Why the Gig Economy Won’t Call Workers Employees

A food delivery worker rides through an intersection on May 31, 2025, in Washington, DC. Employers are working to hollow out the notion of contractual employment. If the gigification of labor markets is normalized, all workplaces will increasingly come t | Kevin Carter / Getty Images

The following is excerpted from Disposable Workers: The Transformation of Employment by Paul Osterman (Harvard University Press, 2026).

s gig work has expanded from a marginal feature of the labor market into a significant one, a question that once seemed narrow and technical has taken on broad consequences: What does it mean to be an employee? The answer shapes whether a worker can join a union, whether they are owed overtime, whether they have recourse if injured on the job, and whether they can collect unemployment if the platform cuts them off. Employers have strong financial incentives to classify workers as independent contractors rather than employees, and many have pursued that classification aggressively, even where the practical reality of the work relationship closely resembles traditional employment. The disputes that have followed, in courts, in regulatory agencies, and in legislatures, reveal not just a legal ambiguity but a policy system struggling to keep pace with how work has actually changed.

To see why defining who is an employee is complicated, consider the disputes around ride-sharing services. Uber, working hard to avoid any ruling that its drivers are employees, calls the people behind the wheel “driver-partners,” but this is an odd use of the term partner. The CEO of Uber earned $24 million in 2022, while only 13 percent of Uber drivers in 2021 earned $30,000 or more. This difference among “partners” is remarkable compared to, say, law firms, where a top partner in a big New York firm earns only about twice as much as an average partner. Presumably, Uber uses the term as a signal of its insistence that the drivers are freelancers and not employees, but it is surprising that it can do this with a straight face.

Rhetoric aside, employee status for Uber drivers is complicated. For most drivers, the job is a part-time supplement to another standard job they hold. In a survey of Uber drivers, Jonathan Gruber reported that 45 percent earned less than $5,000 from all app jobs and only about a quarter earned $20,000 or more annually from all apps. In any three-month period, the survey found, only 22 percent worked more than twenty hours a week for four consecutive weeks. While most drivers are clearly doing the work part-time, for a nontrivial fraction, driving is their only and main livelihood. And the ride-share companies exert considerable control over how the drivers do their work. The importance of this point will become apparent when the relevant law is described below.

One might argue that the amount of effort and focus of advocates on the classification of gig workers seems disproportionate to the importance of these gig jobs in the labor markets. That figure is 1.9 percent of the workforce according to my estimate, an estimate that is consistent with that of other researchers. This would be a misreading of what is at stake. Many employers outside of ride-sharing are pushing against employee status, and what we see is essentially an effort to chip away at the boundaries. Consider that FedEx doesn’t seem to stop looking for ways to classify more of its workforce as freelancers.

Another example along the same lines is Amazon Flex, a service by which drivers use their own trucks to deliver packages, but do so under tight control by Amazon. Yet the company insists that they are freelancers. Likewise, Walmart is building its own delivery system, called Spark, which relies on freelancers who are under tight corporate control. Indeed, as the Wall Street Journal reported, “Today tens of thousands of Spark drivers, who aren’t Walmart employees and are paid by the delivery, make the majority of the retailer’s same-day deliveries. Walmart pays Spark drivers about $10, plus tip, to pick up orders from Walmart workers at stores, and sometimes collect items from shelves.”

Sometimes these efforts to play the classification game are almost comical: for example, a Las Vegas casino I interviewed dressed its cocktail waitresses as comic-strip characters so that it could claim them as performers rather than employees. A similar tactic was addressed by the courts when reality television shows were compelled to classify their contestants as employees.

If boundaries were weakened, it is easy to imagine employers in other industries similarly hiving off pieces of their workforces into freelance status.

A Possible Legal Solution

At the federal level, there are currently two somewhat different legal tests for defining who is an employee: the standard used by the Department of Labor’s Wage and Hours Division, the agency responsible for interpreting and enforcing the Fair Labor Standards Act; and the standard used by the National Labor Relations Board (NLRB).

These differing standards rest on different underlying bodies of law. The NLRB is compelled to rely on common law (that is, court decisions on prior cases, not all of which are consistent with each other) because the statutory language does not define employee, whereas the Fair Labor Standards Act language does define “to employ” as meaning “to suffer or permit work.” This language is seen as broader than the common law framing and so opens the door to more aggressive treatment of ride-sharing and to joint-employment liability.

As a practical matter, the two standards often overlap, and each depends on a list of job features such as degree of employer control, the scope of whatever discretion the worker has, the length of the relationship, and whether it appears the individual is in business for him or herself. Because the list is long under either of the standards, it becomes a matter of judgment and dispute over how to measure each factor and which to weigh most heavily. Indeed, in 1968, the Supreme Court unhelpfully ruled that there is no shorthand formula or magic phrase that can be applied to find the answer, and instead, all the features of the relationship must be assessed and weighed, with no one factor being decisive. What is important is that the total factual context be assessed.

The consequence is seemingly endless confusion and contestation. The challenges arise in part from inconsistent court rulings, but most problematic are the constantly shifting administrative agency interpretations, which cycle back and forth depending on the political winds. After the Obama administration adopted, in the Department of Labor’s Wage and Hours Division, a broad interpretation of the definition of employee status, the first Trump administration rescinded it and narrowed the definition by putting a heavy emphasis on the entrepreneurial opportunities of the worker. (Hence, an Uber driver could be considered an entrepreneur and therefore not an employee.) The Biden administration then returned to the Obama view, and at this writing the new Trump administration had not yet but was expected to undo the Biden rules. The same back-and-forth occurs with labor law. The National Labor Relations Board in the Obama years ruled in FedEx Home Delivery that drivers were employees, whereas in 2019, under Donald Trump, a new board considering SuperShuttle DFW, with essentially the same fact pattern, ruled that drivers were freelancers.

All of this confusion is complicated even more because some important protective legislation, such as Title VII of the Civil Rights Act, offers no definition of employee status.

The ideal solution would begin with legislative clarification of how to define an employee. A straightforward approach would be federal adoption of the so-called ABC rule, already in use by over thirty states to define employee status for state employment rules and for programs related to minimum wages, unemployment insurance, and workers’ compensation. This rule makes the assumption that everyone is an employee unless the employer can prove otherwise, and to succeed, that employer needs affirmative evidence on three criteria: that the work is done without the direction and control of the employer, that the work is outside the usual scope of the employer’s business, and that the person doing the work has their own independent business or trade doing that kind of work.

Simple and clear as this might seem, getting such a thing through Congress seems impossible, and in fact, an effort to do just this failed when the reform bill titled the 2021 Protecting the Right to Organize Act died in Congress. Absent a legislative remedy, the line between employee status and freelancer status will continue to be disputed and uncertain, with the resolution lying less in thinking about the law and more in thinking about who sits on the courts and in the White House.

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Paul Osterman is a professor emeritus of human resources and management at the MIT Sloan School of Management and the author of Disposable Workers: The Transformation of Employment.

Gig Economy; Labor Rights; Employee Status;

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