The gig economy has revolutionized the way Americans work—and are treated by employers. From ride-sharing drivers to freelance graphic designers, gig workers now make up a significant percentage of the workforce. But the new reality has come with tough legal questions, primarily worker classification and labor rights.
At Najla Law Firm, we counsel startups, platforms, and well-established businesses in the gig economy on how to stay U.S. labor regulation compliant and safeguard business interests.
Employee vs. Independent Contractor: The Central Legal Problem
One of the greatest areas of concern for every gig-based business is proper employee classification. Misclassifying employees as independent contractors may lead to penalties, claims for back pay, and harm to reputation. The Department of Labor (DOL) and IRS apply tests to determine classification, where the key considerations are behavioral control, economic dependence, and the nature of the relationship.
Recent Developments and State Laws
Federal law is a factor—but numerous states, including California, New York, and Massachusetts, have enacted more stringent laws. California’s AB5 law, for instance, uses the “ABC test” to decide if an employee is indeed independent. Gig platforms need to exercise caution to keep up with compliance at both the federal and state levels to stay away from lawsuits and enforcement.
Most Critical Compliance Matters Confronting Gig Platforms
• Have formal, written agreements with all employees
• Don’t overload management with how the work gets accomplished
• Give legal education to HR and operations staff
• Review wage and hour legislation, particularly minimum wage and overtime legislation
• Monitor improvements from the Fair Labor Standards Act (FLSA)
Why Legal Guidance Is Important
With more regulatory oversight than ever before, legal regulation is not a choice. At Najla Law Firm, we assist gig economy companies to craft models of maximum flexibility and scalability with minimal legal exposure. You’re starting a new platform or growing across states, and ahead-of-the-game legal compliance is the secret to long-term growth.
If you require personalized legal guidance or need a labor compliance audit, reach out to our employment law team today.
