Mary is a dog walker on the Rover app. She advertises her dog-walking business on the app, and once she gets a booking request, she can respond or decline it. Mary is a gig worker because she derives income from freelance work on an on-demand basis.[i] The term gig economy refers to the larger landscape where short-term contracts and freelance work are more common than permanent, full-time jobs.
The rise of the gig economy has transformed lives, allowing people to earn a living with unparalleled flexibility and opportunities. According to the World Bank, the gig economy now accounts for twelve percent of the global workforce.[ii] Technology platforms have played a crucial role in expanding gig-work, connecting workers with consumers. Applications such as Uber, DoorDash, TaskRabbit, and Upwork have revolutionized industries by providing on-demand services through a mobile device. However, the surge in gig-based work has brought about legal challenges, including labor rights and worker classification, which complicates the balance between worker autonomy and the need for legal protections.
Unlike traditional employees, gig workers are often classified as independent contractors. This distinction exempts companies from providing certain benefits and protections that full-time employees enjoy, such as health insurance, minimum wage, paid leave, workers’ compensation, and unemployment benefits.[iii] The legal status of gig workers has sparked debate across multiple jurisdictions, leading to varying court rulings and legislation.
I. Worker Classification: Independent Contractor or Employee?
One of the most pressing legal questions surrounding gig workers is the classification of workers as independent contractors or employees. The distinction is significant, as only traditional employees are entitled to protections under labor laws, including minimum wage, overtime pay, unemployment insurance, and anti-discrimination protections under the Fair Labor Standards Act (“FLSA”) and Title VII of the Civil Rights Act.[iv] Most gig platforms classify their workers as independent contractors, which allows them to circumvent many labor regulations. This has been the subject of many legal challenges. Courts often apply a combination of the “economic realities” test or the “ABC test” to determine a worker’s status.
A. Economic Realities Test
The economic realities test analyzes the extent to which the individual is financially dependent on the employer.[v]Courts using this test assess factors such as the worker’s opportunity for profit or loss, investments by the worker and the employer, permanence of the working relationship, the degree of control the company has over the worker, and whether the work performed is integral to the employer’s business.[vi] Under this framework, if a worker is dependent on the platform for the majority of their income and is subject to significant control over their work—including pay rate, consumers, and tasks performed—they may be deemed as employees and entitled to labor protections under the FLSA.
B. ABC Test
The ABC test is stricter on employers and is more gig worker friendly. It presumes that a worker is considered an employee and not an independent contractor unless three conditions are satisfied: (1) the worker is free from the control and direction of the hiring entity in regard to the performance of the work; (2) the work performed is outside the usual course of the hiring entity’s business; and (3) the worker is customarily engaged in an independently established trade or business of the same nature as that of the work performed.[vii] Under this framework, a worker would have to be significantly detached from the hiring entity’s control and line of work. For example, a restaurant owner hiring someone to install an air conditioning unit in their building will likely satisfy the requirements under the ABC test. According to the World Population Review, most states now use the ABC test, including California, Washington, and Illinois.[viii] Several other states require that only two of the prongs be met.[ix]
II. Regulatory Responses and Legislative Efforts
The legal landscape surrounding gig work is constantly evolving, with federal and state jurisdictions taking various approaches to the issue of worker classification.
A. Federal Legislation
On January 10, 2024, the Department of Labor (“DOL”) published a final rule issuing guidance on worker classification through the FLSA.[x] It emphasizes conducting a totality-of-the-circumstances analysis and references the ABC test in length.[xi] However, the DOL’s stance on gig workers fluctuates depending on the administration in power. During the Trump administration, the DOL was more lenient on independent contractor classification, which the Biden administration subsequently rescinded.[xii] The Protecting the Right to Organize (“PRO”) Act was introduced in 2021 to expand the rights of workers to unionize and challenge different labor and employment issues, including the misclassification of independent contractors.[xiii]
B. State and Local Efforts
States like California and New York have made efforts to regulate gig work. California passed the AB5 law, codifying the ABC test, and New York’s recently enacted Freelance Isn’t Free Act ensures that gig workers receive similar protections to those of traditional employees.[xiv] On the other hand, more business-oriented states, such as Texas and Florida, allow companies to classify workers as independent contractors with minimal oversight.[xv]
III. Legal Implications
The legal status of gig workers has significant social and economic implications. Misclassification of workers can lead to wage theft, loss of tax revenue, and increased reliance on public assistance programs.[xvi] However, overly restrictive worker classification laws could reduce employment opportunities and eliminate the flexibility that gig workers currently enjoy. The economic realities test and the ABC test represent opposite ends of the worker classification spectrum. A more balanced approach could involve modifying the ABC test to require only two of its three prongs to be satisfied, as is currently done in a few states. The gig economy is an added complexity of a rapidly evolving labor market, which means the debate over the future of worker classification will likely intensify. The challenge for courts and policymakers lies in finding a balance in the tug-of-war between protecting workers’ rights and preserving the qualities that make gig opportunities attractive.
[i] See What is a Gig Worker?, Gig Econ. Data Hub (2024), https://www.gigeconomydata.org/basics/what-gig-worker; see also Gig Worker, Merriam-Webster, https://www.merriam-webster.com/dictionary/gig%20worker (last visited Sept. 25, 2024).
[ii] See Demand for Online Gig Work Rapidly Rising in Developing Countries, World Bank Grp. (Sept. 7, 2023), https://www.worldbank.org/en/news/press-release/2023/09/07/demand-for-online-gig-work-rapidly-rising-in-developing-countries.
[iii] See Kevin Kleine, Challenges to Gig Worker Laws Are Spreading, JDSupra (June 28, 2024), https://www.jdsupra.com/legalnews/challenges-to-gig-worker-laws-are- (“Independent contractors typically are not subject to the same laws as employees, including those mandating benefits such as paid time off, minimum wage or overtime pay.”).
[iv] See Daniel Kurt, Laws That Protect Employees, Investopedia (Apr. 10, 2024), https://www.investopedia.com/articles/personal-finance/120914/8-federal-laws-protect-employees.asp.
[v] See 29 C.F.R. § 795.110.
[vi] See id.
[vii] See ABC Test, Lab. & Workforce Dev. Agency (2024), https://www.labor.ca.gov/employmentstatus/abctest/.
[viii] See Independent Contractor Laws by State 2024, World Population Rev., https://worldpopulationreview.com/state-rankings/independent-contractor-laws-by-state (last visited Sept. 25, 2025).
[ix] See id.
[x] See Employee Misclassification as Independent Contractors Under the FLSA, U.S. Dep’t of Lab., https://www.dol.gov/agencies/whd/flsa/misclassification/rulemaking (last visited Sept. 25, 2024).
[xi] See Employee or Independent Contractor Classification Under the Fair Labor Standards Act, 89 Fed. Reg. 1350 (Jan. 10, 2024), https://www.federalregister.gov/documents/2024/01/10/2024-00067/employee-or-independent-contractor-classification-under-the-fair-labor-standards-act.
[xii] See Trump-Era Rules Reversed on Treating Gig Workers as Contractors, The Register (Jan. 10, 2024), https://www.theregister.com/2024/01/10/us_dol_gig_worker_rule/.
[xiii] See Protecting the Right to Organize (PRO) Act, H.R. 842, 117th Cong. (2021).
[xiv] See A. B. 5, 2019–2020 Leg., Reg. Sess. (Cal. 2019) (codified as amended at Cal. Lab. C. § 2750.3).
[xv] See Independent Contractor Laws by State 2024, supra note viii.
[xvi] See John Schmitt, et al., The Economic Costs of Worker Misclassification, Econ. Pol’y Inst. (Jan. 25, 2023), https://www.epi.org/publication/cost-of-misclassification/.
