Classifying the Rights of Participants in Nigeria’s Emerging Gig Economy

Many businesses, particularly those in the Gig Economy, have been sued because they have misclassified workers as independent contractors rather than employees. These issues frequently present bet-the-company litigation[1], with billions of dollars and the very business models of the businesses at stake. Although there is a near-universal agreement that categorizing workers into two rigid categories cause a slew of problems, this category is based on antiquated notions that do not map cleanly onto the modern economy. Legal scholarship has thus, far failed to adequately confront the existing employment case-law[2] to propose a new way forward.

This article accomplishes this by delving into the history of both the gig economy and the contractor-employee divide, using insights from their intersection to propose a new test for properly categorizing workers. In doing so, it defines the contours of a new type of worker, the “independent employee.” Although many people have suggested that a new type of worker would be beneficial, they have generally failed to explain how such a category would work in practice. This article fills that void by suggesting a functional framework for identifying independent employees, as well as determining the legal protections and benefits that should be provided to them.

THE GIG EVOLUTION

At the dawn of the Industrial Revolution, it was a logical step for business owners to gather large groups of workers together in firms to produce ever-increasing quantities of identical goods, as it was seen to be cheaper and more efficient than dividing labour into manageable units arranged around uniform systems and processes[3]. While this may have limited the number of bespoke and artisanal products available, consumers seeking consistent and affordable goods and services benefited greatly from mass production.[4] As early as the 1970s, cracks in the façade began to appear. Businesses began to follow the advice of investors and management experts at the time, selling off secondary or tertiary business lines and outsourcing back-office responsibilities to cut costs and focus on core competencies. [5]

However, with the advent of pocket-sized computers with GPS, wireless Internet access, and the ability to run complex algorithms connecting individual users, a new breed of businesses that serve as intermediaries between their users, offering “platforms” or “virtual marketplaces” that connect those in need of specific services with those offering them,[6] has been enabled. Many of these self-acclaimed gig businesses offer two key features in addition to connecting service consumers and service providers: payment processing and dynamic reputational rating systems. Platforms make it possible for strangers to conduct business “sight unseen” by providing the security and information required.[7]

Gig Economy businesses were born by utilizing modern technology to create virtual marketplaces that allow service providers and service consumers to connect directly with one another with minimal transaction costs, and it has rapidly unlocked a latent market for goods and services that could not have functioned in a world of higher transaction costs.[8]

In its earliest form, the gig economy referred to musicians performing “gigs” at various jazz clubs, bars, and concert halls. Its current usage began “at the height of the 2009 financial crisis in early 2009 when the unemployed made a living by ‘gigging,’ or working several part-time jobs.” [9] But throughout its usage, the gig economy has been referred to as employment that lasts for a set amount of time. Work arrangements such as freelancers, independent contractors, project-based workers, and temporary or part-time hiring are examples of gig employees in the workforce. Gig-workers typically work irregular schedules that are driven by the fluctuations depending on the demand for their services[10] as a result of this fluctuating demand, most gig-workers are paid on a piecework basis, i. e. they are paid per task rather than hourly.

Fortunately, recent technological strides and the proliferation of smartphones have reshaped the gig-economy and the commercial landscape in which it operates, and has also allowed for the creation of digitally mediated labour marketplaces. The increased use of the smartphone has contributed significantly to the growth of the gig-economy through the creation of digitally mediated labour marketplaces and platforms. [11]

The impact of the gig economy cannot be overemphasized as it has seismically shifted the traditional workplace model to be more individualized, independent, and impersonal, however, this impersonal relationship inherent in the gig economy has created an environment that lacks employer accountability. Consequently, working conditions for the vast majority of gig-workers appear to be poor, irrespective of the work being performed. These conditions are largely defined by low wages, increased health and safety risks, and a lack of basic employment benefits.

THE INTERSECTION

The employee-contractor distinction stems from nineteenth-century common law, which sought to determine when a master should be held liable for tortious injuries caused by his servant. However, the historical justification for exempting independent contractors from employee protections is that they were thought to have more bargaining power than employees. This is because they were typically highly skilled workers who commanded premium wages on the open market and could provide their services to many customers on a project-by-project basis, rather than being tied to a single employer.

Now, members of the Gig Economy, have been forced to choose whether to classify the employees who use their platforms as ’employees’ or ‘independent contractors.’ This distinction is far from academic because the safeguards afforded by a plethora of statutes only apply to employees. Many (though not all) Gig Economy businesses classify their service providers as independent contractors, but several downsides of this blanket approach are apparent. Setting aside the question of whether that classification is correct as a matter of law, utilizing independent contractors entails real costs for both the workers and the businesses involved. For example, several Gig Economy businesses have expressed a desire to provide various benefits and training to workers they have classified as independent contractors but fear that doing so might provide further ammunition for plaintiffs bringing misclassification suits.[12] As explained by the leader of Peers[13], a membership organization comprised of Gig Economy workers, many businesses in this sector “would probably love to give more training, if they could, and would probably like to give workers’ compensation, but if they do that, that’s a benefit. Their workers start to look like an employee.” [14]

As a result, laws and regulations intended to help workers are actively harming them by preventing businesses from providing independent contractors, with benefits that both the contractor and the company would prefer.

THE NIGERIA LABOUR AND EMPLOYMENT LAW REGIME

Among the consequences of this lacuna created is the rash of lawsuits[15] being filed against Gig Economy businesses, in which billions of dollars in damages are at stake and the legality of the businesses’ very business models are called into question. Like in the case of Oladipo Olatunji & Anor (Representing themselves and other Uber and Taxify Drivers in Nigeria in a Class Action) v. Uber Technologies System Nigeria Limited & 2 Ors[16] where the National Industrial Court was presented with an opportunity to address the status of Uber drivers under the Labour law. In this case, the Claimants brought an action against Uber imploring the Court to declare that the drivers working for Uber are employees of Uber under Section 91 of the Labour Act by the nature of Uber’s control over them. Unfortunately, the Court dismissed the case because the Claimants were unable to prove their case as they did not furnish sufficient evidence that would have aided the resolution of the case. However, the Court recognized that forms of work have changed, and the traditional or orthodox distinctions between the worker/employee and the employer no longer exist or have been stretched to absurd limits.

The crux of the matter is borne out of the need for laws and regulations to be enacted that would specifically reference these sets of employees and also clearly state their rights, protections and obligations. The draftsmen of the extant labour and employment-related legislation must be commended for at least attempting even times when the concept of a gig economy was not envisaged.

NIGERIAN LABOUR ACT

Under the Nigerian Labour Act[17] Section 91(1) defines a worker thus

‘“Worker” means any person who has entered into or works under a contract with an employer, whether the contract is for manual labour or clerical work or is expressed or implied or oral or written, and whether it is a contract of service or a contract personally to execute any work or labour, but does not include-

  1. any person employed otherwise than for the purposes of the employer’s business, or
  2. persons exercising administrative, executive, technical or professional functions as public officers or otherwise, or
  3. members of the employer’s family, or
  4. representatives, agents and commercial travellers in so far as their work is carried on outside the permanent workplace of the employer’s establishment; or
  5. any person to whom articles or materials are given out to be made up, cleaned, washed, altered, ornamented, finished, repaired or adapted for sale in his own home or on other premises not under the control or management of the person who gave out the articles or the material; or
  6. any person employed in a vessel or aircraft to which the laws regulating merchant shipping or civil aviation apply;’

TRADE UNIONS ACT

In a similar vein, the provisions of Section 1 of the Trade Unions Act[18] defined a trade union as:

Any combination of workers or employers, whether temporary or permanent, the purpose of which is to regulate the terms and conditions of employment of workers, whether the combination in question would or would not, apart from this Act, be an unlawful combination because of any of its purposes being in restraint of trade, and whether its purposes do or do not include the provision of benefits for its members.’

The phrases “whether temporary or permanent,” and “workers or employees,” in this definition demonstrate the draftsman’s intention to capture all workers regardless of employment status. The implication would then be that they have the right to join or form trade unions without prior authorization from their employer, to improve their welfare and working conditions.

WORKMEN’S COMPENSATION ACT

Section 73 of the Workmen’s Compensation Act[19] defines an employee thus

‘a person employed by an employer under an oral or written contract of employment whether on a continuous, part-time, temporary, apprenticeship or casual basis in the federal, state and local governments and any of the government agencies and the formal and informal sectors of the economy.

This is the first definition in Nigeria that adequately captures all the relevant categories of employees, both traditional and non-traditional. The use of the terms “part-time,” “temporary,” and “casual” expressly states that the benefits provided by this Act apply to casual or non-traditional workers such as gig workers.

However, there still exists a dire need for the laws to be very precise and specific in addressing the misclassification of these employees in order to grant them equal rights as their counterparts.

A LEGISLATIVE AND JUDICIAL SOLUTION

The economic realities of the gig economy warrant a new test for determining whether a worker is performing services for a company. However, some courts have been hesitant to adopt a new test, finding that it is the role of the legislature to provide an appropriate solution. Nigeria should take on legislative actions by passing laws that permit gig employees to collectively bargain with the businesses “that hire, contract with, and or partner with them.” This law should also be drafted to allow the parties to seek a judicial remedy if either party refuses arbitration.

It should therefore be taken as a principle that one of the primary goals of the “independent employee” classification must be predictability: the parties to an agreement should have legislative and judicial confidence concerning how disputes regarding their relationship are likely to be resolved.

Also, there should be a rebuttable presumption that workers are properly classified as “independent employees” once they agree to render service(s) to a business it will be expressly stated that such a classification would apply.

Also, in situations where there is good reason to believe that workers have been misclassified, litigation would, of course, remain an option. To determine whether the presumption of classification had been applied in error in doing so, courts should eschew the complex and convoluted multi-factor tests developed to distinguish employees from independent contractors, but instead should follow these factors in the course of determination:

  1. whether the company exercises significant control over the details of the work: If a company exercises significant control over the details of the work completed by a worker, that control should weigh in favour of finding an employer-employee relationship.
  2. whether the worker is relying on the proceeds of the work as a primary or sole source of income: If a worker is relying on the proceeds of the work as their primary or sole source of income, that reliance should weigh in favour of indicating that the worker is an employee of the company[20].
  3. whether the company relies on the workers, collectively, as a significant, consistent revenue generator: If a company relies on the workers, collectively, as a significant, consistent revenue generator, that reliance should weigh in favour of finding that the workers are employees of the company.
  4. whether the employer is operating in an industry that traditionally utilizes employees or independent contractors: The type of business the employer is in has always been a factor in the test. Platform businesses, however, are non-traditional entities that can operate within a traditional industry. Businesses who are and want to be treated as gig businesses must show that they are indeed operating in the gig economy. Therefore, this analysis must take into account the industry that the business is in. This would counter the effect of businesses claiming to be gig businesses simply to lower costs and undercut the competition.
  5. whether the arrangement is defined by a contract of adhesion: If the arrangement between a business and an employee is defined by an adhesion contract, the definition should clearly state the employee’s classification. This factor, however, unfairly favours the company. Because these the business will always define the label of the parties’ relationships in the employment contract which are rarely read by employees, for instance, Uber drivers must agree every time the contract is revised before they can access the passenger pool.[21]

Having stated how to determine if a worker qualifies as an independent employee, the next step naturally would be to provide legal protections for these employees. First, the various civil rights protections provided to employees should be expanded to cover independent employees as well.

Also, the Nigerian Labour Congress should propagate and push for the establishment of a trade union for independent employees in the different facets of labour in Nigeria. Trade Unions Act should be amended to allow independent employees to unionize and collectively bargain

CONCLUSION

The binary categorization of workers as either independent contractors or employees has failed. Our persistent application of antiquated legal tests to distinguish between outdated types of workers presents stark problems for all involved. Businesses struggle with how to structure their workforce, workers do not know the benefits and protections to which they are entitled, and the judiciary is left to resolve disputes without clear guideposts as it sifts through the muck. Rather than continue trying to force square pegs into round holes, this Article offers a new model by sketching the contours of the third type of worker: the independent employee.

In particular, outmoded tests should be abandoned in favour of focusing solely on the amount of control exercised over a worker, defining independent employment as an intermediate category of work. This will help those who are not as autonomous as independent contractors but who are also not subject to the same degree of instruction and supervision as traditional employees. This Article proposes a new legal regime in which independent employees would be entitled to many of the same protections granted to traditional employees, but who trade a degree of economic assurance for greater flexibility in setting the terms and conditions of their work. Focusing on one possibility provides a foundation upon which others may build, by further illuminating the benefits and pitfalls of revising our employment laws, to better reflect the new types of work that have emerged in the modern economy.

Flowing from the above recommendations, the future of independent workers should be able to match this description: A job that allows you to provide your services, explore your capabilities, gives you the freedom to do your job, allows you to make mistakes while experimenting, pays you to think, recognizes your worth by rewarding you, and allows you to spend time with your loved ones while gigging. More of this must be designed in the future of work.

REFERENCE

  1. can be any legal action that threatens the existence of the company or major line of business, whether or not the case goes to trial.
  2. Anigboro v. Sea Trucks (Nigeria) Ltd [1995] 6 NWLR (Pt 399)
  3. IRS, ‘Independent Contractor (Self-Employed) Or Employee? Internal Revenue Service’ [2021] 1(1) IRS Journal, , Https://Www.Irs.Gov/Businesses/Small-Businesses-Self-Employed/Independent-Contractorself-Employed-Or-Employee [Https://Perma.Cc/4q7u-Qcac] accessed on the 17th January, 2022.
  4. Economist, ‘There’s an App for That’, [2015] 1(1) Economist Monthly Digest <https://www.economist.com/briefing/2014/12/30/theres-an-app-for-that> accessed 17th January, 2022
  5. J. O. Shimabukuro ‘What Does the Gig Economy Mean for Workers?’ [2017] 1(1) Congress Research Service Journal < https://fas.org/sgp/crs/misc/R44365.pdf> accessed on the 17th January, 2022.
  6. N. Davidson & J. Infranca, ‘The Sharing Economy as an Urban Phenomenon’ [2016] 34 Yale Law and Policy Review < https://ylpr.yale.edu/sharing-economy-urban-phenomenon> accessed 17th January, 2022.
  7. Steven Hill, Raw Deal: How The “Uber Economy” And Runaway Capitalism Are Screwing American Workers (St. Martin’s Press 2016)
  8. A. R. Kaplan & M. L. Nadler, ‘Airbnb: A Case Study in Occupancy Regulation and Taxation’ [2015] 82 University of Chicago Law Review Dialogue https://chicagounbound.uchicago.edu/cgi/viewcontent.cgi?referer=&httpsredir=1&article=1038&context=uclrev_online accessed 17th January, 2022
  9. Leslie Heck, ‘Year in a Word: Gig Economy’ Financial Times <https://www.ft.com/content/b5a2b122-a41b-11e5-8218-6b8ff73aae15/ > accessed 17 January, 2022.
  10. A. Stewart & J. Stanford, ‘Regulating Work in the Gig Economy: What Are the Options?’ [2017] 28 Economics and Labour Relations Review, <https://journals.sagepub.com/doi/abs/10.1177/1035304617722461> accessed on 17th January, 2022
  11. Ibid (n4)
  12. C. Said, ‘Employee vs. Freelancer? Choice Is Based on Outdated Laws, [2015] San Fransisco Chronicles < http://www.sfchronicle.com /business/article/Employee-vs-freelancer-Choice-is-based-on-6431933.php> accessed 17January, 2022
  13. M. L Nadler, ‘Independent Employees: A New Category of Workers for the Gig Economy’ [2018] 19 North Carolina Journal of Law & Technology < https://scholarship.law.unc.edu/ncjolt/vol19/iss3/2/> accessed 17th January, 2022
  14. E. Huet, ‘Contractor or Employee? Silicon Valley’s Branding Dilemma’, [2014] Forbes <https://www.forbes.com/sites/ellenhuet /2014/11/18/contractor-or-employee-silicon-valleys-branding-dilemma. >Accessed 17 January, 2022
  15. Lawrence Igwegbe v. Standard Alliance Life Assurance Limited (unreported Suit No. NICN/LA/465/2013)
  16. Suit No. NICN/LA/546/2017, judgment delivered on 4 December 2018; per Kanyip J. available at https://judgement.nicnadr.gov.ng/details.php?id=3075;
  17. CAP 198. LFN 1990
  18. CAP T14 LFN 2004
  19. Cap W6, LFN 2004
  20. Razak v. Uber Techs., Inc., 2017 WL 4052417 (E.D. Pa. 2017)
  21. Rimel v. Uber Techs., Inc., 246 F. Supp. 3d 1317 (M.D. Fla. 2017)

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