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CARES Act May Propel Gig Economy Employment Law Shift

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Law360 (April 9, 2020, 5:38 PM EDT) —

Kevin Vozzo
Kevin Vozzo

In 2019, California enacted A.B. 5, a controversial law designed to make it more difficult for businesses to classify workers — including those providing services in the gig economy — as independent contractors.

The new law, which went into effect on Jan. 1, codifies and expands use of the so-called ABC test in California to differentiate between employees (who are entitled to certain benefits and other protections under the law) and independent contractors (who generally are not).

Although worker classification has been a polarizing issue for many years, A.B. 5 — in conjunction with the continued expansion of the gig economy — intensified the debate. Soon after California Gov. Gavin Newsom signed the bill into law, businesses in several industries mounted challenges to the statute in court. In addition, lawmakers have since introduced a number of bills seeking to amend the law, or repeal it outright.

Despite the backlash in California, other states may soon follow suit. Indeed, New Jersey considered similar legislation in 2019, and Illinois and New York are expected to do so within the next year.

The motivation behind legislation like A.B. 5 is clear: extending the protections of various labor and employment laws — such as the right to earn minimum wage and overtime, and to collect unemployment insurance benefits — to as many workers as possible. But for many workers and small businesses, the legislation could do more harm than good. 

As the U.S. Department of Labor acknowledged in an April 2019 opinion letter, the gig economy presents workers with unique entrepreneurial opportunities, including the right to simultaneously work on multiple different platforms; to work as much (or as little) as they want; to dictate when, where and how often they work; and to accept, reject and select among the job offers they receive.[1]

As many employees would likely attest, this level of autonomy is irreconcilably inconsistent with an employer-employee relationship. And for many workers, it is precisely the reason they choose to provide services as independent contractors, rather than work in a traditional employment setting.

The coronavirus pandemic has increased the tension between parties on both sides of the debate over worker classification. 

On March 26, for example, the New York State Court of Appeals reinstated a finding from the Unemployment Insurance Appeals Board holding that couriers who complete deliveries arranged through Postmates Inc.’s online platform are employees of Postmates, and as such, are entitled to unemployment insurance benefits under New York state law.[2] 

Although the Court of Appeals did not mention the coronavirus pandemic in its decision, the New York Attorney General’s Office issued a press release noting that the ruling is “particularly relevant today as New Yorkers and Americans across the nation battle the coronavirus disease 2019 … which has resulted in many workers losing their jobs and turning to unemployment insurance benefits to make ends meet.”[3]

In most jurisdictions, courts and government agencies view a business’s extension of benefits (e.g., paid leave, medical insurance, retirement benefits, etc.) to independent contractors as strong evidence of employee status. Accordingly, although businesses may want to provide greater assistance to independent contractors who use their platforms, some may be reluctant to do so solely because of the current legal framework, which many believe has not yet adapted to the modern workplace.[4]

The Coronavirus Aid, Relief, and Economic Security, or CARES, Act, which President Donald Trump signed into law on March 27, could provide insight into how U.S. labor and employment law, as applied to the gig economy, might evolve. 

Notably, the CARES Act provides for enhanced unemployment benefits for both employees and independent contractors. Among other things, the act establishes a pandemic unemployment assistance program, which provides up to 39 weeks of unemployment insurance benefits to workers not otherwise eligible for unemployment compensation, including independent contractors and self-employed individuals, who are unable to work because of COVID-19.

Although the program is temporary, the CARES Act provides independent contractors and other self-employed individuals with a safety net during the pandemic, without jeopardizing their independence and autonomy. 

Voters in California will have an opportunity to nudge California law in a similar direction later this year. In October 2019, a coalition of businesses and drivers announced a ballot initiative designed to preserve certain gig economy workers’ independence, and establish earnings and benefit guarantees.[5] The initiative, known as the Protect App-Based Drivers & Services Act, will likely appear on the California ballot in November. 

Under the proposal, certain app-based transportation and delivery drivers would necessarily qualify as independent contractors under California law, so long as they retain certain freedoms, such as the right to control the days and times at which they make themselves available to perform services.

Notwithstanding their independent contractor status, covered drivers would be entitled to various benefits, including 120% of the minimum wage, 30 cents per mile for automobile expenses (e.g., fuel, and vehicle wear and tear), health care stipends, occupational accident insurance, automobile accident and liability insurance, and protection against discrimination and sexual harassment. In other words, if approved, the initiative would both preserve workers’ independence and guarantee their entitlement to certain benefits. 

The prospect of extending benefits to independent contractors is not a new concept, and lawmakers in multiple jurisdictions proposed bills with similar objectives long before the coronavirus pandemic. However, the pandemic — and the federal government’s decision to temporarily extend unemployment insurance benefits to independent contractors through the CARES Act — may accelerate the rate at which businesses and lawmakers around the country explore alternative approaches to the traditional framework in their respective jurisdictions.

Accordingly, both businesses and workers — many of whom place a premium on the autonomy and entrepreneurial opportunities available to them in the gig economy — should be mindful that changes could be on the horizon.


Kevin R. Vozzo is a member at Epstein Becker Green.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] See U.S. Department of Labor, Wage and Hour Division, Opinion Letter FLSA 2019-6 (April 29, 2019).

[2] See Matter of Vega (Postmates Inc. – Commissioner of Labor), 2020 NY Slip Op 02094 (NY Ct. App. March 26, 2020).

[3] See https://ag.ny.gov/press-release/2020/attorney-general-james-scores-major-win-gig-workers-victory-postmates-case.

[4] For example, the dissenting opinion in Matter of Vega acknowledged that “[w]e need a clear understanding, comprehending the modern realities of our rapidly evolving economy, of who should be an employee and who an independent contractor, including whether work relationships should continue to be measured on that dichotomy. It is past time for the law to reexamine the definition of work and its application to different forms of entitlement and obligation.”

[5] See https://protectdriversandservices.com/.

For a reprint of this article, please contact reprints@law360.com.

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Oxygen chooss CPI for gig economy debit cards

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CPI Card Group Inc. (OTCQX: PMTS, TSX: PMTS) (“CPI” or the “Company”), a payment technology company and leading provider of credit, debit and prepaid solutions, today announced a collaboration with Oxygen, the first digital banking platform tailored to meet the unique needs of the freelance economy.

Oxygen selected CPI to develop its first personal and business debit cards – tapping the Company’s card manufacturing experience and advanced print design services to create a payment product that embodies Oxygen’s unique financial market positioning.

Oxygen provides flexible banking to the millions of U.S. professionals who thrive on multiple income streams, contract work and freelance gigs. The company’s solutions are available through a mobile app that enables a fast, frictionless user experience. Oxygen takes a holistic approach to meeting the financial services needs of independent professionals. In CPI, Oxygen found a card manufacturer that could create a payment solution from end to end. CPI and Oxygen collaborated to develop two packages with clean and crisply-designed vertical cards that arrive nested in interactive packaging. Back-of-card personalization completes the high-end look and feel.

“At Oxygen, we understand that the physical brand experience, – including everything from the card design to the packaging appearance – matters for our creative, tech-savvy clientele. With CPI’s cost-effective scale and design strengths, we were able to deliver a sleek card to customers in a unique, memorable fashion,” said Hussein Ahmed, founder and CEO at Oxygen. “We are pleased to have such a reliable secure card provider and are thrilled to offer customers an eye-catching debit card that echoes their drive, ambition and lifestyle.”

Through CPI’s advanced personalization capabilities and packaging options, financial institutions can develop differentiated card programs that deliver a premium cardholder experience. The Company provides end-to-end support and customizability that allow businesses to create tailored products that bridge the digital and physical worlds for their brands. Additionally, CPI’s innovative manufacturing approach empowers companies to introduce exciting card designs and technology features, which can offer a competitive edge in the pursuit of top-of-wallet status.

“CPI and Oxygen share in being deeply customer-centric in everything we do. We are excited to leverage our manufacturing strengths and high-quality print and design services to achieve debit cards that match the modern, sophisticated aesthetic of Oxygen’s brand and its clients,” said Guy DiMaggio, SVP and General Manager, Secure Card Solutions, CPI Card Group. “We look forward to supporting more fintech innovators and pioneers in creating payment cards that expand the physical aspect of their brands.”  

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How Covid-19 has affected the gig economy in South Africa

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/ MEDIA STATEMENT / This content is not written by Creamer Media, but is a supplied media statement.

A report by The Fairwork Project – a collaboration between various South African and foreign university research units – has found that the non-standard employment status of gig workers during Covid-19 has made them particularly vulnerable during an economic shutdown. However, some gig networking platforms have stepped up to ease the pain.

Fairwork, which draws on the expertise of staff from the universities of Oxford, Cape Town, Western Cape, Manchester, Institute of Information Technology Bangalore in India and the Technical University of Berlin, wrote a report titled Gig Workers, Platforms and Government During Covid-19, which was released in May 2020.

The report looked at gig economy platforms active in South Africa, government responses  regarding informal, freelance or gig economy workers, and actual worker experience surveys. While most platforms regarded workers as independent contracts rather than employees, to their detriment, the report found that gig technology company, M4Jam and SweepSouth actively worked to offset looses of income for contracted giggers.

The report compiled a scorecard which covered principles of fair pay, fair working conditions, fair contracts, fair management and fair representation. The scorecard specifically highlighted pay-related policies, given their importance to gig workers.

The scorecard found that three of the top-ranking platforms – M4Jam, SweepSouth and getTOD – had come up with innovative solutions to the problems their workers faced during Covid-19 and lockdown. M4Jam and SweepSouth were the only platforms to attempt to compensate for gig worker pay loss during lockdown.

“Our survey suggests the majority of gig workers have lost their jobs entirely, while those able to work during lockdown have, on average, lost four-fifths of their income. As a result, many reported that just getting food to eat was their top priority,” the researchers note.

“While [gig economy] platforms have long marketed themselves as facilitators of supplementary income streams, all of this exposes the complete dependency of most workers on their platforms as the basis for their livelihood,” they wrote.

The report stated that gig economy platforms, which operate by connecting jobbers with potential temporary work at corporate entities, should and could do more to help, by such measures as reducing commissions, deferring loans, offering healthcare assistance and sick pay, improving communication and engaging with workers and their representatives more effectively.

Georgie Midgley, CEO of M4Jam, said the report’s finding that inaction on behalf of gig platforms was the norm gave credence to common criticism of the gig economy. “Unfortunately most gig economy platforms live up to negative perceptions about jobber vulnerability. In a country like South Africa where the gig economy can play a vital role in supplementing income and providing much-needed temporary employment, the down side is potential exploitation of workers who do not have the safety net permanent employees have.”

Gig workers have tended to fall between the cracks of government financial relief measures, according to the report, principally because they fall outside the UIF net. “Gig workers have fallen between two stools: able to access neither the [government] support offered to formal employees, nor the support offered to those registered as small businesses. If gig workers are to avoid destitution, government must take further action,” the researchers said.

At the same time, the report said, the value of gig workers to the economy has been underlined by Covid-19 and lockdown. “Delivery services, for example, have been essential to society during lockdown. In the longer term, a legal resolution must be found to rescue gig workers from the employment-status limbo that the pandemic has brought into sharp relief.”

The report found, for example, that both Uber and Bolt ride-hailing services had closed down their local contact centres, “making it harder for drivers to interact with the platforms”. A constant criticism of gig economy platforms is that they simply cannot provide protection of workers’ rights in the same way that the formal economy’s employers do.

With lockdown preventing physical movement of jobbers completing micro-tasks for corporate employers, the report commended M4Jam’s approach of collaborating with one of its clients, Cell C, in rolling out a three-week training initiative that provided payment to workers for completing up to 48 short lessons undertaking via their mobile phones.

This provided further upskilling of contracted jobbers during the down time, and provided an average of R310 per week for those undergoing the training. M4Jam works with corporate clients such as Morecorp, i-People, Twizza, Sereti and more.

The research found that the trends in South Africa broadly reflected gig economy trends around the world, with roughly half of gig workers losing their “jobs” during lockdown. 

“We agree with the report’s findings that if gig economy platforms direct and exercise control over the work given to contracted jobbers, they should go to greater lengths to be responsible for assisting workers in dealing with the effects of Covid-19. This will not only maintain goodwill with contracted workers and ensure livelihoods are not lost – it will also show that the gig economy is a viable long-term alternative for job seekers who cannot get a foothold in the formal economy,” said Midgley.

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Gig economy battle spans unemployment benefits (NYSE:UBER)

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The $2.2T coronavirus relief law enacted in March extended unemployment benefits to previously ineligible groups, like the self-employed and independent contractors.

However, some Uber (NYSE:UBER) and Lyft (NASDAQ:LYFT) drivers are nervous about tapping the program out of fear it would certify them as independent contractors, and undermine their fight to be classified as employees.

While some labor attorneys believe their concern is valid, others think the threat is overblown.

California passed a law last year requiring gig companies to treat independent contractors as employees, and other states, like New York, are attempting to follow suit. California’s AB5 law took effect in January, but is being challenged in court.



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