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Shifting Landscape of Worker Classification In Tech’s Gig Economy?

Published by on July 25, 2017

Leapforce, a gig economy platform that sources its workers to Google, is converting U.S. workers from independent contractors to employees.

Leapforce, a gig economy platform that sources its workers to Google, is converting U.S. workers from independent contractors to employees.

“Raters” are the humans who check, verify, and provide feedback on the effectiveness of Google’s advertising algorithms. These raters complete short tasks and produce data that Google uses to analyze the usefulness of its algorithms for the purpose of strategically placing targeted advertisements. Raters are not directly employed by Google, but sourced from labor contracting companies such as Leapforce. Many raters are self-employed people who work from home, are disabled, or live in remote areas.

Raters are part of the greater gig economy —- a task-based, short-term, freelance job market. Google and other technology companies use this type of labor for tasks that humans can complete relatively easily but computer programs cannot. A rater’s job is not easy, however. Raters for Google must pass a test based on a 160-page book of guidelines and stay up to date on these ever-changing guidelines and are subject to constant oversight and testing.

Until recently, these raters have been treated as independent contractors and made between $13.50 and $17.50 per hour, many using it as their full time job. Recently, Leapforce unpleasantly surprised its U.S. raters with an email indicating that, starting June 1, 2017, they may not work more than 26 hours per week. In an attempt to explain the change, the CEO of Leapforce, Darren Jackson, reportedly reached out to his workforce indicating that Google was essentially forcing the change by preferring employee-based labor vendors. Therefore, Leapforce was forced to shift from contractors to employees. As employees are more expensive for employers to hire and maintain, and require compliance with the FLSA and state minimum wage and overtime requirements, this process is almost certainly increasing Leapforce’s labor and compliance costs, hence the cutbacks.

Whether an individual is an employee or independent contractor is a fact-intensive inquiry that requires consideration of a number of factors. In determining employee versus contractor status, California courts consider the extent to which the principal controls the work of the individual, as well as other factors. Independent contractors are typically engaged in a different and distinct business than the principal, supply and invest in their own tools, equipment, materials, and the place where work takes place, render highly skilled work, conduct work with little supervision, perform work on a shorter, temporary-term basis, and are paid by the job, rather than by the hour.

Although there may be other business considerations, Google could be switching to employee-based vendors to mitigate the risk of a FLSA misclassification lawsuit, similar to the Uber class action, in which the judge denied a motion for settlement approval, suggesting the potential monetary damages could be upwards of $850 million. If raters were to ever bring a suit and a jury determined Leapforce misclassified its workers as independent contractors, Google could also face liability if found to be a joint employer. While Google raters receive a paycheck from Leapforce, their work takes place exclusively on Google’s Raterhub service. Raters believe they are integral to the success of Google’s algorithms, but they do not receive any Google employee benefits.

Welter Insight

With Google’s shift towards employee-based labor vendors, this may indicate a wider trend away from a contractor-based labor vendor model in the technology sector. While this may benefit laborers who will enjoy certain employee protections under federal and state law, such a model is more expensive for businesses and the predictable response will be to cut employee wages, hours, or jobs.

Employers that frequently hire independent contractors should conduct a thorough analysis of the contractors’ job duties and characteristics to ensure they are properly classified. Courts and the Department of Labor construe ambiguity in favor of a finding that the worker is an employee. The risks of misclassification can be severe, including unpaid wages, taxes, or a costly class action lawsuit. More information on how to properly classify workers may be found here.

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