A Better Gig? Analyzing Efforts to Improve the “Gig Economy”

Welcome to the November 2020 edition of our newsletter!  In this issue, we’ll examine a recent proposal to allow “gig” workers to be compensated in stock by privately-held companies they work for.

Gig Workers Stock and Trade: A Look at a Recent Proposal to Compensate Gig Workers with Stock

In the years prior to the pandemic, the development of “gig work” – where independent contractors provide services from meal delivery to various “on call” services – changed several aspects of the economy, making it easier for more remote areas to have access to various goods and services.  During the spring 2020 lockdown and in the months since, demand for these types of services has skyrocketed.  Critics of this type of work complain that workers are pushed to extreme limits in the name of productivity, without enjoying the benefits and protections of typical employees,

A recent U.S. Securities and Exchange Commission proposal seeks to change that balance in some ways.  Specifically, a rule was proposed that would allow privately-held companies to compensate gig workers with stock amounting to 15 percent of their compensation, up to $75,000.

Although the change of political administrations may imperil the advance of this specific proposal, it highlights risks for employers and employees.  It is somewhat reminiscent of employees being paid in stock options by various “dot com” technology companies at the turn of last century.  The risk for employees hinges on the financial viability of the company and its stock – though the reward may come if that company later goes public.  If policies such as the recent SEC proposal become part of the gig economy, it is incumbent upon workers to educate themselves about the company’s prospects before they decide to opt for a portion of their compensation being paid in its stock.  Researching a company’s executive team and analyzing its recent track record can be difficult regarding privately-held companies, but policies meant to incentivize “gig work” may drive such workers to form groups (if not actual unions), which would then be wise to educate their members about the risks that could accompany the rewards.