Unique Legal Challenges for Businesses in the Gig Economy

The growth of the gig economy has led to an increasing number of legal challenges faced by freelancers, independent contractors, and other gig economy participants. These issues typically become prominent as a freelancer keeps taking on different projects or a contractor performs different roles.

An experienced corporate law attorney can help you sift through and find remedies to unique legal challenges, including litigation, misclassification, and contract disputes. Here are some of the unique legal challenges faced by entrepreneurial businesses in the gig economy.

Legal Issues Related to Pay and Labor

Alabama laws are clear on legal issues regarding fair pay and labor. Freelancers don’t have access to standard benefits as regular employees do. In the gig economy, workers don’t get vacation days, days off, sick leaves, and time off with pay. Labor laws are designed for employees to ensure they get a fair deal.

These laws don’t support freelance work, which means that gig workers don’t have access to numerous benefits. In addition, freelancers don’t get insurance and other benefits as part of their contracts as well. Legal issues can occur when businesses categorize employees as gig workers or independent contractors.

Taxation-Related Concerns in the Gig Economy

Freelancers are independent contractors where state law is concerned. They are required to apply taxes for each payment received instead of having the amount deducted from their paychecks. Freelancers need to know the amount of taxes they should pay for both state and federal taxation periods. You may need to research taxation laws and contact IRS for additional paperwork. It’s fundamental that you fill out correct forms since they are different from when working as a company.

Contract Situation Can be Precarious

The gig economy has come a long way. Besides, there are still concerns about the future of this industry. The heavy lean on contractual work over gaining standard employment can give rise to several legal issues. Contract agreements in the gig economy can result in a precarious situation where the freelancer has to rely on them for work.

These documents may not have ironclad terms. Companies use loose language in contracts so that it can apply to different scenarios. This fuels the possibility of legal issues. A primary concern with contracts is the high possibility of a breach. This can leave a freelancer without obtaining payment for their work. These legal concerns can be avoided if an attorney draws the terms and provisions listed within a contract. It will also help ensure the document is valid.

Running a Business in the Gig Economy

Most freelancers work alone in the gig economy without an employer. They acquire payment for individual jobs and essentially run their own business. Without a legal entity, freelancers are open to the risk of losing their assets. In the gig economy, business owners should make sure that they take the necessary steps for protecting their assets. This can be done through entity protections. You should consult with an attorney to learn more about protecting yourself and your assets.

Many freelancers experience payment issues when their employer refuses to follow through with the terms of the contract. An experienced attorney can help you if the employer doesn’t complete the necessary actions for providing payment. Small business owners and freelancers usually don’t have the capacity to initiate legal proceedings against a party that refuses to pay.

Other legal concerns regarding payments in the gig economy relate to the type of payment made. For instance, many employers prefer making payments through cryptocurrency instead of standard funds. It can be challenging for freelance businesses to navigate through contracts, client lists, and other aspects of a standard business without hiring an attorney.

Gig Economy is Full of Hurdles for Small Businesses

The gig industry may be smooth and lucrative for Uber, Lyft, and other giant conglomerates. However, things are rife with legal issues for small businesses and freelancers. As per a survey by the Bureau of Labor Statistics, over 20 million US workers are employed in the gig economy. This covers independent contractors, contingent workforce, temporary help agency workers, on-call workers, and workers provided by contract firms.

Technology-based platforms have only added to the surmounting legal troubles in the economy. They use disruptive business models that lower business costs by hiring third-party suppliers. These businesses have reclassified traditional workers that would otherwise have been on payroll as self-employed.

While the new working arrangements provide increased flexibility and have deepened the labor pool, many workers prefer security over flexibility. In addition, the model transfers sick pay, minimum wage, vacation, maternity or paternity benefits, health insurance, and social welfare taxes to the freelancer. These challenges were addressed in the landmark Dynamex ruling.

This ruling by the California Supreme Court prohibits companies in the gig economy from misclassifying their workers as independent contractors.

Get a Competent and Skilled Business Law Attorney on Your Side

The experienced and capable corporate law attorneys at the BHM Law Group provide simplistic yet relevant legal advice to businesses of all sizes. Our attorneys have decades of legal experience in all matters related to corporate and employment law. You can count on us to provide innovative and streamlined solutions to any challenges you come across. To set up your complimentary consultation, call (205) 994-0902 or reach us online.