The buzz around gig economy protections continued as the Federal Trade Commission took yet another action to safeguard gig workers. Last week, the FTC adopted a policy statement asserting its authority to address unfair and deceptive practices and anticompetitive conduct that harms workers in the gig economy.
The statement highlights data from several studies concerning the gig economy, including that it is expected to generate $455 billion in annual sales by 2023, and that 16% of Americans report earning income through an online gig platform. The statement also reports that, while gig work has already established itself in food delivery and transportation, it is now expanding into healthcare, retail, and other segments of the economy. The FTC noted that the decrease in demand for transportation during the COVID-19 pandemic illustrates “the precarious nature of gig work.”
The FTC statement focuses on three features of the gig economy “that implicate the Commission’s consumer protection and competition missions:”
Control without responsibility
This relates to what many, including the FTC, see as the misclassification of gig workers as independent contractors rather than employees. The FTC states that misclassification:
- Deprives workers of critical rights, like overtime pay, health and safety protections, and the right to organize
- Burdens workers with undue risks, like unstable pay and responsibility for vehicles or other equipment
- Burdens workers with business expenses that the employer should bear, like insurance and gas
Diminished bargaining power
The statement discusses a “power imbalance” that “leave[s] gig workers more exposed to harms from unfair, deceptive, and anticompetitive practices and is likely to amplify such harms when they occur.” According to the FTC, this power imbalance is characterized by:
- Algorithms that dictate workers’ relationship with a gig platform and leave workers with “an invisible, inscrutable boss”
- Little leverage to demand transparency from gig companies
- Commonly used mandatory arbitration clauses and class-action waivers
The statement asserts that many gig platforms exist in concentrated markets and, therefore, are “more likely to have and exert market power over gig workers or engage in anticompetitive unilateral or coordinated conduct.” Here, the FTC is concerned that loss of competition in these markets will enable gig platforms to suppress wages, reduce job quality, or impose onerous terms on gig workers.
The FTC plans to “use the full portfolio of laws it enforces” to protect gig workers from unfair, deceptive, and anticompetitive practices, regardless of how gig companies choose to classify their workers. The FTC’s enforcement priorities listed in the policy statement include:
- Holding gig companies accountable for claims they make to prospective workers about costs and benefits of gig work. This includes claims about potential earnings, lack of clarity regarding how pay is calculated, and undisclosed costs or terms of work.
- Combating unlawful practices and unlawful constraints imposed on gig workers. The FTC is concerned with the automated or algorithmic control exerted over gig workers and the lack of transparency that results. Moreover, the FTC views restrictive, “take-it-or-leave-it” contract terms as potentially unfair or deceptive if they unfairly harm workers, render a gig company’s representations misleading, or prevent fair competition for workers. The expansion of the FTC’s unfairness authority to cover employment relationships (on both the consumer protection and competition missions) has the potential to vastly expand the FTC’s role in the gig economy and elsewhere.
- Policing unfair methods of competition that harm gig workers. The main concerns here are wage-fixing and coordination, as well as market consolidation and monopolization. The statement highlights the FTC’s intent to investigate evidence of wage-fixing, non-poaching agreements, and technology-enabled methods of collusion or exclusion. The FTC will also review and, if necessary, challenge mergers that it believes will harm competition for workers.
The commissioners split in adopting the agency’s new policy statement in a 3-2 vote. Republicans Noah Joshua Phillips and Christine S. Wilson dissented, illustrating the continuing political divide on the commission. At an open meeting Wilson said the statement was “another step in the effort to shift the Commission’s attention from its traditional mission of protecting consumers and competition, to an agenda focused largely on ‘workers.’ Abandoning the consumer welfare standard, as this Policy Statement purports to do, will harm consumers.”
Earlier this summer, we reported that the FTC has concentrated its efforts on protecting gig economy workers, and more recently we discussed the formation of a new partnership with the National Labor Relations Board. The FTC is now firmly in the employee protection business. For further updates on the regulatory challenges facing the gig economy, bookmark our All About Advertising Law blog and subscribe to our monthly newsletter.