HR News

EEOC's Strategic Focus on "Gig Economy" Raises Questions for Employers

March 2, 2017

The Equal Employment Opportunity Commission (EEOC) has released their Strategic Enforcement Plan (SEP) for fiscal years 2017-2021, and it raises some interesting questions for employers. 

One of the changes that the EEOC has made to the most recent SEP is a focus on complex employment issues related to the “on-demand economy,” also known as the “gig economy.” While there’s no official definition of “gig,” The Bureau of Labor Statistics (BLS) has defined a “gig” as “a single project or task for which a worker is hired, often through a digital marketplace, to work on demand.” In this context, the EEOC will seek to clarify the relationships between businesses and the workers that they may engage through the gig economy.

The EEOC’s concern is that as the 21st century workplace evolves to take advantage of technology, businesses will use this environment to avoid hiring “employees” and thus avoid potential liability under workplace employment laws. This brings up an important question that businesses will need to ponder regarding their workforce; are these gig workers actually employees?

This question is a different version of a question that businesses have been wrestling with for years; is a worker properly classified as an independent contractor or as an employee? Specifically, when determining whether a worker is an independent contractor or an employee, businesses should keep in mind both the IRS independent contractor test and the economic realities test under the Fair Labor Standards Act (FLSA). The FLSA test relies on the following questions:

1. Is the work vital to the employer’s business?
2. Can the worker experience a financial profit or loss?
3. What investment is being made in the work by both the employer and the employee?
4. Are special skills required to perform the work?
5. What is the duration or permanency of the relationship?
6. How much control does the employer have over the worker?

Based on the above tests, businesses utilizing “gig economy” workers should review their arrangements to determine if their workers are, in fact, independent contractors or employees who are protected by workplace employment laws.

Additionally, businesses will need to determine what to do about their employees who may “moonlight” or engage in “gig-type” work after normal work hours. The rise of the “gig economy” provides employees with the opportunity to earn extra income, but employers will want to make sure they are mitigating any potential risks that could arise from a conflict of interest or violations of company policy. To do this, employers should review and consider updating the following employment policies:

  • Outside Employment – Review and consider updating this policy to not prohibit employees from having outside employment. It should still set the expectation that they will be held to the same performance standards and scheduling demands for their position regardless of any outside work requirements.
  • Conflict of Interest – Review and consider updating this policy to include a statement that employees must avoid any actual or potential conflicts of interest. Also consider a provision that employees must refrain from outside activities that detract or interfere with any employee’s performance or services for the company.
  • Anti-Solicitation – Review and consider updating this policy to set expectations that an employee is prohibited from soliciting other employees for his/her moonlighting or gig services during work hours or in any way that interferes with other employees’ work.

This communication is for informational purposes only; it is not legal, tax or accounting advice; and is not an offer to sell, buy or procure insurance.

This post may contain hyperlinks to websites operated by parties other than TriNet. Such hyperlinks are provided for reference only. TriNet does not control such web sites and is not responsible for their content. Inclusion of such hyperlinks on TriNet.com does not necessarily imply any endorsement of the material on such websites or association with their operators.

By Sam Neff

Sam Neff is a human capital consultant at TriNet.

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