What is the Gig Economy?

Currently, there is no official definition of the “gig economy” but can best be described as an engagement to complete a single task or project more or less to “work on-demand”. According to the Pew Research Center on Internet and Technology, more than one-third of the U.S. workforce is officially part of the freelance gig economy and 24% of Americans have reported earning money from the digital ‘platform economy’ (think Lyft, Uber, AirBnB) in the past year and 54% of older adults said that they no longer want to work full time. 

Some interesting stats from SmallBizTrends.com:

  • More than one-third of Millennials (the largest demographic age group in the workforce since 2015) are independent workers.
  • Nearly 3-in-10 American workers earn some form of income through independent work and gig opportunities like Uber and Airbnb.
  • 63% of those interviewed in the report say marketing is the most important expense to grow their business.

While the concept of a short-term job is not new the method of which people are finding employment is. Companies are connecting these workers with “employers” through websites and apps.

Examples of Websites/Apps for the “Gig” Economy

  • Amazon Flex is an app that gives people ages 21 and older the opportunity to set their own schedule jobs range from $18 – $25 an hour.
  • CrowdFlower is an app for data scientists as well as mathematicians and statisticians, to psychologists, entrepreneurs, and information systems engineers who want to complete simple tasks from their own home.
  • Fancy Hands‘ mission is to provide assistants for everyone. As an assistant and accept tasks on your own schedule and get paid per task based on the difficultly, time of day, and how long it takes to complete.
  • Freelancer.com is the world’s largest freelancing and crowdsourcing marketplace with more than 25 million users.
  • Instawork is an on-demand staffing app for gig workers and hospitality businesses. Instawork will handle the insurance, billing, and payments.
  • Rentah makes it easy for you to rent out your belongings and services to earn money. You choose what to rent and for how much according to your schedule.
  • Snagajob is for full-time or part-time security, restaurant, customer service, retail, administrative, and seasonal jobs in your area.
  • SpareHire is for on-demand finance and consulting work. You need at least two years of professional work experience in investment banking, management consulting, private equity, venture capital, or corporate development.
  • Wonolo is an-demand staffing platform that allows job seekers work on their own terms. From same-day hourly jobs to longer engagements.

The Future of the Gig Economy

In early Sept 2019, the California legislature passed AB5 a gig-work bill, which could turn contractors into employees that have sparked a heated debate. The bill was signed by Gov. Gavin Newsom in September 2019 and went into effect on Jan. 1, 2020.

  • Companies such as Uber, Lyft, and DoorDash work with “contractors” who act a lot like employees—they perform those companies’ core business functions since they are the drivers and delivery workers.
  • Who supported the bill: …gig workers, unions, and legislators who see tech companies’ big talk about disruption and innovation as a way to underpay people for their labor.
  • Who’s against: Uber and Lyft claim that contracting gives workers flexibility, and labeling them employees could result in higher costs and kill their businesses.

The #MeToo movement has triggered a sea of change with regard to sexual harassment in the workplace, including a new trend in legal agreements.   

Dubbed the “Weinstein clause,” the new addition to the standard roster of representations and warranties in a sales agreement focuses on a company’s knowledge or awareness of accusations of sexual misconduct against its executives and managers.

For example, if Company A decides to purchase Company B, the practice has always been for the soon-to-be acquired company to disclose any information about its financial situation as well as ongoing litigation or threats of lawsuits, and represent that it has complied with certain laws. Issues like allegations of sexual misconduct were not previously part of the consideration.

Now, in the wake of the disclosures of decades of alleged sexual harassment and abuse by former Weinstein Company CEO Harvey Weinstein, a new clause has appeared. Company B is now being asked to represent to Company A that individuals holding leadership positions have not been accused of sexual misconduct and that Company B has not entered into a settlement agreement related to sexual misconduct.

A typical clause may read: “To the Knowledge of the Company, (i) no allegations of sexual harassment have been made against (A) any officer or director of the Acquired Companies or (B) any employee of the Acquired Companies who, directly or indirectly, supervises at least eight (8) other employees of the Acquired Companies, and (ii) the Acquired Companies have not entered into any settlement agreement related to allegations of sexual harassment or sexual misconduct by an employee, contractor, director, officer or other Representative.”

In some cases, Company B has been asked to put some of the purchase price in escrow for a period of time to cover costs shouldered by Company A in the event allegations of sexual misconduct arise after a transaction. Other clauses feature a time period going back several years, often past the actual statute of limitations for claims based on the conduct at issue.

A review of agreements involving public companies by Bloomberg revealed the clauses are being used by companies in a host of industries, from real estate to hospitality to entertainment to healthcare. While the use of the clauses was at first limited to large deals, they are now being found in deals of all sizes.

A variation on the Weinstein clause is also making its way into employment agreements. Companies have reportedly started to change their contracts with executives to be more explicit about sexual harassment and misconduct with regard to termination for cause, in the hopes of reducing (or eliminating) severance pay or the acceleration of stock options when a high-ranking employee is asked to leave.

Previously, cause for termination was generally limited to triggering events such as conviction of a crime.

In addition, companies are asking incoming executives to affirmatively represent that they have not been the subject of a sexual harassment claim, reached a settlement agreement involving allegations of sexual misconduct and/or engaged in harassment or misconduct.

The updated employment agreements serve a two-fold purpose: to create an incentive for executives to avoid such behavior and to protect the company in the event the executive does engage in sexual misconduct.

Allegations of sexual misconduct are now a significant business risk to companies, as evidenced by the drop in $3.5 billion in value to shareholders of Wynn Resorts after sexual harassment allegations surfaced against Steve Wynn; Weinstein’s production company, valued at $200 million, filed for bankruptcy as the claims against him mounted. 

Whether in an employment agreement or sales deal, the so-called Weinstein clauses demonstrate the concrete effect of the #MeToo movement that continues to play out for employers and businesses, with greater scrutiny on culture, diversity, sexual harassment claims and preventative measures.