The gig economy might yet come to retail — but there are some growing legal issues that will have to be worked out before store associates log in to an app to go to work.
While the gig worker model is popular with ridesharing services such as Uber and Lyft, there are signs of interest in alternative short-term work systems for retail, which has long relied on independent contractors, but just usually when looking for freelance photographers and models.
The Retail Industry Leaders Association, which represents nearly 80 members including “premier members” Walmart, Target and Gap Inc., issued a report last month suggesting that retailers should consider more alternative employment arrangements, including hiring independent contractors. RILA’s report, which it put together with staffing firm ManpowerGroup Solutions, was based in part on a survey of 2,500 retail workers from roughly two years ago, according to the group, and concluded that such options help hire workers who value flexible working hours and arrangements.
But experts said retailers considering hiring independent contractors for core, daily operations must be mindful of legal barriers, including the new California law set to take effect in January that raises the bar for classifying workers as independent contractors.
The gig economy has drawn criticism from academics, lawmakers and worker advocates who have pointed out that independent contractors do not qualify for the minimum wage, Social Security, worker’s compensation and health insurance benefits extended to traditional employees. Independent contractors, who are not considered employees, are also not covered by federal workplace discrimination protections.
As of May 2017, independent contractors accounted for nearly 7 percent of employment in the country, according to the Bureau of Labor Statistics. The California bill AB-5 imposes a test for employers that asks whether the worker in question is performing work that is within the usual course of the company’s business — and, if so, that means they should be classified as employees, and not gig workers.
That will also be an important question for retailers considering expanding their use of independent contractors, attorneys said.
“The sticking point is — what is the usual course of a retailer’s business?” said Samantha Hardy, who leads the retail practice at Sheppard, Mullin Richter & Hampton, and is a partner in its labor and employment practice group. Hardy represents retailers on employment issues.
“Clearly, sales people are within the course of a retailer’s business, as well as people selecting merchandise and deciding what to sell,” she said. “But there are a lot of other things that retailers hire people to do, and there was a lot of uncertainty on the part of retailers on how AB-5 would affect them.
“People you expect to find in a store in the mall — greeters, cashiers, salespeople, stockpeople in the back, those people are really doing what is the usual course of the retailers’ business — under [AB-5], those people would need to be employees,” said Hardy.
Evan Armstrong, vice president of workforce at RILA, said, “The style of work that Uber and Lyft and those other tech companies have popularized should be utilized in more traditional industries like retail, which attract the same type of part-time employees that the gig economy does.”
RILA does not yet track data on the extent of the retail industry’s use of independent contractors, but plans to do so. Representatives for Walmart, Target and Gap did not respond to requests for comment on the report.
Supporters of measures like AB-5 in California said such regulations can prevent workers performing core function roles from being misclassified as independent contractors and missing out on pay and benefit advantages of being employees. AB-5 mirrors some similar legal language that has gained traction in other states, including Massachusetts.
“It proceeds upon the assumption that one of the factors involved in exacerbating inequality in our society today is the growth of the independent contractor classification,” said William Gould, 4th, professor of law emeritus at Stanford Law School, and a former chairman of the National Labor Relations Board. Gould joined a group of professors who wrote to California Governor Gavin Newsom in August supporting the bill.