What Are Gig Workers?

Use these links to jump to different sections:

• The Problem of Misclassifying Workers in the Gig Economy
• Federal and State Laws Govern Worker Classification
• How Worker Classification Is Determined
• The Consequences of Misclassifying Workers
• Find an Experienced Employment Law Attorney

The world of employment has undergone significant restructuring in the last decade or so, incorporating concepts like remote work, flex-time, gig economy workers, and a host of other innovations that challenge our traditional understanding of what it means to be an employee.

Gig workers are often understood to be independent contractors. However, whether gig workers are classified as employees or independent contractors is a matter of ongoing debate and legal change.

The Problem of Misclassifying Workers in the Gig Economy

“The thing about the gig work economy is that people want to make everybody within that an independent contractor,” says Antoinette Choate, an employment law attorney in Chicago, Illinois. “But misclassification of employees is a significant concern.” Certain sectors are particularly prone to misclassification, such as construction, Uber, Lyft, and offsite services like housecleaning.

If you’re classified as an independent contractor and do not have employee status, the company you perform work for doesn’t have to pay you minimum wage or offer overtime, payroll taxes, sick leave, unemployment insurance, workers’ compensation, or health insurance mandated by the Affordable Care Act. In addition to the impacts on workers, misclassification costs the United States government billions of dollars in revenue.

Federal and State Laws Govern Worker Classification

There can be obvious incentives for business owners to shield themselves from the expenses of employees—like saving 30 percent or more in labor costs.

However, classifying a worker as a full-time employee or independent contractor is not a matter of choice. Instead, it’s dictated by federal, state, and local laws. Intentional misclassification, then, can have costly outcomes for the employer.

How Worker Classification Is Determined

Determining a worker’s classification is largely an assessment of who controls the work itself. “You look at the degree of control the employer has,” says Choate. “Do they set your schedule, give you your shifts, give you your supplies? Do they control the way you effectively do your work? If so, you’re truly an employee of the company.” Expanding on such factors, the U.S. Department of Labor (DOL) finalized a new rule in March 2024 for determining if a worker is an independent contractor under the Fair Labor Standards Act (FLSA).

Choate elaborates on what can be a common misconception: “As I understand the gig economy, it’s temporary. But just because it’s temporary or seasonal, like holiday-season workers for a retailer, that doesn’t mean you’re not an employee. They’re setting your schedule, telling you when to show up; you have to comply with their code of conduct. You may have a transient project, but if you’re making them come to your workplace and act like any other employee, it may be a gig, but they must still be an actual employee.” 

The Consequences of Misclassifying Workers

When employers get it wrong, the results can be severe. “There are tons of actions where people get misclassified,” Choate says. “For example, I represented drivers who worked for a restaurant where the restaurant called them independent contractors. The judge agreed that, under the law, they were employees. When that happens, they can be owed wages because they may not have been paid overtime. Any time an employee works more than 40 hours in a given work week, they get time-and-a-half under the Fair Labor Standards Act and Illinois and local law.”

She continues: “Depending on whether the conduct was willful, you may also get liquidated damages under federal and state law, which is double damages plus attorney’s fees and costs. Under Chicago and Cook County employee law, you can get treble damages if you fail to pay someone properly.” Moreover, officers and employees who willfully misclassify can be held liable for unemployment and workers’ compensation fines and be subject to criminal charges.

Find an Experienced Employment Law Attorney

Clearly, there are significant risks to assuming project workers are independent: “Be very careful when you classify because misclassifying you can get into a lot of trouble,” Choate says. If you need help evaluating your workers’ classifications, talk to an experienced employment attorney. For more information about this area, see our overview on labor law and wage and hour laws.