Labour rights in the gig economy - an explainer
Research Note n°7 - Parliament of Victoria
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The gig economy has had a drastic impact on the nature of employment. The traditional paradigm of full-time, stable individual employment is being challenged by on-demand freelance contractor work. Consequently, certain protections and benefits that employees usually enjoy are not afforded to workers in the gig economy. This paper explains what the gig economy is, how it functions and the implications it has on labour rights. It also provides some information on the regulatory responses of other countries to the gig economy.
The gig economy essentially employs an economic model in which temporary and flexible jobs are the norm and in which companies hire contractors for on-demand work. Generally, workers in the gig economy do not receive salaries, as would employees, but are paid in return for the services or ‘gigs’ they perform. There are a number of features that define work in the gig economy, including:
§ the division of work into particular tasks and the contracting of workers for these tasks;
§ individuals undertaking the work;
§ companies facilitating labour transactions; and
§ workers being classified as independent contractors.
Analysis shows that workers in the gig economy tend to have lower wages than employees. They also often miss out on a number of other benefits. Further, their classification as independent contractors has implications on their tax status and superannuation. The analysis suggests that the current superannuation guarantee system may need to be reworked, as it was designed to cater to individual full-time employees, and did not envisage a gig economy labour market.
Overseas, there have been a number of different approaches to labour rights and the classification of workers in the gig economy. In general, comparable jurisdictions such as New Zealand, Canada, and states in the United States of America adopt a similar approach to Australia in categorising workers as either employees or contractors. In the United Kingdom (UK), a third category, the ‘worker’, exists between the employee and contractor. The ‘worker’ has recently been the subject of legal proceedings discussed in greater detail below, involving businesses such as Uber and Deliveroo. Overall, it appears that the legal frameworks of comparable international jurisdictions are capable of regulating the gig economy. In terms of workers’ rights, some cases suggest that gig economy workers are entitled to greater rights while in other cases they have been found to have fewer rights. At the time of writing, several related matters are underway in the courts overseas.
While the debate around the gig economy can be polarising, it is certain that the gig economy is disrupting traditional methods of doing business and does not look like it is going away. Some stakeholders are in favour of it, arguing that greater flexibility and choice is a positive result of technological innovation. Others have argued against it, claiming that the gig economy is essentially about the exploitation of workers and labour laws, as opposed to being about the development of new technologies. This has led to some workers missing out on benefits like security of income, accident insurance, paid leave and superannuation contributions.