The Gig Economy: How Should Regulators Respond?

By Geoff Mason.

While you might not have heard the term before, the “gig economy” has grown tremendously over the past decade or so. The broader concept of the gig economy is foreign to most, but the companies that comprise it are familiar to many. Uber, Airbnb, and Grubhub are all examples of companies operating in the gig economy, which is characterized by businesses that enter into short-term contracts with workers who are paid for “gigs” they perform. While the rise of the gig economy brings with it many benefits, it also poses complex and challenging questions for regulators.

From an employment law perspective, the main concern with the gig economy is that workers within it are most often classified as “independent contractors.” In British Columbia, independent contractors stand in contrast to employees, and do not enjoy many employment benefits and protections that many of us take for granted. For example, independent contractors are not entitled to notice of dismissal, pay in lieu of notice, or employment insurance contributions.

The issue of worker classification in the gig economy is magnified when one considers current economic trends regarding jobs generally. A 2016 study conducted by the Brookfield Institute for Innovation and Entrepreneurship found that 42 per cent of the Canadian workforce is at a high risk of being displaced by automation over the next two decades. Salespeople, administrative assistants and cashiers make up a large portion of these positions, which are traditionally filled by employees, not independent contractors. Further, the gig economy is also directly replacing many traditionally employee-based jobs. For example, companies such as DoorDash may make delivery drivers a thing of the past before this decade is over.

This means that there is a growing number of people in need of unemployment financial assistance and a shrinking number of people entitled to it. Those ingredients do not mix well.

Understanding that the gig economy poses serious problems is just part of the equation. The more challenging task is determining how to respond.

One might ask why we don’t simply extend employee benefits to gig economy workers. That seems like the simplest way to address these workers’ lack of employment protections. However, it must also be understood that regulating this business sector requires a balancing of interests. While the gig economy is problematic in many ways, it is also very important in others.

For one, many of us might be dependent on gig economy jobs in the near future. As mentioned, jobs in general are in steep decline. The gig economy provides a vital source of labour at a time when it is needed desperately. Companies in the gig economy are unlikely to set up shop in a jurisdiction that will add millions of dollars to its budget in costs for employee protections. The gig economy must be regulated in a way that protects its workers, but does not discourage companies from setting up shop.

Further, many companies in the gig economy are also fledgling start-ups. Operating in a jurisdiction that requires compliance with traditional employee protections may simply be cost-prohibitive for some. Regulation might not just discourage gig economy companies from coming to Canada, but simply make it impossible.

Another issue will be developing a blanket set of regulations that applies broadly to the entire gig economy. There is a wide variety of companies within this sector, and regulations that make sense for some may not make sense for others.

When one considers how to regulate the gig economy, it quickly becomes apparent that it will be a puzzling balancing act requiring compromise and ingenuity. It will be an exceptionally challenging task. However, the underlying economic trends cannot be denied. While what needs to be done may not be readily apparent, it’s obvious that something does.

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