• Tue. Nov 29th, 2022

Federal Trade Commission announces enforcement priority to protect gig workers (US)

ByChad J. Johnson

Sep 21, 2022

An estimated 16% of American workers derive at least some of their annual income from work from “gigs” – “secondary agitations” in which they choose (supposedly) work opportunities available on demand, usually through Internet-based platforms or applications, working when, where and for as long as they want. However, the practical reality for many construction workers is that these drivers, buyers, cleaners, social workers, designers and other freelancers often find themselves constrained by concentrated markets with limited work opportunities, surprising start-up costs, unexpected contractual and profit opportunities. Because gig workers are disproportionately low-income and people of color, and gig work is not guaranteed to pay minimum wage or overtime pay, the excessive business practices of gig-economy businesses have the greatest impact on already vulnerable worker populations.

Preventing gig worker abuse has been an enforcement priority for the current administration, particularly within the Department of Labor (see here, reversing an earlier DOL position) and National Labor Relations Board, but on September 15, 2022, the Federal Trade Commission (FTC) joined the effort by announcing its policy statement on gig work enforcement. The 17-page policy statement emphasizes that in addition to being workers, gig workers remain consumers, and therefore subject to FTC oversight and protection from unfair, deceptive, and anticompetitive business practices. The FTC highlights three major pitfalls of on-demand work:

  • Control without liability: This refers to the appeal of gig work as a flexible opportunity, where workers control their working hours and conditions, when in reality, labor companies can prescribe and control the tasks of workers to a way that contradicts the promise of independence, or adopting algorithms to derive more revenue from customer payments than is disclosed to workers, without offering workers in return the protections that a traditional employment relationship provides (e.g. , right to organize, minimum wage and overtime, health and safety precautions, stable and predictable pay, reimbursement of business expenses). expenses, insurance).
  • Reduced bargaining power: The decentralized working environment, the unavailability of the organization and the high turnover rate contribute to the reduction of the bargaining power of the workers against the small companies, some of which offer little transparency in the formulas of payment, when the work will be available, where they will have to perform it if they accept the gig, and if and how they will be evaluated.
  • Concentrated markets: Markets populated by companies that operate online platforms are often concentrated, especially in urban centers, reducing the choice of suppliers for workers and customers. As a platform gains market dominance, it incentivizes workers to seek employment with that provider, reducing competition for workers’ services, acting as a barrier to market entrants and lowering wage rates.

The FTC notes its “vital role” in preventing practices that violate the protection of gig workers as consumers and in eliminating anti-competitive practices generally. The agency warned that it would use the full weight of its authority to enforce laws, such as the Sherman Act (15 USC § 1), the FTC Act (15 USC § 45), the Franchise Rule (16 CFR pt. 436), and the Business Opportunity Rule (16 CFR pt. 437), to penalize gig businesses that make false or misleading statements regarding salaries and start-up or training costs; agree to set wages with or not to hire competing workers; provide opaque remuneration criteria or present non-negotiable and unreasonable contracts that limit mobility or competition; or withhold wages from workers without their consent. Also in the agency’s sights are gig companies that engage in practices involving artificial intelligence or algorithm-based decision-making to govern how gigs are made available to audiences. workers, and how workers are paid, evaluated, monitored, and suspended or terminated from the platform, using undisclosed or arbitrary measures. The FTC also pointed to the impact of non-competition clauses in the gig economy on undermining free and fair labor markets, restricting workers’ ability to obtain competitive offers for their services, lowering wages and the deterioration of working conditions. The agency has expressed particular skepticism about the use of covenants in the gig economy without violating antitrust principles.

If the FTC files a lawsuit against a company for deceptive or unfair trade practices (and, by the end of 2021, more than 1,100 companies had received notices of criminal violations warning them of potential actions), the Commission can obtain an order prohibiting the unfair activity or anticompetitive practice, seek redress from consumers, and obtain civil penalties that now amount to $46,517 per violation (16 CFR § 1.98(e)). Additionally, collusive actions between gig businesses, such as wage-fixing agreements or non-poaching agreements, can be referred to the Department of Justice (DOJ) for criminal prosecution.

The policy announcement underscores this administration’s increased efforts to protect workers. Construction workers themselves are encouraged to report unfair trade practices (at ReportFraud.ftc.gov), while the FTC has confirmed its commitment to work on an interdisciplinary basis with the NLRB, DOL, DOJ and other other interested agencies to share information, uncover patterns of illegal practices and prosecute repeat offenders. Companies that retain workers through the gig economy model are encouraged to work with employment (and tax, data privacy and antitrust) councils to proactively audit their practices and put implement actions that reduce the risk of significant enforcement action in the future.