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An Early Holiday for Gig Workers: SEC Proposes to Expand Ability of Companies to Grant Equity Compensation to Gig Economy Workers | K&L Gates LLP




On 24 November 2020, the Securities and Exchange Commission (SEC) proposed rules that would meaningfully expand the ability of companies involved in the “gig economy” to grant equity compensation to their workers under Rule 701 of the Securities Act of 1933 (Rule 701) and on the Form S-8 Registration Statement (Form S-8).

The proposed rules summarized here were issued in tandem with a second set of proposed rules, issued by the SEC on the same date, that would significantly modernize and simplify the ability of companies to grant equity compensation to their workers under Rule 701 and on Form S-8. Our client alert summarizing those proposed rules may be found here.


By way of background, for companies that are not required to file reports under the Securities Exchange Act of 1934 (i.e., “private” companies), Rule 701 provides a broad exemption from registration for equity compensation granted to employees, consultants, and certain other service providers. For companies required to file such reports (i.e., “public” companies), equity compensation granted to employees, consultants, and certain other service providers may be registered on the Form S-8, a simplified registration form.

Rule 701 is the most prevalent exemption from registration used by private companies for equity compensation granted to their employees and consultants. Similarly, the Form S-8 is the most common registration statement used by public companies for equity compensation granted to their employees and consultants.

Proposed Rules

In recent years, practitioners have raised concerns that, by their terms, Rule 701 and the Form S-8 are not available for equity compensation granted to “platform workers”—individual workers who use a company’s internet or other technological platform to provide work to end users other than the company. One common example of a platform worker is an individual worker who uses an app to provide riding services to third-party riders. Platform workers are also prevalent in businesses involving food delivery, household repairs, dog-sitting, and tech support.

In response to these concerns, the proposed rules would amend Rule 701 by adding a temporary rule, effective for five years, allowing private companies to use Rule 701 for equity compensation granted to platform workers. In order for a private company to avail itself of this proposed rule, the following conditions must be met:

  • The private company must operate and control the platform (i.e., provide access to the platform, establish the terms of service for using the platform, establish the terms for paying workers, and retain discretion to accept and remove workers from the platform);
  • The equity compensation must be under a written compensation plan and not paid in exchange for capital-raising or market-maintaining services;
  • No more than 15 percent of a worker’s platform-related compensation during a 12-month period, and no more than US$75,000 of such compensation during a 36-month period, may consist of equity compensation from the private company;
  • Such equity compensation may not be subject to individual bargaining or the ability of the worker to elect to receive it in cash; and
  • The private company must take reasonable steps to prohibit the transfer of any equity received pursuant to the equity compensation, other than a transfer to the private company or by operation of law (i.e., pursuant to the laws of descent and distribution and domestic relations orders in divorces).1

The proposed rules would also permit public companies to use the Form S-8 to grant equity compensation to platform workers. The same conditions described above would apply to public company equity compensation registered on the Form S-8 (other than the proposed transferability restriction).

It is important to note that the proposed rules do not extend to platform worker activities relating to the sale of tangible goods (for example, a seller of books on an online marketplace), though the SEC note that it may in the future consider extending the proposed rules to such activities.

In order to help the SEC evaluate whether the proposed rules are being used for legitimate compensatory purposes (e.g., not for capital-raising purposes) and having their intended beneficial effect, the proposed rules would expire five years from the date of their effectiveness and would require a company that grants equity compensation to platform workers to furnish certain information to the SEC at six-month intervals.

The proposed rules are subject to a 60-day public comment period following their publication in the Federal Register.


The proposed revisions to Rule 701 and the Form S-8 are welcome news for companies engaged in the “gig economy,” and will enable them to provide equity compensation to individuals who do not fit within traditional categories of “employee” and “consultant.”

1The SEC noted that such transfer restrictions would “help ensure that the shares are obtained for compensatory and not speculative purposes” and “would prevent the development of a market in such securities until after the issuer becomes” a public company.

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Local chef creates app to connect gig workers with hospitality jobs




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CHARLESTON, S.C. (WCBD) – Connecting gig workers to hospitality jobs in Charleston is now easier than ever thanks to the app, Gigpro. It was created by a local chef, Ben Ellsworth, along with three others. The app lets anyone apply for and book jobs for just a single night at a time. It’s a fast and easy way to fill open shifts without committing to full employment with a business.

The hospitality industry is facing a detrimental shortage of workers with both back-of-house staff like line cooks and dishwashers as well as front-of-house staff like servers and bartenders.

The idea came to Ben Ellsworth, who’s been a chef in Charleston since 1998, as he stared at a pile of dishes in the Royal American kitchen during a shift when the dishwasher called out. He says the lightbulb switched on when he checked his cell phone.

“I got a notification on my phone that someone had booked my Airbnb and I said out loud ‘I wish he had booked to wash these dishes.’,” said Ellsworth.

That’s when Gigpro was born.

Nearly 150 Charleston businesses and over 2,000 workers have joined the platform since its initial release in late 2019. In the first month of beta testing, 36 gigs were booked and in the second month, 86 gigs were booked.

Now Ellsworth says around 200 gigs are posted to the platform each week.

There are only a few simple steps to set up Gigpro and begin picking up shifts. Download the free app, create a profile with a resume, fill out insurance information and add a payment method. A restaurant will post a shift with information like date, hours, and pay, then workers on the app can scroll through and apply for a job. If the employer finds a good fit for the night, the job will be booked. After a worker completes the job, payment is sent through the app two to three days later.

“Everybody that’s on the platform gets covered with occupational accident insurance,” explained Ellsworth. “Which takes the liability off the business and keeps the pro safe.”

He says the occupational accident insurance is about $0.38 per hour. Many gigs pay $15 to $30 an hour.

It’s a big help for employers working to fill shifts when employees call out or when staff is short.

Wild Dunes Resort on the Isle of Palms has been working with Gigpro for just over a year and recently has been booking workers most weekends.

“It’s a great tool to have in our toolkit,” said Manny Montes, the assistant director of HR at Wild Dunes Resort.

In some cases, at Wild Dunes and other businesses, workers have been asked to stick around.

“There’s actually two people that we connected with originally on the app that we’ve ended up offering positions to stay on board with us as actual employees,” said Montes.

Gigpro is a way to get some fast cash and help out businesses that are in dire need of staff.

“I would say right now that our biggest mission is to try and get more money in the pockets of the workforce in this industry. I’ve heard from multiple businesses that we’re working with that we’re kind for the only thing that’s moving the needle and getting help in the door,” said Ellsworth.

Gigpro is officially expanding to Nashville, TN and Charlotte, NC and Ellsworth hopes to add more “food eccentric cities” to the list soon.

For more about Gigpro, click here.

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Rep. McHenry introduces Gig Worker Equity Compensation Act




U.S. Rep. Patrick McHenry (R-NC) introduced legislation that would include the gig workforce in the category of workers who can benefit from equity compensation.

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The Gig Worker Equity Compensation Act (H.R. 2990) would help gig workers share in the economic resurgence while preserving their flexibility and independence.

“How people choose to work is changing. Our technology-driven economy is embracing this shift, Washington needs to keep up,” McHenry, the Republican leader on the House Financial Services Committee, said. “By giving these non-traditional workers access to equity compensation—just like traditional employees—we can ensure they benefit from the growth of the companies they are making successful. While Democrats attempt to stifle this growing sector of the workforce, my bill ensures they retain the flexibility they need while giving them the opportunity to grow wealth. This is a win for our capital markets, job creators, and gig workers.”

McHenry points out that about a quarter of the U.S. workforce participates in the gig economy or non-traditional work — whether as a rideshare driver, food delivery courier, or sharing their property through a platform like Airbnb. Further, about 10 percent of workers rely on alternative work arrangements for their primary source of income. These workers do not want to be bound by constraints like an office, set hours, or a traditional employer-employee relationship. This bill seeks to provide additional flexibility to support these workers.

In November 2020, the Securities and Exchange Commission (SEC) voted to propose rules to provide equity compensation options for gig workers. McHenry welcomed this initiative and is committed to working with the SEC to implement his broader proposal.

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GigIndia to provide Rs 3 lakh insurance cover to active gig workers




GigIndia, a B2B gig marketplace for on-demand work completion, will provide free COVID health insurance to its active gig workers covering up to Rs 3 lakh of medical expenses. Considering the adverse financial impact of COVID-19 on its gigger families, the Pune-headquartered firm in a release said that it is offering this insurance to active gig workers to make them feel relatively secure during these challenging times.

Moreover, the company is initiating efforts to ensure certified giggers on its platform continue receiving gigs (projects), thereby enabling a steady monthly income, it added.

“The COVID Health Insurance will ensure that medical costs are covered if any gig worker tests positive for COVID-19. We are also providing financial assistance to gig workers, which will help them with essential expenditure such as hospital charges, oxygen cylinders and ventilators, among others,” said Sahil Sharma, Co-founder & CEO, GigIndia.

Sharma said Rs 3 lakh covid health insurance will be given to thousands of active giggers on the company’s platform. In addition, the company has also set up an internal Rs 10 lakh covid relief fund for gig workers in need.

He further said that unlike full-time white/grey collar workers, giggers and grey collar part-time workers typically do not receive social security benefits and paid leave or access to health insurance.

According to Sharma, GigIndia is providing emergency loans for medical expenses, 100 per cent reimbursement of vaccination cost for all its employees and their family members, along with 14-days’ paid leave if an employee tests positive.

GigIndia said it empowers large enterprises to scale rapidly by providing a flexible workforce along with tech-enabled real-time tracking for work completion, remote customer onboarding, virtual customer support, recruitment on-demand, influencer marketing and field operations among others.

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