective labor laws than the US, but the approach to gig work was initially fragmented across Member States. However, the EU has taken significant steps towards harmonization.

The Core Problem: Mis-classification and Precarious Work of Gig Workers

• Similar to the US, platforms often classify workers as self-employed to avoid obligations.
• Concern over “bogus self-employment” where workers are labeled independent but operate under conditions very similar to employees.

EU Directive on Platform Work (Key Development):

• In recent years, the EU negotiated and approved a Directive aimed at improving the working conditions of platform workers. Member States are required to transpose this Directive into their national laws (usually within a 2-year time-frame from final approval).
• Legal Presumption of Employment: This is the cornerstone. The Directive establishes a legal presumption that platform workers are employees, not self-employed, if their relationship with the platform meets certain criteria indicating control and subordination. Typically, if gig worker met 2 or more indicators , the law presume employment relationship. Indicators , often including things like setting pay, supervising performance electronically, restricting working hours/availability, setting rules on appearance/conduct, restricting ability to work for others.
• Reversal of Burden of Proof: If the presumption applies, it is up to the platform to prove in court or before administrative bodies that the worker is genuinely self-employed according to national law definitions, rather than the worker having to prove they are an employee.
• Algorithmic Management Transparency: The Directive includes groundbreaking rules requiring platforms to be transparent about how they use algorithms in monitoring, evaluation, task allocation, and setting pay. They must inform workers about automated systems, and crucial decisions (like account suspension) must have human oversight. Workers have the right to contest automated decisions.
• Data Protection: Reinforces GDPR rights in the context of platform work data.

Consequences of Gig Workers Employee Classification (under EU/National Laws):

• Minimum Wage: Entitlement to national or sectoral minimum wages.
• Working Time Protections: Limits on working hours, rights to rest periods and paid annual leave (under the Working Time Directive).
• Social Security: Access to statutory social security systems (pensions, sickness benefits, unemployment benefits, etc.), often requiring employer contributions.
• Health and Safety Protections: Coverage under workplace health and safety regulations.
• Protection Against Unfair Dismissal: Rights against arbitrary termination of the working relationship.
• Collective Bargaining Rights: Right to join trade unions and engage in collective bargaining. The EU Commission has also issued guidelines clarifying that genuinely self-employed sole traders can collectively bargain in certain circumstances without breaching competition law, addressing a hurdle faced by independent workers.

National Variations and Implementation:

• While the Directive sets a minimum standard and framework, the exact definitions of “employee” and the specific implementation details will still vary somewhat between the 27 EU Member States.
• Some countries (like Spain with its ‘Rider Law’) had already implemented legislation creating a presumption of employment for specific sectors (like food delivery riders) even before the finalize of the EU-wide directive.

Summary Comparison Gig Workers in USA and EU:

• USA: Characterized by a fragmented system, multiple legal tests, significant state variations, ongoing legal battles, and regulatory uncertainty. The default tends towards independent contractor status unless successfully challenged legally or legislatively (like AB5, though often countered by industry lobbying like Prop 22). Federal rules are subject to change with administrations.
• EU: Moving towards harmonization with a strong focus on worker protection via the Platform Work Directive. Key features include a legal presumption of employment based on control criteria, reversal of the burden of proof onto platforms, and pioneering rules on algorithmic transparency. The general direction is towards classifying more gig workers as employees, granting them access to established labor rights and social protections, though national implementation is key.

Both regions grapple with how traditional labor law frameworks apply to new models of work facilitated by digital platforms, but the EU is pursuing a more standardized and worker-protective regulatory solution compared to the more litigious and varied approach in the US.

Lot of points that say the very important need of legal protection for both parties.

More resources

• New California Employment Laws for 2020 | JD Supra
• California Has Now Enacted Controversial Law Making Use of Independent Contractors Harder: What Should Employers Do in Response? | Wilson Sonsini
• California Assembly Bill 5 (2019) – Wikipedia
• Platform workers and social security: Recent developments in Europe
• More about online work blogs in the archives of NozyCat blog