Gig economy: US 'under-resourced' to enforce employment laws

A new law from the Biden administration set to go into effect this March aims to protect gig workers from predatory employment practices and guarantee select benefits. Separately, independent contract work reportedly contributed up to $1.27 trillion to the US economy in 2023.

NYU Wagner Labor Initiative Director Terri Gerstein addresses loopholes employers use to label workers as independent contractors rather than full-time employees, demanding more regulation and enforcement from investigatory bodies to protect American workers.

"The US Department of Labor Wage and Hour Division, which enforces the minimum wage law and overtime as well as child labor and other laws, only has around 700 something investigators for the entire country, which is around 400 fewer than they had in the late 1970s," Gerstein tells Yahoo Finance.

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Editor's note: This article was written by Luke Carberry Mogan.

Video Transcript

AKIKO FUJITA: To what extent can this be enforced? Or, I guess, the question is, how does enforcement look like in this particular case, when you consider how wide and how big the gig economy is today?

TERRI GERSTEIN: Well, we certainly do need a lot more enforcement resources than we presently have. The US Department of Labor Wage and Hour Division, which enforces the minimum wage law and overtime, as well as child labor and other laws, only has around 700 and something investigators for the entire country, which is around 400 fewer than they had in the late 1970s. So we really need a lot more enforcement resources. State and local enforcement agencies are also similarly under-resourced.

At the same time, they can still take action and make a big difference in this area. For example, as I wrote about in the op ed, Denver Labor, which is a city and county labor enforcement office in Denver, Colorado, recently issued citations to two gig companies that were hiring workers-- it was astonishing to me when I learned about it. They were hiring workers in restaurants, doing jobs like prep, cook, and busboys, and dishwashers, hiring them as independent contractors instead of as employees.

And again, if you go back to what these laws-- what this means, it means those workers don't have the right to minimum wage. If they're servers, they don't have a legal right to get the tips people have left for them. They don't have a right to a safe workplace. These are very serious, very serious deprivations of people's rights.

And the notion that a dishwasher in a restaurant is running their own small business is kind of ludicrous on its face. And to me and why I was inspired to write the op ed in "The New York Times" is that this shows the spread of this model to far beyond drivers or delivery workers or much higher paid knowledge and creative workers to really, really areas where we've never seen it before-- restaurants warehouses.

I found websites, doing some googling, where there were health care apps that were hiring nurses, hospital janitors. There's an education app that bills itself as being like DoorDash, except you get to work with kids. And so you just see this spread throughout the economy. And it's really, really concerning when you think about the fact that it means that workers by doing these companies, they are trying to ensure they don't have to pay minimum wage or comply with the laws that every other employer has to follow, including our tax laws, as well.