The Future of Employment Law in a GIG Economy – Elvis E. Asia

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Introduction

The world has moved towards alternative work arrangements. Spurred by information technology which has made communication a click or dial away and the consequential ease with which work can be done from anywhere, a substantial part of the labour force is no longer dependent on the traditional employment relationship.  This trend is typified by what is popularly referred to as the gig economy[1]. The gig economy is a free market economy with short-term work, zero-hour contracts, independent workers, freelancing and other alternative work arrangements or gig-employment normally sourced using apps and online platforms. The gig economy contemplates an economy where there are no employers and employees but customers, platforms and entrepreneurs.

The major fallout of the gig economy is that there has to be re-characterization and reclassification of the old divide between contract of service and contract for services for the purposes of legal duties, rights and obligations. Some of the work relationship in this emerging economic arrangement may not come under the classical definition of these terms. Within the general understanding of these terms, there are many variations today. More and more people are exercising preference for flexible work arrangements[2] even in normal contract of service situations with possible different legal implications[3]. There is also the difficulty in situating algorithm driven arrangements like the one between Uber, Bolt, Lyfts, Gokada and the likes and their drivers/riders within the strictures of independent contract arrangements.  This is also true for delivery services in e-commerce and many other business arrangements today[4].

The fact that the existing legal interpretation of labour relationship is now insufficient to capture the dynamics of the gig economy is already playing out in many jurisdictions.. Deliberate legislations and policy are being fashioned to fill the void. Nigeria must embrace this trend particularly now that attempt is being made to review the legendarily archaic Labour Act[5]. The Labour Act, as it is today, is not good enough even for a 20th century economy and certainly useless for the gig economy.

The Divide between Contract of Service and Contract for Services

Historically, the agreement between parties in relation to work was divided into contract of service and contract for services. Whilst the former refers to an employer/employee relationship, the latter is an independent contractor relationship. The difference is significant. Employees are entitled by law to salaries and other emolument, pension, leave, insurance, compensation for injury or death etc. and terminal benefits upon termination as well as general protection of employment like redundancy provisions. The law also expects employers to deduct tax on salaries and remit to the relevant tax authority[6]. This is not so for an independent contractual relationship in which case the contractor takes care of himself or itself within the express provision of the contract for services.

The test for determining the difference between an employee and an independent contractor is control. Unlike a contract of service, the independent contractor has its own business and carries out the contract without any form of control from the other party. Questions like what time of the day the work should be done, how and when  the job is to be carried out, the place of work, etc. are determined by the contractor. The contractor also uses his tools for the work, can delegate it to someone else and may provide the same service to more than one client at a time[7].

The emergence of the Dependent Contractor

The difference between an employee and an independent contractor can be blurred in certain cases. The situation is further complicated when the relationship cannot be said to be either of the two. This has led to the emergence of the third category called the ‘Dependent Contractor’. A dependent ‎contractor relationship looks like an independent contractor relationship, but operates more like an employment relationship. The key point is exclusive services and dependence on the entity for whom the service is being rendered to.

In a dependent relationship, as it is often the case in gig arrangements, the ‘employer’ stipulates the terms of the contract, set rates of pay for services, controls the way the work is done, rates workers performance, handles complaints and third parties sees the worker as part of the employer’s business.  The work is mostly temporary and the employer can dispose with the gig worker as it pleases. The possibility for exploitation and job insecurity is therefore very high.

The place of Gig workers

Gig workers are often perceived as independent contractors. Platforms offering opportunities for gig services would prefer to classify them as such. However, it does not necessarily follow that being a gig worker makes one an independent contractor. In some cases and circumstances, gig platforms exercises control over the workers in ways similar to what obtains in regular employer-employee relationships,  and the workers are just as dependent as the regular employee.. Dependent contractors in the gig-economy deserve special considerations because whilst their activities are controlled by their platforms ,they do not enjoy the benefits of job security  and employment benefits which are the major advantages of traditional employment. The current global pandemic of coronavirus reemphasizes the challenge faced by gig workers. Gig workers deliver foods, groceries and transport passengers with a much higher risk of coming into contact with people infected with the virus but, because they are classified by employers as independent contractors, they don’t have the health benefits and job protections of the traditional employee.

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There is therefore the need to ensure that there is no deliberate misclassification with sole aim of depriving workers’ rights and protections which inures to them as employees.

The ultimate consideration of whether or not a person is an employee, an independent worker or a dependent worker should be the facts and circumstances of each case. In the United Kingdom (UK), the Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA) report on the gig economy[8] and the Taylor Review on Modern Employment Practices[9] concludes that how a worker is classified should be decided on a case by case basis rather than assuming that all workers in the gig economy fall under a particular category. Taylor Review also recognized the dependent worker as the ‘dependent contractor’. This is consistent with the position of the International Labour Organisation on the scope of employment.[10]

Gig Workers and Nigerian Law

Under the Nigerian law, the easy conclusion is that gig workers are not contemplated and protected. In the first place, the Labour Act applies only to workers and not independent contractors. A combined reading of section 7 and 91 of the Labour Act and section 73 of the Employee Compensation Act, 2010 is that Nigerian law contemplates temporary or contract workers but independent contractual relationship is outside its purview. Secondly, though temporary or contract workers are contemplated by law, the unique arrangement in a gig economy could not have been foreseen in 1971 when the Labour Act was enacted. Even for ordinary contract of employment, the law struggles to provide succor to workers who have been classified as contract staff. The law is also limited in scope because it does not apply to persons exercising administrative, executive, technical or professional functions. The effect is that even in arguable circumstances where gig workers are classified as employees under the law; majority will be excluded from the limited protection of the Labour Act because they cannot be considered manual or clerical staff to which the law principally applies. This means that they will be at the mercy of the contracts designed by the gig platforms[11].

It must be pointed out that employment law in Nigeria has been seriously disrupted by the National Industrial Court (NICN). Under the Third Alteration of the Constitution[12], the NICN has the power to apply International Best Practices and Labour Standards[13]. Given the antecedent of the court in attempting to modernize labour law in Nigeria, it is expected that the court will weigh in to define when a gig worker may be considered an employee and otherwise. The concept of dependent contractor as explained above is likely to play a major role in the court’s resolution of the issue because, being a labour court; chances are that it will do anything possible within its wide powers under the Constitution to protect workers. The court has already expressed its intention to disregard express contractual terms in favour of the reality of the facts and on the principle of the primacy of facts[14]  . In Olatunji & John v. Uber and Taxify[15], the court hinted that it is possible to classify Uber drivers as employees and that a contract to personally execute any work or labour can qualify as employee relationship under section 91 of the Labour Act. This was a case in which the Claimants sought declarations that they and other drivers were employees of Uber and Taxify and not independent contractors. The Court however dismissed the suit on the basis that it was initiated through the wrong process and that there were no sufficient facts placed before it to determine the issues raised by the Claimants.

The challenge with powers of the NICN under the Constitution is that one is not certain as to what the law is on employment issues until declared by the court. This uncertainty is not good for investment in this age where many startups are emerging in the gig economy. Legal certainty is an indispensable feature of an economy that wishes to compete in a gig economy. It is therefore imperative that Nigeria reforms its labour laws to capture the reality of employment relationships today.

The shape of Employment Law in a Gig Economy

The traditional conception of relationship between employers and employees is obviously unsustainable. The use of the terms ‘employees’ and ‘independent contractors’ for the purpose of determining employment rights and obligations needs to be revisited to accommodate modern work arrangements. The essence of special rules for the protection of workers is to prevent or reduce ‘exploitation’ and ‘slavery’ in the work place. Fairness which employment rules represent globally must be incorporated into modern work culture.  There is need to prevent digitization of ‘casualisation’ of the workforce. There are also other public policy considerations such as tax, pension and general regulation and control of the workforce by the government. The gig economy also needs certainty of law to thrive.

Creating a balance between unleashing the free spirit of the gig economy with the prosperity it brings, protecting workers and public policy consideration is not an easy task but it is a task that must be undertaken. The balancing act must be carefully woven and concretized in legislations to avoid uncertainty and arbitrary exercise of discretion in regulation by government. A brief review of developments in other climes underscores the need for a   reworking of employment rules to embrace the gig economy.

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United States

In the United States (US) sweeping legislations are being enacted to protect freelancers, independent contractors and gig workers. In New York State, under the New York State Human Rights Law[16] and the New York City Human Rights Law[17], these categories of workers are entitled, among other things, to request and receive reasonable accommodation for disability, pregnancy, lactation, religious observance and general anti- discrimination protections as traditional employees. They can now pursue workplace discrimination, harassment and retaliation. In 2018, the New York City passed minimum wage rate for workers working for ride-hailing platforms like Uber and Lyft.

On September 18, 2019, California passed into law Bill 5 (AB 5) law, which reclassifies many of the state’s independent contractors, including gig workers, as employees[18].  The bill adopted the “ABC” test established by the California Supreme Court in Dynamex v. Superior Court[19]. The test is to the effect that, a worker must be classified as an employee unless the hiring entity can establish:

(A) that the worker is “free from the control and direction of the hiring entity in connection with the performance of the work,”

(B) that the worker “performs work that is outside the usual course of the hiring entity’s business,” and

(C) that the worker is “customarily engaged in an independently established trade, occupation, or business.”

Europe

In the United Kingdom (UK), the government commissioned the Taylor Review which recommended, inter alia, as follows:

  1. a new right for workers to request a more stable and predictable contract;
  2. From 6 April 2020 the following will come into force:
  3. new right for all workers to a written statement of terms on or before the first day of employment;
  4. a right for agency workers to be provided with a “Key Facts Page”, to include information about the type of contract, the minimum expected rate of pay, how they will be paid and by whom (for example, by an intermediary or umbrella company), any deductions or fees to be made, and an illustrative example of what this might mean for take-home pay;
  5. lowering the threshold required for a request to set up information and consultation arrangements from 10% to 2% of employees (subject to a minimum of 15 employees).

There was also a suggestion that tax treatment of dependent contractors should be aligned with that of employees.

In Uber BV v Aslam[20] the English Court of Appeal, confirmed the Employment Tribunal’s ruling ordering Uber to treat its drivers as employees. The court reasoned that, though the parties expressly describes their relationship as that of ‘partners’ and that no employment relationship is intended, the contract was a sham and inconsistent with the relationship actually created. The Tribunal had, among other things, considered Uber’s recruitment process, control of customer information, Uber’s rating system acting as performance management, setting of fixed fare rates, Uber’s handling of complaints and forced acceptance of bookings to reach the conclusion. This decision has been followed by the French court[21].

For the rest of Europe, in April 2019, the European Parliament approved rules on minimum rights for gig workers, including the right to free training and keeping workers informed about their working condition from the beginning.

Canada

The fate of the gig economy is being put to test in Canada in the case of David Heller v.Uber. The case is a class action case brought by representative plaintiff David Heller, an Uber Eats driver. Heller’s case  on behalf of Ontario Uber drivers, is that they are employees of Uber and entitled to the benefits of the Employment Standards Act, 2000 (ESA). Uber’s responded to the action by requesting a reference to arbitration under the Service Agreement.  Article 15 of the Service Agreement provides that conflicts arising from the Agreement will be resolved by arbitration in Amsterdam under the Rules of Arbitration of the International Chamber of Commerce in accordance with the law of Netherlands.

The Superior Court agreed with Uber but the decision was upturned by the Ontario Court of Appeal. The court reasoned that the arbitration clause was unconscionable at common law because there was huge inequality of bargaining power between Uber and the drivers to the extent that that it would be practically impossible for an individual driver to exercise his right under the arbitration provision. Importantly, the court held that the clause is an illegal contracting out of the ESA and therefore invalid [22]. The question of the invalidity of the arbitration clause matter has now been referred to the Supreme Court of Canada.[23]

On February 25, 2020, the Ontario Labour Relations Board ruled  that Foodora food couriers are dependent contractors, a classification  that gives them the ability to unionize.

India

In India, the government introduced the Code on Social Security, 2019[24] aimed at protecting gig workers.  The Code refers to gig platforms as ‘aggregator’. The Code does not seek to reclassify gig workers as employees but provides that the Central Government may formulate suitable social security schemes for gig workers and platform workers on matters relating to life and disability cover; health and maternity benefits; old age protection; and any other benefit as may be determined by the Central Government and provide for the role of the aggregators in the scheme.

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Conclusion

The changing dynamics in employer/employee relationship in the gig economy is not sufficiently captured in existing employment law. There are legitimate public policy considerations for an overhaul of employment regulation. A modern employment law must be comprehensive, address the distortions in the labour market and protect gig workers. It is difficult to conclude on the shape such protection should take. There is currently no globally acceptable formula for doing so. What is clear however is that the law must evolve to embrace modern work arrangements with a view to setting out minimum standards for their protection as it is being attempted in many jurisdictions. In this regard, guidelines for differentiating between gig workers in an independent contractor relationship as against a dependent contract relationship should be set out to ensure certainty.

The goal of the law however should not be to frustrate self-employment and entrepreneurship in the gig economy but to arrest sham contracting and misclassification of workers for pecuniary benefits. Conferring a blanket standard employee status on gig workers will destroy the gig business model along with its benefits of flexibility, low cost for employers and low prices for consumers. This will in turn deny people work and income they are generating from the economy. What is needed is a legal framework that maintains the delicate balance between the benefits of the gig economy and the need to avoid exploitation and ‘digital casualisation’ of the workforce.

Elvis is the Managing Partner of Law Future Partners
Email: elvis.easia@gmail.com; elvis.easia@lawfuturepartners.com
09017163850

[1] The term was first coined by journalist Tina Brown in 2009 where she described the work world as “a bunch of free-floating projects, consultancies, and part-time bits and pieces’’. See Tina Brown, ‘The Gig Economy’, the Daily Beast, January 12, 2009. https://www.thedailybeast.com/the-gig-economy (accessed on February 26, 2020).

[2] The Covid-19 pandemic has temporarily made this the norm.

[3] Many companies are adopting virtual work culture which allows some employees to work from home or from anywhere. In terms of liability for instance, will the employer be liable for the injury suffered by the employee in the course of working virtually even at home? What about vicarious liability to third parties? Ultimately, the facts and circumstances will determine the answers to these and other similar questions but they are legal concerns worth thinking about.

[4] The gig business model has spread beyond ride hailing and delivery services globally to include virtually all types of work.

[5] Cap L1 LFN, 2004

[6] Section 81 of the Personal Income Tax Act Cap P8, LFN 2004

[7] For a detailed analysis of the difference between contract of service and contract for services, see the Supreme Court case of Shena Security Co. Ltd v. Afropak (Nig.) Ltd & 2 Others [2008] 18 NWLR (Pt. 1118) 77 SC; [2008] 4 – 5 SC (Pt. II) 117 where the court prescribed the following criteria to provide guidance in making this determination: the mode of payment; ownership of the equipment, tools or instruments used in providing the services; the ability to delegate duty; the hours of work; the place where the work is carried out; and the provision of office accommodation and a secretary.

[8] https://www.thersa.org/globalassets/pdfs/reports/rsa_good-gigs-fairer-gig-economy-report.pdf

[9]https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/627671/good-work-taylor-review-modern-working-practices-rg.pdf

[10] See the ILO Report titled, The Scope of the Employment Relationship (ILO Office: Geneva), 2003 at pages 23 – 25

[11] Outside statutory protection, a fundamental principle of contract interpretation is that the weaker party in a standard form contract or contract of adhesion such as the one common in the gig economy deserves some protection. See Sonnar (Nigeria) Ltd & Anor. V. Partnreedri M. S. Norwind Owners of the Ship M. V. Norwind & Anor (1987) LPELR-3494(SC). This principle may come in handy to protect gig workers in deserving cases.

[12]The Constitution of the Federal Republic of Nigeria (Third Alteration) Act No. 3 of  2010 elevated the National Industrial Court to the status of a superior court with expanded jurisdiction and powers

[13] section 254C (1) (f) and (h) of the 1999 as amended

[14] PENGASSAN v. Mobil Nig. Unltd [2013] 32 NLLR (Pt. 92) 243 and Olatunji & John v. Uber & Taxify (2018) https://judgement.nicnadr.gov.ng/details.php?id=3075,

[15] supra

[16] Effective February 8, 2020

[17] Effective April 1, 2019

[18] The law has faced stiff opposition; a temporary injunction was issued against the law by a federal court in December 2019 and has now been extended in January 2020. Uber has also filed action challenging the constitutionality of the law.

[19] 4. Cal. 5th 903 (2018)

[20] [2018] EWCA Civ 2748

[21] https://www.france24.com/en/20190111-french-court-rules-against-uber-employment-contract-case

[22] https://www.canlii.org/en/on/onca/doc/2019/2019onca1/2019onca1.html

[23] https://www.lexology.com/library/detail.aspx?g=4edf3018-aa8d-49ce-b0ba-4ce98c517708

[24] https://labour.gov.in/sites/default/files/375_2019_LS_Eng_0.pdf

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