US Treasury Weighs in on ‘Gig Worker’ Status Debate

The U.S. Treasury published a report on Thursday (April 7) titled “The State of Labor Market Competition” that summarized the impact of uncompetitive firm behavior in labor markets. The report discusses how excessive concentration in the market, non-compete agreements or the misclassification of workers may reduce wages and workers’ benefits.

The report ends with some proposed legislation and enforcement actions that the Federal Trade Commission (FTC) and the Department of Justice (DOJ) will take or have taken to improve competition in labor markets.

One of the companies’ practices under scrutiny is the misclassification of workers. This is when a worker should be classified as an employee, but it is classified as an independent contractor. In view of the Treasury, “the ability of a firm to misclassify workers without successful pushback from employees (who clearly would have an incentive to not be misclassified) can itself be viewed as a demonstration of the market power firms have over workers.”

Worker misclassification has garnered particular attention around so-called “gig workers.” Uber and Lyft have been embroiled in heated debates and judicial battles all over the world to define the classification of their drivers. Recently, Washington Governor Jay Inslee signed a new law governing ride-hailing drivers that provides them with additional rights such as sick pay and minimum pay guarantees based on the time and distance they spend on each trip. Yet, the law maintains the independent contract status of drivers in the state. Interestingly, the Treasury cited a 2018 study in Washington state to justify the need to act in this space. According to the report, “the proportion of employers that misclassify at least one of their workers almost tripled between 2008 and 2017 (from around 5 percent to 14.4 percent).” But if a firm misclassifies some of their workers, they tend to misclassify as much as 10% to 25% of their workforce.

The Biden administration is looking into different ways to reduce the misclassification of workers, particularly for gig workers. One of the most recent interventions was at the consultation launched by the National Labor Relations Board (NLRB) about whether to change the standard for determining the independent contractor status of workers. The DOJ filed an amicus brief in February to “support clarifying the NLRB’s definition of “employee.” The filing didn’t go as far as suggesting that the standard should be changed or reverted to the previous standard, but it suggests that more should be done to protect workers’ rights in the rise of the so-called “gig economy.” It said, “The Division believes that the NRLB is in a position to better protect both labor market competition and the welfare of workers by adopting a sound, up-to-date, consistent approach to worker classification that adequately protects workers’ rights to organize.”

The Treasury report also suggests that the agencies, DOJ and FTC, will continue to seek opportunities to provide guidance to courts in cases that implicate the antitrust exemptions that protect labor organizing. This includes cases where firms are classifying workers as non-employees, depriving them of certain protections that only apply to employees.

Additionally, besides the enforcement actions and the amicus brief in courts, DOJ and FTC may also consider updating their guidance in areas where people may not be interpreting correctly the agencies’ past guidance in ways that are “insufficiently protective of workers’ access to robust, competitive labor markets.”

The report includes broad policies rather than specific rules or actions to clarify the status of gig workers, but the report comes at a relevant moment because the NLRB may take a decision regarding the standard of independent contractors by the end of April or beginning of May.

Read more: Federal Regulator Launches Consultation to Reconsider Gig Workers Status