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Gig Economy Boost Will Persist Post-Pandemic, Report Says

By Max Kutner · Mar 31, 2021, 10:13 PM EDT

Remote work and an expanded gig economy are just some of the trends that will outlast the COVID-19 pandemic and create wage and hour, discrimination and labor issues that employers will have to navigate, according to a new report by Littler Mendelson PC.

Tuesday's inaugural report by the management-side firm's Global Workplace Transformation Initiative analyzed how the health crisis will transform workplaces post-COVID-19. Among the predictions is that, as workers stay remote, employers will increasingly rely on independent contractors and gig economy workers.

"It is inevitable that as companies continue to shift their reliance to a remote workforce, they will also realize a greater ability to more easily outsource more flexible functions of the workplace," the report said.

Michael A. Chichester Jr., a Littler shareholder and one of the report's authors, said the pandemic has sped up existing changes to workplaces when it comes to remote work.

"It was almost as if the pandemic was rocket fuel for workplace transformation issues," Chichester told Law360 on Wednesday. "These are multifaceted issues. ... When you think about employees working remotely long term, there are a whole host of labor employment law issues that come up, such as the wage and hour implications."

Outsourcing could happen in sectors such as information technology, accounting and finance, software development, web development, customer service and administrative support, according to the report.

"There is no question that the reality of working from home will accelerate the use of independent contractors in the workplace," the report said.

Independent contractors often lack legal protections and benefits mandated for employees, such as minimum wage, overtime pay, and paid sick and family leave.

The report pointed out that laws have already shifted to raise the bar for employers to be able to classify workers as independent contractors instead of employees, such as California's A.B. 5, which is based on the so-called ABC test from the Golden State's high court.

A similar federal law could follow, as President Joe Biden said in his campaign platform that he would work with Congress to create a "federal standard modeled on the ABC test for all labor, employment, and tax laws," the report said.

Such a law could make things harder for employers, according to the report.

"The Biden administration's desire to utilize the stringent independent contractor test nationwide may hinder the ability of companies to engage with independent contractors," the report said.

'Wandering Workers' and Wages

As workers stay remote even after the pandemic, employers will have to navigate the various state laws where employees are working, which could be different from where they typically work or where an employer is located, according to the report.

"When workers 'wander,' an employer must evaluate the impact that relocation will have on a variety of labor and employment compliance topics," the report said. Those include expense reimbursement and minimum wage.

The report gave an example of an employee from Texas who earns a local minimum wage of $7.25 per hour and who goes to stay with parents for a few months in California, where the minimum wage is higher. If the employee is physically working in California, the employer must instead pay the higher minimum wage and also provide paid sick leave.

Remote work also makes it harder for supervisors to monitor or verify hours worked.

"The home-work boundaries are now blurred," the report said. "Monitoring off-the-clock work is particularly challenging as the workday for many has stretched, and managers do not have line-of-sight visibility to their subordinates — one cannot look over the cubicle walls to make sure everyone has left for the day."

More Sick Leave

With so many different state and local paid leave laws, some of which have gone into effect in response to the pandemic, there is "a minefield for the unsuspecting employer," the report said. Remote work complicates this, too, as workers are not always in the same place as their employer, begging the question of which jurisdiction's law holds.

Many of the state laws mirror the Family and Medical Leave Act, which enables eligible employees of covered employers to take unpaid leave for certain medical reasons for up to 12 weeks in a year, according to the report. These state laws almost always prohibit discrimination and require an employer to reinstate the employee who took leave, the report said, cautioning employers to monitor the laws to avoid employee lawsuits.

Labor Advocacy in the Workplace

When it comes to labor issues, the report said employers should watch for the Protecting the Right to Organize Act, which passed in the House and would change the National Labor Relations Act to include the ABC test. The legislation "would change the entire labor landscape, including the ... independent contractor versus employee debate," the report said.

The legislation could force employers to decide whether to "terminate independent contractor relationships, which would cost millions of people their livelihoods or carry the heavy financial burdens of converting independent contractors to regular employees despite many contractors' preference to remain independent," the report said.

An even more immediate labor issue employers are facing and will continue to face is worker engagement in social justice issues in the workplace, which "will present unprecedented and difficult challenges for employers," the report said.

The report pointed out that topics coming up in this advocacy are not traditional organizing issues.

"The employees are not as concerned about wages, benefits or even workplace safety," the report said. "These workers seek to have a voice in the strategic direction of the organization, not only as it relates to employees, but as it relates to customers, vendors, suppliers, the community and the world, at large."

The report warned employers against taking adverse action against these organizers, but also against "giving in to these demands or negotiating with small groups of employees" that co-workers might not have designated as an appropriate bargaining unit.

--Editing by Abbie Sarfo.

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