Lina Khan led FTC announces policy to tame gig economy companies, protect workers


Workers of the gig economy companies have a reason to rejoice as the Federal Trade Commission (FTC), headed by FTC Chair Lina M. Khan, on Tuesday, September 20, announced a policy to ensure that gig workers like online cab drivers and delivery partners are protected against unjust contracts, pay, and hours. As highlighted in the FTC’s Serving Communities of Color report, 19% of gig workers are Asians.

The gig economy has grown exponentially, with 16% of Americans reporting that they earn money through the gig economy. The FTC’s Serving Communities of Color report highlights that many gig workers are people of color – 30% of Latino adults, 20% of Black adults, and 19% of Asian adults report having engaged in gig work, compared to only 12% of White adults. A Federal Reserve study estimates that gig work accounts for hundreds of billions of dollars in economic activity each year.

The policy statement of FTC on enforcement related to gig work begins with: “American workers deserve fair, honest, and competitive labor markets. Over the past decade, internet-enabled “gig” companies have grown exponentially, and gig work now composes a significant part of the United States economy. One study suggests the gig economy will generate $455 billion in annual sales by 2023.”

The gig economy touches nearly every aspect of American life, from food delivery to transportation to household services. Gig work involves activities where people earn income by providing on-demand work, often through a digital service like an app.

Ride-hailing companies recruit workers to drive customers in the worker’s personal vehicles. Food delivery services find workers to deliver items from restaurants, grocery stores, and other merchants to customers. Service apps connect workers with customers seeking help with cleaning, home repair, and other temporary jobs.

The gig work model is expanding into healthcare, retail, and other segments of the economy.  The demand for some of the services that gig workers provide grew during COVID-19. While demand for other gig services, particularly transportation, decreased during that same time and caused financial struggles for some workers, illustrating the precarious nature of gig work.

“The rapid growth of the gig economy is made possible by the contributions of drivers, shoppers, cleaners, care workers, designers, freelancers, and other workers. Protecting these workers from unfair, deceptive, and anticompetitive practices is a priority, and the Federal Trade Commission will use its full authority to do so. As the Commission’s past work and current initiatives illustrate, the agency’s broad-based jurisdiction and interdisciplinary approach to market harms make it well positioned to confront the challenges this model can pose to workers,” the FTC policy statement adds.

After outlining a number of the issues that gig workers may face – including deceptive claims about pay and hours, unfair contract terms, and anticompetitive wage fixing and coordination between gig economy companies – the statement makes it clear that while gig companies may seem unique, established principles of consumer protection and competition still apply to them.

Here’s another key takeaway: that principle holds true regardless of how companies choose to classify the people who perform gig work.

Many gig workers have lower incomes and, because they may not be covered by wage and hour laws, can earn less than the minimum wage. More than half of American gig workers report that the money they earn through the gig economy is essential or important for meeting their basic needs.

Gig workers are paid in different ways, including weekly, in “batches” after completing multiple gigs, or immediately upon completing a gig (for a fee). Many workers are heavily dependent on customer tips. Gig companies may generate revenue from multiple sources, including a “take rate” (a percentage of customer payments for workers’ services), customer fees, and commissions charged to merchants.

“Successfully addressing the range of consumer protection and competition challenges associated with the gig economy requires innovative and collaborative approaches by governmental enforcers that are responsive to the public’s concerns and input. The Commission will continue to capitalize on its broad jurisdiction and interdisciplinary expertise to combat unlawful practices that harm gig workers,” the policy statement concluded.

The policy statement points to a number of areas where the FTC will aim to prevent harm to consumers: Holding companies accountable for their claims and conduct regarding gig work’s costs and benefits; combating unlawful practices and constraints imposed on gig workers, and policing unfair methods of competition that harm gig workers. The statement explains, “Protecting these workers from unfair, deceptive, and anticompetitive practices is a priority, and the Federal Trade Commission will use its full authority to do so.”

Workers harmed by questionable practices can share their experiences with the FTC. If workers believe their labor rights have been violated, they can call the National Labor Relations Board at 1-844-762-6572 or file a charge on the NLRB’s website.




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