The gig economy is on trial, and policymakers must take notice

This month, the gig economy began its first ever court trial — and it will certainly not be its last. And while Silicon Valley will undoubtedly be monitoring the case, policymakers in Washington and across the country should also be paying close attention, given the enormous ramifications it could have for American entrepreneurs, workers and consumers.

The core question before a San Francisco judge is whether an aspiring actor who was delivering food on the side was an employee of GrubHub or an independent contractor, as the company asserts. The judge’s decision could set precedents that send shockwaves through the on-demand economy, which is capturing an increasingly larger share of the American economy.

Much of the “gig” or “on-demand” economy is predicated on the independent contractor model. Both the start-up companies and, increasingly, the employees themselves like the “independence” of the gig economy. It fosters speed and innovation on the employer side and flexibility and entrepreneurship on the employee side. GrubHub’s business model, at least as it relates to labor, is similar to other on-demand companies. This is why a precedent set in this case could expose other companies to similar lawsuits.

{mosads}The GrubHub lawsuit also has a closer and more direct connection to other cases advancing against on-demand companies like Uber and Lyft. The plaintiff’s lawyer in the case, Shannon Liss-Riordan, has made it her work to hold companies liable for extending employment protections to workers. She runs the website UberLawsuits.com.

While protecting workers from abuses is important work, the problem is that it essentially attempts to maintain the architecture of the old economy workplace within the new economy. In the current political environment, legislative and regulatory efforts to address these issues remain elusive — but the courtroom provides a real opportunity.

Creating the guardrails for a new employment model that works for a new economic model should not be a matter for the courts. Elected officials and policymakers at the federal, state and local levels need to smartly engage in this space and bring clear and concise rules to the modern workplace. A patchwork of court-ordered precedents in different jurisdictions will only create confusion for businesses and workers and fail to serve the millions of customers who rely on the services and conveniences provided by the on-demand economy.

The good news is that Congress has recently dipped its toe in the water around these issues, with the House Education and Workforce Committee holding a public hearing on the sharing economy this week focused on innovation and opportunity. Although congressional action is not known for its speed, the fact that some federal lawmakers are showing a willingness to better understand the policy ramifications of the new economy is an encouraging sign for businesses, workers and consumers.

The “future of work” is here, and if policymakers do not quickly get their arms around modernizing the rules of the workplace, the economic disruption that is occurring may create irreparable harm to the “future of workers.” At a minimum, the current system is creating confusion, uncertainty and inefficiencies. Everyone needs clarity around what constitutes an employee or an independent contractor, and exactly what the obligations of employers are — if any.

Workers, employers, investors, entrepreneurs — and all American consumers — deserve clear legal distinctions so that everyone knows their rights, obligations and economic opportunities.

In the arena of employment law, policymakers tend to make small changes and tweaks to the existing framework. As we enter a period of disruption probably not experienced since the Industrial Revolution, it is time for lawmakers on all levels to begin rethinking the entire framework in a comprehensive way and pay close attention to court cases targeting the on-demand economy.

Joe Rinzel is a spokesman for Americans for a Modern Economy, a consumer advocacy group focused on reducing the number of laws governing the U.S. economy.