In the aftermath of Californian’s disastrous decision to avoid classifying gig workers as employees, the Securities and Exchange Commission is proposing a rule change that would allow businesses focused on the gig economy to compensate workers with equity.
In recent years, gig-focused tech companies have asked the SEC to tweak regulations that prevent them from issuing equity to anyone who isn’t an investor or employee. Because gig workers—like Uber drivers and Grubhub delivery agents—are considered contractors, they’ve been excluded from that potential benefit. In 2018, the SEC took up consideration of the idea and asked for public comment, and on Tuesday it released a proposal to make the rule changes.
The proposal outlines a system in which a qualifying company would be allowed to issue up to 15% of a “platform worker’s” compensation in the form of company stock over the course of a 12-month work period. The value of the equity issued can’t exceed $75,000 over the course of a 36-month period. The amendments also propose some potential lockup period where workers couldn’t sell their stock for some duration or to specific parties in order to curb securities speculation. Workers would not be allowed to choose between equity or cash payment.
There will be a 60-day public comment period on the rules and in the meantime, the Biden administration will take over. The next administration could have a different outlook on this issue.
In a letter to the SEC in 2018, Uber’s head of federal affairs wrote “providing equity would allow partners to share in the growth of the company, which could lead to enhanced earning and saving opportunities for the partner and for the generations ahead.” That may be true, but observers like Laura Padin, a senior staff attorney at the National Employment Law Project, see this bureaucratic shuffle as nothing more than another bandage on a wound that’s bleeding workers dry.
“They want a loyal and committed workforce, which is why they seek a change to Rule 701(c) that would align their platform workers’ compensation with the companies’ stock price,” Padin wrote in a 2019 letter to the SEC. “Yet, by labeling their workers as independent contractors, they seek to deny them the many legal protections and benefits that attach to employees, such as the right to collectively bargain and to be paid a minimum wage, as well as unemployment insurance, workers’ compensation, and employer-sponsored health insurance and retirement benefits.”
Until earlier this month, it looked like California was set to rectify the inequality of benefits between gig workers and employees through its AB 5 labor legislation but gig giants like Uber came together to pour more than $200 million into successfully promoting the passage of the Prop 22 ballot measure that rendered AB 5 toothless. Now, we’re seeing similar political efforts in Illinois and the push to sideline gig workers from benefits appears to be in overdrive.
Two SEC commissioners opposed the rule change on Tuesday. Writing in a dissenting statement, Allison Herren Lee and Caroline A. Crenshaw took issue with the attempt to create an exemption for one category of business while excluding others. “Unfortunately we cannot support this proposal because there is no sound policy justification for singling out a subtype of alternative workers for this exemption – those who provide services through internet- or technology-based platforms,” they wrote. “Indeed we cannot find any principled basis for the policy choice to single out a specific platform-based business model for a particular competitive advantage.”
The principled basis for providing gig workers with the same benefits as those enjoyed by employees remains clear: It’s the right thing to do, and your job could be the next to get gig-ified.
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