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Gig Worker or Economically Dependent?

By Trevor Sheffield

January 20, 2023

In October 2022, new legislation was proposed to help correctly identify the class a worker is in. This legislation is likely to heavily impact businesses that run on gig labor, or those who work for rideshare or food delivery apps. It would require these companies to classify their workers as employees, which would legally require them to have more benefits and protections. This can be a complicated process that causes companies time and money—fortunately, Timerack software is equipped to help.

Why Is Worker Classification Important?

The main point of the proposed policy is to ensure that workers are classified correctly. Worker classification allows workers to be properly protected legally, so companies can’t take advantage of them. Reuter’s explains, “U.S. Labor Secretary Marty Walsh in a statement said businesses often misclassify vulnerable workers.” Gig laborers are often classified as independent contractors, which leaves them economically vulnerable. Gig work is often varied and through rideshare and food delivery apps, those who rely on their gig work for their income are not guaranteed income eerie day they are available to work. 

Economically Dependent

The proposed policy would best help those who are classified as “economically dependent,” or who rely solely on their work through independent contracting for their income. But this isn’t the only qualification for identifying economically dependent individuals. So how else are they classified? Well, the following points are also considered: “The Labor Department said it will consider whether workers have an opportunity for profit or loss, the permanency of their jobs, and the degree of control a company exercises over a worker, among other factors. The proposal is similar to legal guidance issued during the Obama administration that was withdrawn by the Labor Department under former President Donald Trump.”

The policy would be highly beneficial for those who depend on independent contractor work for their source of income. Reuter’s also explains, “Many gig and delivery workers currently work long hours for low pay and lack safety nets, such as paid—or even unpaid—time off, according to worker advocates.” 

Profitability Impact

When the policy was proposed, stock options for companies like Uber, Lyft, Grubhub, DoorDash, and other companies dropped almost ten percent. If these companies are pushed into following these new laws, profitability will likely drop as they are forced to pay workers more and allow for time off when requested. It also means that by investing in more employees instead of gig workers, the companies will not have as many work positions available for those in search of work.

Timerack Can Help

How can time tracking software help companies solve the issue of classifying more workers as employees? Most notably, the number of hours a contractor is working can help establish whether they are “economically dependent.” However, time tracking isn’t the only variable in play. Economically dependent workers are categorized by a six point test. 

The first point in the test, weighed more heavily than the others, considers whether the person working has control over the amount of profit they earn beyond choosing which jobs to work and which to decline. The third, also weighed more heavily than the others, discusses the degree of permanence involved in the job. Timerack gathers enough information to help employers determine variability in price per project and project frequency. With this information, companies can ensure they are not employing independent contractors who are economically dependent. 

Consider whether using time tracking software can help your company achieve its goals and ensure you aren’t employing economically dependent workers. You can learn more about what Timerack has to offer here.



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