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2 Million Jobless Motorbike Drivers Show Covid’s Toll on Indonesia’s Gig Economy

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Millions of sidelined motorcycle taxi drivers in Indonesia are bracing for a long recovery as the country’s coronavirus outbreak shows no signs of abating.

The taxis — known locally as “ojek” — are a fixture in congested Indonesian cities where transport infrastructure is limited and gridlock is among the worst in the world. They’re also the inspiration for Indonesia’s most valuable startup, the ride-hailing and food-delivery app Gojek.

The ojek drivers are a bellwether for Southeast Asia’s largest economy, as they facilitate consumer spending and business activity. Roughly 40% of the country’s estimated 5 million ojek drivers have lost their jobs in the pandemic. President Joko Widodo has been hard-pressed to tame unemployment and pull the economy out of recession, while keeping a lid on Covid cases that have topped 700,000.

“We pray to God every day that the situation can recover as soon as possible,” said Igun Wicaksono, who heads the industry association Garda in Jakarta. “These are very basic jobs we have.”

Spikes in Covid-19 infections and deaths have ushered in a raft of stricter social-distancing measures this month, threatening to undercut a gradual improvement in ridership since the worst of the crisis. Amid gaps in social-safety nets, drivers are resorting to lower-paying gigs. Wicaksono estimates that drivers are seeing only about half their prior business.

The government is aiming for 5% economic growth next year, hoping that stimulus spending and an aggressive vaccination plan can boost private consumption. The economy is expected to shrink as much as 2.2% this year, Indonesia’s first annual contraction in more than two decades.

Amid gaps in social-safety nets, drivers are resorting to lower-paying gigs that may not be enough to pay down loans they took for their motorbikes, according to Joanna Octavia, a doctoral researcher at the U.K.-based Warwick Institute for Employment Research.

“For an ojek driver, their most important asset is their motorcycle. It’s the way to get around and the way they generate an income,” she said. “If that was taken away, it would be very difficult for them to start all over again.”

That could have broader implications for the economy, where the ranks of the jobless are growing. The sector has been crucial in absorbing low-skilled labor, Octavia said, since all drivers need is a license and a bike to earn money.

Aid Gaps

Ohci Heavyani, 35, used to earn about 300,000 rupiah ($21.18) a day as a driver for Gojek. A mother of two and her family’s breadwinner, she works full time and her pay is well above Jakarta’s minimum wage.

Heavyani currently makes about seven trips a day, mostly to deliver food or parcels. That’s up from almost zero at the height of Indonesia’s lockdown, but still a fraction of the 20 daily trips she used to make.

With only a one-time assistance of food and cash vouchers from Gojek, Heavyani has had to slash expenses and borrow money from friends and family to make ends meet.

READ MORE: Covid Has Wiped Out t he Economic Dreams of an Asian Generation

“A lot of my driver friends are selling food or stuff to generate other income,” she said. “They usually use the government social-assistance money as capital, but I don’t qualify for that.”

©2020 Bloomberg L.P.



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2021 01 20 US DOL Issues Final Rule to Simplify Analysis of Workers in Gig Economy

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A critical and growing issue facing gig economy platforms and other similar business models is the failure of existing laws to reflect the realities of a modern, adapting workforce. In response to calls for action, the United States Department of Labor recently published a final rule providing a simplified framework to determine if a worker is an “employee” or an “independent contractor” under the Fair Labor Standards Act (FLSA). The final rule, scheduled to take effect on March 8, represents the latest DOL endorsement of the gig economy platform model.

Background

In its final rule, the DOL observed that the FLSA does not define the term “independent contractor.” Instead, the DOL long ago adopted the economic realities test to determine proper worker classification. The economic realities test ultimately evaluates the extent of a worker’s economic dependence on the putative employer: the more dependent the worker is on the business, the more likely he or she could be considered an employee of that business.

The DOL noted that there has been significant confusion regarding the meaning of economic dependence and increasing legal uncertainty against the backdrop of increasingly flexible work arrangements. The DOL therefore promulgated the final rule to provide greater clarity on its own worker classification test under the FLSA.

DOL provides five factors to determine a worker’s ‘economic reality’

In its effort to clarify the confusion caused by the ever-changing meaning of the “economic reality” of a worker’s engagement, the DOL provided five factors to assess a worker’s economic dependence. Although the factors below are not exhaustive, and no single factor is dispositive, the DOL has clarified that the first two factors “are the most probative as to whether or not an individual is an economically dependent ‘employee.’” If these two factors point to the same conclusion, the remaining three factors need not be analyzed in making the classification determination.

  1. The nature and degree of the worker’s control over the work. This factor examines whether the worker exercises substantial control over key aspects of the performance of the work, such as scheduling the hours worked, selecting projects and/or being able to work for competing companies. The DOL noted, however, that even if a business required a worker to comply with specific legal obligations – such as satisfying health/safety standards and carrying proper insurance, or contractually agreed-upon deadlines or quality control standards – this alone would not constitute “control” for the purpose of this factor.
  2. The worker’s opportunity for profit or loss. This factor focuses on the extent of the worker’s opportunity to earn profits or incur losses based on (i) his or her own managerial skill, business acumen or judgment, and (ii) management of his or her investment in or capital expenditure on helpers or equipment or material to further his or her work. By contrast, if a worker “is unable to affect his or her earnings or is only able to do so by working more hours or faster,” the more likely he or she is classified as an employee under the FLSA.

If these first two factors conflict, however, the following three remaining factors can serve as further guideposts for proper classification.

3. The amount of skill required for the work. This factor examines whether the individual’s work requires specialized training or skill that the business does not provide.

4.The degree of permanence of the working relationship. This factor examines whether the relationship is impermanent (i.e., finite or sporadic) or permanent (i.e., indefinite or continuous). If a worker’s engagement falls into the former category, this would be indicative of an independent contractor relationship.

5. Whether the work is part of an “integrated” unit of production. This factor focuses on the extent the work is a component of the business’s “integrated production process” for a good or service. Significantly, in incorporating this rule, the DOL rejected the prior test’s assessment of a worker’s “integrality” – which focused solely on a worker’s “importance” or “centrality” – because it found that identifying the “‘core or primary business purpose’ is not a useful inquiry in the modern economy.” Instead, under this factor, the worker is not likely to be found to be an employee if they are not “integrated” into the business’s production process, which is composed of operational subparts working in coordination towards a “specified unified purpose.”

Also noteworthy, the DOL announced that offering health, retirement and other benefits to independent contractors in and of itself is not “necessarily indicative of employment status.” However, the DOL cautioned that offering the same benefits to both independent contractors and employees poses misclassification risks.

Will the final rule take effect?

This remains to be seen. While the final rule is scheduled to go into effect on March 8, 2021, the future of the final rule remains uncertain because the incoming Biden administration is expected to issue a directive to all agencies to delay the effective date of any pending regulation that is not yet effective. Further, under the Congressional Review Act, the Democratic majority in the Senate and House could rescind the final rule with presidential approval.

What does this all mean?

Unlike the DOL’s 2019 Opinion Letter supporting the gig economy, if implemented, the final rule constitutes binding authority that stands to alter how the DOL and adjudicative bodies analyze and ultimately classify workers under the FLSA. Although its practical impact can be limited by state laws with different and potentially more rigorous standards, the final rule represents another positive development for gig economy platforms and others businesses hampered by worker classification tests that fail to reflect, as the DOL describes it, the modern economy.

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The gig economy – a new category of worker on the horizon?

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Over five years ago, in 2015 we wrote a thought piece about the “gig economy” and where it might be headed. Given the gig economy was then only emerging as a part of the broader economy, the impacts, positive and negative, were not yet known. However, we observed that there was potential for workers and employers to successfully leverage technology as a complement or substitute for traditional ways of working.

In 2017, our colleague Ben Dudley, wrote about the continual rise and development of the gig economy. He observed that employment and industrial laws were slow to catch up with these developments but sophisticated businesses would be looking at their structures and operations to stay ahead of the movement.

Now, we come to the start of 2021.

The global pandemic has put a spotlight on gig work in a real and tangible way. On the one hand, platforms have helped us manage during lockdowns, supporting businesses to pivot to online delivery, providing work and allowing those in self isolation to access necessities. At the same time, tragically, a number of food delivery workers lost their lives on the roads, prompting the New South Wales Government to set up a taskforce to investigate the deaths and assess how to improve the safety of such workers.

The fact that contractors generally do not receive paid sick or carer’s leave was also highlighted in the pandemic response. It was reported that a number of ride-share and food delivery platforms moved to cover their partners’ lost income when required to self-isolate – to the benefit of both the individuals and their communities fighting a highly contagious virus. However, those platforms would understandably have been concerned about providing benefits associated with “employment” to those workers and potentially increasing their risk of misclassification claims.

In short, gig work and platforms are continuing to gain traction as a part of the economy, but governments have only recently recognised that the law must evolve to keep pace with them.

In the Report of the Inquiry into Victorian On Demand Work issued in June 2020, Chairperson Natalie James found a “compelling case for change” in relation to the regulation of gig work. The Inquiry’s recommendations included:

  • codifying work status in the Fair Work Act (rather than relying on “indistinct” common law tests),
  • allowing gig economy workers to bargain collectively with platforms, and
  • providing streamlined advice around work status.

The Victorian Government closed public consultations about the Inquiry’s recommendations in October 2020. It is now considering feedback on the Report.

Where to from here?

The correct classification of gig work is critical for both employers and workers because it determines the application of a broad range of entitlements and benefits. However, that issue is inherently uncertain in “borderline cases” where there are factors pointing in opposing directions.

The Fair Work Act currently applies in the main to employees, but leaves the definition of employee versus independent contractor to the common law. This requires employers to weigh up a series of factors, none of which are conclusive. In one case[1], the application of this multi-factor test resulted in a young backpacker engaged by a labour hire company to work on construction sites in Perth being found to be an independent contractor – an outcome which was queried but not overturned on appeal. One judge who sat on the appeal observed:

“It may be thought that the prevalence of trilateral relationships, the evolution of digital platforms and the increasing diversity in worker relationships has evolved in a way that the traditional dichotomy may not necessarily comprehend or easily accommodate“.

The “traditional dichotomy” between employee and independent contractor in the common law was once described by the High Court of Australia as “too deeply rooted to be pulled out”. However, with the growth of the gig economy and other innovative approaches to work it is now likely that the law will change to (at the very least) allow the provision of employment-like benefits to gig workers. There is a push to take the more radical step of defining “employment” in legislation to expand those rights and protections to gig workers. This would represent a marked shift in the law as we know it. Arguably, it could undermine the value of gig work – to provide workers with greater flexibility than traditional employment (for instance the right to set their own schedule and to accept or reject work). It would be preferable for a national approach to be taken rather than a state by state, piecemeal approach if this can be achieved. Whatever comes next, the gig economy will certainly be one of the most interesting legal and policy challenges for employment and industrial relations in 2021 and beyond.

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Alert: US DOL Issues Final Rule to Simplify Analysis of Workers in Gig Economy | Cooley LLP

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A critical and growing issue facing gig economy platforms and other similar business models is the failure of existing laws to reflect the realities of a modern, adapting workforce. In response to calls for action, the United States Department of Labor recently published a final rule providing a simplified framework to determine if a worker is an “employee” or an “independent contractor” under the Fair Labor Standards Act (FLSA). The final rule, scheduled to take effect on March 8, represents the latest DOL endorsement of the gig economy platform model.

Background

In its final rule, the DOL observed that the FLSA does not define the term “independent contractor.” Instead, the DOL long ago adopted the economic realities test to determine proper worker classification. The economic realities test ultimately evaluates the extent of a worker’s economic dependence on the putative employer: the more dependent the worker is on the business, the more likely he or she could be considered an employee of that business.

The DOL noted that there has been significant confusion regarding the meaning of economic dependence and increasing legal uncertainty against the backdrop of increasingly flexible work arrangements. The DOL therefore promulgated the final rule to provide greater clarity on its own worker classification test under the FLSA.

DOL provides five factors to determine a worker’s ‘economic reality’

In its effort to clarify the confusion caused by the ever-changing meaning of the “economic reality” of a worker’s engagement, the DOL provided five factors to assess a worker’s economic dependence. Although the factors below are not exhaustive, and no single factor is dispositive, the DOL has clarified that the first two factors “are the most probative as to whether or not an individual is an economically dependent ‘employee.’” If these two factors point to the same conclusion, the remaining three factors need not be analyzed in making the classification determination.

  1. The nature and degree of the worker’s control over the work. This factor examines whether the worker exercises substantial control over key aspects of the performance of the work, such as scheduling the hours worked, selecting projects and/or being able to work for competing companies. The DOL noted, however, that even if a business required a worker to comply with specific legal obligations – such as satisfying health/safety standards and carrying proper insurance, or contractually agreed-upon deadlines or quality control standards – this alone would not constitute “control” for the purpose of this factor.
  2. The worker’s opportunity for profit or loss. This factor focuses on the extent of the worker’s opportunity to earn profits or incur losses based on (i) his or her own managerial skill, business acumen or judgment, and (ii) management of his or her investment in or capital expenditure on helpers or equipment or material to further his or her work. By contrast, if a worker “is unable to affect his or her earnings or is only able to do so by working more hours or faster,” the more likely he or she is classified as an employee under the FLSA.

If these first two factors conflict, however, the following three remaining factors can serve as further guideposts for proper classification.

  1. The amount of skill required for the work. This factor examines whether the individual’s work requires specialized training or skill that the business does not provide.
  2. The degree of permanence of the working relationship. This factor examines whether the relationship is impermanent (i.e., finite or sporadic) or permanent (i.e., indefinite or continuous). If a worker’s engagement falls into the former category, this would be indicative of an independent contractor relationship.
  3. Whether the work is part of an “integrated” unit of production. This factor focuses on the extent the work is a component of the business’s “integrated production process” for a good or service. Significantly, in incorporating this rule, the DOL rejected the prior test’s assessment of a worker’s “integrality” – which focused solely on a worker’s “importance” or “centrality” – because it found that identifying the “‘core or primary business purpose’ is not a useful inquiry in the modern economy.” Instead, under this factor, the worker is not likely to be found to be an employee if they are not “integrated” into the business’s production process, which is composed of operational subparts working in coordination towards a “specified unified purpose.”

Also noteworthy, the DOL announced that offering health, retirement and other benefits to independent contractors in and of itself is not “necessarily indicative of employment status.” However, the DOL cautioned that offering the same benefits to both independent contractors and employees poses misclassification risks.

Will the final rule take effect?

This remains to be seen. While the final rule is scheduled to go into effect on March 8, 2021, the future of the final rule remains uncertain because the incoming Biden administration is expected to issue a directive to all agencies to delay the effective date of any pending regulation that is not yet effective. Further, under the Congressional Review Act, the Democratic majority in the Senate and House could rescind the final rule with presidential approval.

What does this all mean?

Unlike the DOL’s 2019 Opinion Letter supporting the gig economy, if implemented, the final rule constitutes binding authority that stands to alter how the DOL and adjudicative bodies analyze and ultimately classify workers under the FLSA. Although its practical impact can be limited by state laws with different and potentially more rigorous standards, the final rule represents another positive development for gig economy platforms and others businesses hampered by worker classification tests that fail to reflect, as the DOL describes it, the modern economy.

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