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how the Supreme court ruling will change the gig economy – The Oxford Student

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On Friday 19th February, the Supreme Court handed down its decision in Uber v Aslam and Others. It held that the group of Uber drivers who had applied to the court were “workers” under the Employment Rights Act 1996.

This was not a legal revolution. Nobody familiar with employment law was surprised at the outcome or the court’s reasoning. The judgment engages serious questions about the future of Uber, gig workers and employment rights in general, but this does not mean that unaccountable judges have taken a major decision on the economy. Instead, they applied the current legislation to the facts and came to a unanimous agreement.

This was not a legal revolution.

The reasoning of the Supreme Court was relatively simple. The Uber drivers claimed they should be classified as “workers”. They argued that Uber had sufficient control over various aspects of their work to confer this status. With this classification comes the possibility of important rights including a minimum wage, working time protections and so on. Uber claimed that these drivers were not workers because the platform merely connected drivers to the passengers (in reality, no Uber user would recognise this description).

The court held that Uber had missed the point. The starting point of the question about whether or not the drivers were “workers” was not the contract between Uber and its drivers, but instead to understand the purposes behind the relevant law, namely, the Employment Rights Act 1996. The purpose of the legislation was to protect vulnerable workers from exploitation by granting them certain rights. If Uber’s argument was accepted, it would be allowed ‘to determine for itself whether or not the legislation designed to protect workers will apply to its drivers.’ Allowing Uber to exempt its drivers from statutory rights, conferred by Parliament, would seriously undermine the meaning and efficacy of the legislation.

Bearing in mind the purpose of the legislation and applying it to the facts, it is hard to see how Uber’s denial that their drivers were their workers matched the reality. Whilst it is true that drivers decide when and where to operate, they do not decide:

  1. The remuneration paid to them, which is determined entirely by Uber;
  2. The contractual terms on which they provide their services;
  3. Their ability to accept or refuse requests for rides (once a driver is logged onto the Uber app);
  4. The type of car used, the location at which they pick up passengers and the passengers’ destination.
  5. Whether they can establish a relationship with the passengers with the hope of providing their services in the future.

The opinion of the court was that these factors, among others, meant the drivers were properly classified as “workers” because Uber exercised a degree of control which was not commensurate with them being self-employed.

Whilst the actual decision of the court directly affects only the drivers in the case, it has implications for Uber’s other drivers and for gig economy workers generally. As Jeremias Adams-Prassl has put it, companies have heard, loud and clear, that “you don’t get to choose whether the law applies to you or not”.

The problem Uber now faces is a difficult one. It can change its practice, giving the drivers more control and making them genuinely self-employed. This may negatively impact the current uniform service that Uber offers, and it was this uniform service which partly influenced the court’s decision. The alternative is to alter the contracts between Uber and its drivers so as to conform to the judgment, which will inevitably lead to higher costs. Either way, the current business model of Uber in the UK will have to change and London is currently one of Uber’s relatively few profitable markets.

This will not be an instantaneous overhaul of the gig economy. However… the precedent has been set, the largest taxi-hailing service in the UK has been stunned, and an update to the labour legislation may be needed.

The wider effect on the gig economy further solidifies this judgment as evolutionary and not revolutionary. Workers at other companies will have to apply to the Employment Tribunal to enforce their rights, before waiting for months to receive a judgment that may be appealed. This will not be an instantaneous overhaul of the gig economy. However, Lord Leggatt’s reasoning in the Uber case is clear and it should be easy to apply; the precedent has been set, the largest taxi-hailing service in the UK has been stunned and an update to the labour legislation may be needed. Other companies employing gig workers will have to review their practices and contracts, but whether they pre-empt any litigation and adapt before being told to do so by the courts is another matter.

Amidst the calls for new legislation to accommodate gig workers, it’s important to remember that legislation cannot predict the future. Workers who have uncertain status and uncertain rights have one form of redress: an application to the courts. It is not ‘judicial activism’ for the court to rule on such matters. Any new legislation will also have to be interpreted by the courts and yet more ways of working may develop which operate in the grey area between ‘gig worker’ and ‘self-employed’. The courts, using Uber v Aslam, will not lose sight of the ultimate goal; ensuring that companies cannot duck legislative obligations.

Image credits: Akash Rai on Unsplash

 

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Workers

Amazon.com, Inc. (NASDAQ:AMZN), (DASH) – COVID Relief Bill Could Trigger Larger Tax Bills For Gig Workers

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Gig workers and third-party sellers on e-commerce platforms such as Etsy, Inc. (NASDAQ: ETSY), Walmart Marketplace (NYSE: WMT) and even Amazon (NASDAQ: AMZN) could find themselves with tax issues in 2022 thanks to a change in Internal Revenue Service tax codes contained within the American Rescue Plan Act of 2021.

The $1.9 trillion COVID relief bill that just passed the U.S. House and Senate and is expected to be signed into law by President Joe Biden by this weekend amends Section 6050W of the IRS code to require reporting for any transactions that exceed $600 in gross sales through a 1099-K form.

This change means not only are workers required to claim this income on their taxes (as currently required), but any business that pays them, such as Uber (NYSE: UBER), Lyft (NASDAQ: LYFT), DoorDash (NYSE: DASH) and even marketplaces like Etsy (NASDAQ: ETSY), will be required to submit a 1099-K to the IRS on the individual’s behalf. Under current law, payment organizations must only file a 1099-K form on behalf of a seller when total sales exceed $20,000 and/or total transactions exceed 200 in a tax year.

“Payments made in settlement of third-party network transactions, however, are required to be reported only if the amount to be reported exceeds $20,000 and the aggregate number of transactions exceeds 200 with respect to any payee within a calendar year,” Internal Revenue Bulletin: 2011-23, issued in 2011, says.

“There is a segment of the population that is probably making ends meet and of course they should be aware of their tax obligations, but as they try to cobble together an income, should we be going after these people?” asked Katie Vlietstra, vice president of government relations and public affairs for the National Association for the Self-Employed (NASE).

Vlietstra told Modern Shipper NASE believes all sellers and gig economy workers should be meeting their tax obligations, but the new requirement, which goes into effect on Jan. 1, 2022, could have unintended consequences.

“Every individual should be meeting their tax obligation. They should understand their tax liabilities,” she said. “Our concern is … when you are making big fundamental changes, there isn’t a lot of emphasis placed on the technical changes.”

Vlietstra noted the DoorDash driver who makes money on the weekend to supplement a full-time job.

“Is that their true income [on the 1099-K]? Is that expenses? Do they understand what that means?” she said. “My position on this is maybe $600 is the right amount – we have seen some states that have moved to that reporting level – but there hasn’t been a [conversation with] people who are working in the diversified economy.”

Read: Getting gig workers the unemployment they deserve

NASE will be focusing on education this year to ensure everyone complies with the new regulation, and Vlietstra said it will continue to “voice to Congress that we need to circle back on this.”

“I think there are some unintended grabs that could happen,” she added. “Everyone should be meeting their tax obligations, but if I’m selling my table for $800 more than I paid for it, [do I need to claim that]? Overall, the bill was good. We need to get back to work. We need small businesses to get back to work … but in a massive $2 trillion bill, things get thrown in.”

For businesses, the change is straightforward – they need to monitor and report any income they pay out exceeding $600. That includes online marketplaces that are facilitating these transactions. But for third-party sellers on platforms like Etsy, it gets more complicated, requiring more tracking of expenses as income that may have slipped under the IRS’ radar before may no longer.

“You need to be tracking your expenses and what is a qualified business expense,” Vlietstra said. “Make sure you understand what this really means for your tax exposure. Make sure you are tracking gas and meals and other things. As taxes get more complicated, they may need help doing their taxes.”

There are several open questions, though, Vlietstra said. An example would be an individual who sells tickets on a platform such as StubHub. Is that a business? Does that single transaction, if it exceeds the $600 limit, trigger a 1099-K? What about roommates who may pay each via Venmo for utilities? At the end of the year, those transactions could exceed $600, but should that money be claimed as income? How would the roommates record that on a tax return if Venmo issued a 1099-K? And how does a platform such as Venmo know what should be considered income? The answers to these questions, Vlietstra said, are to be determined, but she is concerned that situations such as this could trigger unnecessary IRS audits.

“I feel like we put our finger in a hole and there are still 500 holes spitting water at us,” she said.

Click for more Modern Shipper articles by Brian Straight.

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Ruling in arbitration case bad news for gig workers – Massachusetts Lawyers Weekly

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A recent decision from the 1st U.S. Circuit Court of Appeals found that a housecleaner who claimed her employer had misclassified her as an independent contractor couldn’t sue because she was bound by a “clickwrap” mandatory arbitration agreement.

The plaintiff in Emmanuel v. Handy Technologies, Inc. had submitted an application through the website of a company that assigns housecleaning jobs to workers and clicked a checkbox agreeing to its terms of use.

She subsequently used the company’s mobile app to accept an independent contractor agreement, which was required for her to be connected with customers.

The 15-section agreement included a mandatory arbitration clause in section 12. That portion was not visible unless the user scrolled down through the entire agreement.

The plaintiff performed between 10 to 20 cleaning jobs for the defendant but stopped working because of payment issues. She then brought a putative class action alleging that she and others had been misclassified as independent contractors in violation of the state Wage Act and the federal Fair Labor Standards Act.

When the defendant moved to compel arbitration, the plaintiff argued that she did not have sufficient notice of the arbitration clause to be bound by it.

But the 1st Circuit disagreed. Applying the standard set forth earlier this year by the Supreme Judicial Court in Kauders v. Uber Technologies, Inc., it concluded that an online contract had been formed because the plaintiff had “reasonable notice” of the terms and made a “reasonable manifestation of assent” to those terms.

The court acknowledged that only a portion of the agreement was immediately visible on the plaintiff’s phone screen, and that portion did not include the arbitration provision. But it took the position that it was sufficiently clear that “additional text further specifying the terms of the Agreement could be viewed by scrolling.”

In doing so, it specifically declined to read Kauders as holding that for a user to be bound by terms visible only through scrolling, he or she must be required to scroll through the full text of the agreement.

The problem with that reading is that it fails to take into account that workers like the plaintiff are largely unsophisticated, low-wage gig workers. They are encountering long, dense agreements like the one in Emmanuel on their phones, which makes thorough review next to impossible. Moreover, they are not in a position to negotiate over the terms of such an agreement.

In fact, in some ways, these workers are more similar to consumers facing “take it or leave it” arbitration provisions than traditional employees.

It’s unfortunate that decisions like this one gloss over that reality.

 

Massachusetts Lawyers Weekly’s Editorial Advisory Board provides knowledge and guidance for the editorials that appear on this page. The board is an advisory panel only, with no official voting or participation record. The input from the board is a tremendous resource to Lawyers Weekly; however, the editorials represent the position of the newspaper and its editorial staff, not the members, nor any given member, of the board. 

BOARD OF EDITORS: Robert J. Cordy, Boston; Sophia L. Hall, Boston; Martin W. Healy, Boston; Hon. Margaret R. Hinkle, Boston; Thomas M. Hoopes, Boston; Regina M. Hurley, Boston; Shiva Karimi, Boston; Hon. Rudolph Kass, Boston; Marsha V. Kazarosian, Haverhill; Andrea C. Kramer, Boston; Renee M. Landers, Boston; Richard L. Levine, Boston; Elizabeth N. Mulvey, Boston; Eric J. Parker, Boston; C. Max Perlman, Boston; Patricia M. Rapinchuk, Springfield; Martin R. Rosenthal, Boston; Jeffrey Sacks, Boston; Carol A. Starkey, Boston

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6 Ways Gig Workers Can Invest for Retirement | Business

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In 2021, you can contribute up to $13,500 if you’re under 50, or $16,500 if you’re 50 or older.

There’s no Roth option, so you’ll be taxed upon withdrawal. There’s also a steep penalty if you need to withdraw your SIMPLE IRA funds within two years of setting up the account: 25%, instead of the usual amount, on top of taxes.

As the employer, you’ll have to contribute to your SIMPLE IRA on your own behalf, as well as for any employee who’s earned at least $5,000 in at least two of the past five years and expects to earn at least that much for the current year. You’ll have to choose one of the following formulas:

  • Automatically contribute 2%.
  • Match 3% of contributions dollar for dollar.

Due to the lower limits and the extra layer of rules, a Solo 401(k) or SEP IRA is typically a better option for solo gig workers. However, if you expand and add others to the payroll, a SIMPLE IRA may be a good option.

6. Taxable Brokerage Account

If you’ve exhausted your other retirement savings options or you want the flexibility to invest with fewer rules, a plain old taxable brokerage account works. Since you won’t get any tax breaks for investing in a brokerage account, though, aim to max out your Roth IRA or traditional IRA contribution before you go this route.

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