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Taskrabbit, Postmates, Instacart: In the Gig Economy, Who Is Liable?

Written by Ankin Law Office

“Gig” economy employers classify their workers as independent contractors, which makes liability uncertain when workers injure someone when performing a task on behalf of the employer. “Gig” economy workers, such as Uber drivers and TaskRabbit “taskers,” are treated as independent contractors. As such, their “employer” does not need to pay for insurance coverage, taxes, provide employee benefits, or even unemployment. “Gig” economy workers are particularly vulnerable because they can only earn if they are working and if they are injured, they do not enjoy any workers’ compensation protections. Moreover, the vulnerability of these workers affects those whom they injure and provide services to because they lack the funds to purchase adequate insurance.

What is the gig economy?

The “Gig” economy was made possible by the revolution of the smartphone, apps, and the Internet. What was once called “odd jobs” are now professionalized through slick applications and websites that connect people with spare time and skills with customers who need their services? The “Gig” economy can range from drivers, such as Lyft and Uber, to shoppers, such as Instacart, odd jobs, like TaskRabbit, and small one-time jobs, such as Fiverr. There is an endless amount of “Gig” economy companies all working to connect excess labor and assets with needy customers.

The “Gig” Economy is Expanding

Moreover, the “Gig” economy is expanding. According to Intuit (the company behind Turbotax), the “Gig” economy currently represents about 34 percent of the economy, and it projects it will increase to 43 percent by 2020. However, their estimates include all freelancers, from Uber drivers to plumbers and electricians. In fact, according to CNBC, “Gig” economy payrolls have increased by more than 27 percent over traditional payroll. CNBC found that 81 percent of job growth in the 25 largest metro areas can be attributed to the “Gig” economy.

Employee vs. Contractor

“Gig” economy workers are treated as independent contractors (or “1099” as identified by the tax form they file). An independent contractor, unlike an employees, has no taxes taken out, is not treated as an agent of her employer, receives no additional benefits other than compensation, is paid on a “per job” basis, and is not covered by their employer’s workers’ compensation or liability insurance policies (in most situations).

Conversely, employees are easily understood. Their actions are imputed to their employer, the employer’s liability insurance protects its employees, and the employees enjoy benefits such as health insurance, unemployment, taxes being taken out, and other similar benefits. Employees, if they injure another person in the course of performing their duties, impute liability onto their employer. However, independent contractors do not.

Liability Issues

While a few companies, such as Uber and Lyft, carry insurance policies that cover their drivers, these policies are extremely limited. Moreover, if a victim is hopefully injured by a worker operating under a company with an umbrella liability policy, both the workers and the victim have to pray that the company honors its policy. In many situations, these companies can refuse to provide insurance coverage which harms the victim and the worker. Many workers do not carry personal insurance policies that cover commercial injuries. Furthermore, even the workers that often do not carry policies that are large enough to cover these injuries.

Moreover, these are the few companies that offer umbrella liability coverage. There are many companies that do not provide umbrella insurance. These companies hire workers and discard them once they become a problem or are unprofitable. The model has made these companies fabulously wealthy, with 20 to 30 percent fewer labor costs. However, it leaves the workers and victims without adequate liability coverage.

Future Risks of the “Gig” Economy

The “Gig” economy is severely disrupting the American economy and culture. It is normalizing a work ethic in which people are “always” available. It is allowing small, mega-technology companies to employ a handful of real employees while the majority of its services are performed by independent contractors.

Unfortunately, government regulations have not yet caught up the with the “Gig” economy. “Gig” workers are not true independent contractors because their employer controls the rate they charge, the customers they can take, and sometimes even the hours they work. These companies are exerting the same controls they normally exert over employees except they avoid any of the increased liability and costs. The result is a detriment to both “Gig” economy workers and their customers.

As discussed above, victims of “Gig” economy worker negligence in the course of performing their duties are unable to recover adequate compensation because most of these companies disavow any liability. What was once an open and shut case is dragged out by billion dollar companies who can afford to drown litigants with legitimate claims in paperwork because this area of law is still developing.

Categories: Personal Injury