It should come as no surprise that an innovative city such as Los Angeles has been an incubator for the growth of the gig economy.
The city and its community of business is home to the second-largest population of independent contractors, with more than 400,000 gig workers generating over $18 billion in earnings last year.
But a recent California Supreme Court decision could cause greater uncertainty over how businesses should classify independent contractors.
With more Americans turning to gig economy opportunities than ever before, these cases underscore the need for modernizing workplace policies so they protect workers and allow companies to continue offering flexible work options in a dramatically changing workforce.
The gig economy goes beyond just driving for Uber or Lyft, as independent contractors, freelancers and entrepreneurs are all redefining work in the 21st century. Pricewaterhouse Coopers, for example, recently launched its Talent Exchange Program, which gives businesses access to freelancers on an on-demand basis, allowing enterprises to staff up during busy seasons. As a result, the gig economy is already responsible for an estimated 8.5 percent of all workers in California — with freelancing growing rapidly in Los Angeles, rising nearly 15 percent since 2011.
But as more workers abandon traditional employment for independent gigs, this trend has also raised questions about how to handle benefits for workers in the modern economy, such as access to healthcare or pensions, which are traditionally associated with permanent, full-time employment. Earlier this year, the California Supreme Court ruled on another case examining gig economy employment status – this time concerning a Los Angeles-area GrubHub worker – demonstrating the pressing need for policymakers to update workplace rules.
Gig economy workers overwhelmingly cite flexibility as their rationale for abandoning the traditional workforce. In fact, 85 percent of gig economy workers reportedly chose self-employment to gain greater control of their work schedules. But applying old rules that have long been a staple of traditional employment to new work will limit the flexibility of these options for those who want them.
Along with workers, consumers are also benefiting from a growing and robust gig economy. Ridesharing platforms like Uber, for example, offer trips that can cost half as less than a taxi ride of the same distance in Los Angeles. And for low-income consumers, the availability of these more affordable options can open up access to a world of modern conveniences that would be otherwise unattainable.
However, even though unemployment numbers continue to hit new record lows in California and nationwide, some labor advocates are stalling this new entrepreneurialism by clinging to old policies, such as the AFL-CIO broadly declaring that all workers should be considered employees — even though this approach could limit new job opportunities and strain the economy.
Developing guidelines for the future of work to satisfy labor advocates and all Americans must begin by bringing everyone to the table to develop the rules for the modern workforce — from labor leaders to tech companies and traditional businesses. Uber CEO Dara Khosrowshahi, for example, signed a letter with labor leaders calling for more portable benefits for workers in Washington state. And in California, members of the state Legislature have advanced proposals that would establish portable benefits for gig companies and address the misclassification issue.
These developments represent a positive starting point for developing modern labor policies that reflect the needs of workers, businesses and consumers in Los Angeles in the 21st century. And it’s how we can avoid a complex web of competing state rules that will stifle growth and ultimately limit gig economy opportunities for the millions of workers who want them.
Joe Rinzel is a spokesperson for Americans for a Modern Economy.
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