Fed. Trade Comm'n, Policy Statement on Enforcement Related to Gig Work (Sept. 15, 2022)
American workers deserve fair, honest, and competitive labor markets. Over the past decade, internet-enabled “gig” companies have grown exponentially, and gig work now composes a significant part of the United States economy.1 One study suggests the gig economy will generate $455 billion in annual sales by 2023.2 The rapid growth of the gig economy is made possible by the contributions of drivers, shoppers, cleaners, care workers, designers, freelancers, and other workers. Protecting these workers from unfair, deceptive, and anticompetitive practices is a priority, and the Federal Trade Commission (“FTC” or “Commission”) will use its full authority to do so.3 As the Commission’s past work and current initiatives illustrate, the agency’s broad-based jurisdiction and interdisciplinary approach to market harms make it well positioned to confront the challenges this model can pose to workers.4
The gig economy touches nearly every aspect of American life, from food delivery to transportation to household services. Gig work involves activity where people earn income providing on-demand work, often through a digital service like an app.5 Ride-hailing companies recruit workers to drive customers in the worker’s personal vehicle. Food delivery services find workers to deliver items from restaurants, grocery stores, and other merchants to customers. Service apps connect workers with customers seeking help with cleaning, home repair, and other temporary jobs. The gig work model is expanding into healthcare, retail, and other segments of the economy.6 Demand for some services gig workers provide grew during the COVID-19 pandemic.7 Demand for other gig services, particularly transportation, decreased during that same time and caused financial struggles for some workers, illustrating the precarious nature of gig work.8
Sixteen percent of Americans report earning money through an online gig platform.9 Gig workers live throughout the United States, in urban, suburban, and rural areas.10 As highlighted in the FTC’s Serving Communities of Color report, gig workers are disproportionately people of color11: 30% of Latino adults, 20% of Black adults, and 19% of Asian adults report having engaged in gig work, compared to only 12% of White adults.12 Many gig workers have lower incomes and, because they may not be covered by wage and hour laws, can earn less than the minimum wage.13 More than half of American gig workers report that the money they earn through the gig economy is essential or important for meeting their basic needs.14
Gig workers are paid in different ways, including weekly, in “batches” after completing multiple gigs, or immediately upon completing a gig (for a fee).15 Many workers are heavily dependent on customer tips.16 Gig companies may generate revenue from multiple sources, including a “take rate”17 (a percentage of customer payments for workers’ services), customer fees, and commissions charged to merchants.
As with any evolving sector of the economy, the Commission is attuned to gig work’s promises and pitfalls. This Statement focuses on three market features that implicate the Commission’s consumer protection and competition missions:
Control Without Responsibility. Companies frequently promote gig work as a flexible opportunity for people to set their own hours and work on their own terms.18 These companies often categorize their workers as independent contractors. Yet in practice these firms may tightly prescribe and control their workers’ tasks in ways that run counter to the promise of independence and an alternative to traditional jobs. This tension has contributed to litigation across the country over allegations that gig workers are being misclassified as independent contractors rather than employees.19 When misclassification occurs, workers are often deprived of critical rights to which they are entitled under law (such as the right to organize, overtime pay, and health and safety protections), and saddled with inordinate risks (such as unclear and unstable pay, or responsibility for a vehicle, equipment, or supplies) and business expenses that employers commonly bear (such as insurance, gas, maintenance, and taxes).20 At the same time,
gig companies may use nontransparent algorithms to capture more revenue from customer payments for workers’ services than customers or workers understand.21 This dynamic calls for scrutiny of promises gig platforms make, or information they fail to disclose, about the financial proposition of gig work.
Diminished Bargaining Power. Gig workers often do not have the information they need to know when work will be available, where they will have to perform it, or how they will be evaluated.22 Behind the scenes, ever-changing algorithms may dictate core aspects of workers’ relationship with a given company’s platform, leaving them with an invisible, inscrutable boss.23 Workers have little leverage to demand transparency from gig companies: A decentralized work environment, the potential lack of legal protections to organize, and a high turnover rate driven by companies’ treatment of workers as replaceable all contribute to workers’ diminished bargaining power.24 Mandatory arbitration and class-action waivers are also increasingly common among gig workers, meaning that most efforts to vindicate worker rights occur in nonpublic, isolated proceedings.25 This power imbalance may leave gig workers more
exposed to harms from unfair, deceptive, and anticompetitive practices and is likely to amplify such harms when they occur.
Concentrated Markets. Markets populated by businesses that run online platforms are often concentrated, resulting in reduced choice for workers, customers, and businesses. As a platform grows by attracting more users (e.g., riders), it can become more valuable to users on the other side of the platform (e.g., drivers) by generating so-called “network effects.” Because network effects can lock in a dominant player’s market position, these businesses can be incentivized to pursue tactics designed to quickly capture a large share of the market, leading the market to “tip” and raising significant barriers to entry. Gig companies in concentrated markets may be more likely to have and exert market power over gig workers or engage in anticompetitive unilateral or coordinated conduct. Such conduct may eliminate or further weaken competition among existing gig companies for workers’ services or prevent new gig companies from getting off the ground or being able to enter the market. The resulting loss in competition may enable gig companies to suppress wages below competitive rates, reduce job quality, or impose onerous terms on gig workers.26 In the absence of robust competition among gig companies, unfair and deceptive practices by one platform can proliferate across the labor market, creating a race to the bottom that participants in the gig economy, and especially gig workers, have little ability to avoid.
The FTC plays a vital role in addressing these and other challenges facing gig workers, including practices directed toward customers, workers, and honest businesses. As the only federal agency dedicated to enforcing consumer protection and competition laws in broad sectors of the economy, the FTC examines unlawful business practices and harms to market participants holistically, complementing the efforts of other enforcement agencies with jurisdiction in this space. This integrated approach to investigating unfair, deceptive, and anticompetitive conduct is especially appropriate for the gig economy, where law violations often have cross-cutting causes and effects.
While online gig platforms may seem novel, traditional legal principles of consumer protection and competition apply.27 And the manifold protections enforced by the Commission do not turn on how gig companies choose to classify working consumers.28 The Commission will use the full portfolio of laws it enforces to prevent unfair, deceptive, anticompetitive, and otherwise unlawful practices affecting gig workers.
Gig companies that classify their workers as independent contractors may seek to retain control over their workforce while simultaneously shifting costs and risks onto workers. So classified, workers may be deprived of the protections of an employment relationship to, for example, insist on minimum pay and recordkeeping standards,29 understand what comprises an hour of payable work,30 or share information about their income with coworkers to assess unfair compensation practices or organize for higher compensation.31 A range of FTC authorities can apply when gig companies seek to exploit this vulnerability by disclosing pay and costs in an unfair or deceptive manner. The Commission also recognizes that misleading claims about the costs and benefits of gig work can impair fair competition among companies in the gig economy and elsewhere.
Deceptive or Unfair Pay Practices. False, misleading, or unsubstantiated claims about earnings may violate Section 5 of the FTC Act,32 the Franchise Rule, or the Business Opportunity Rule,33 and can trigger civil penalties.34 Likewise, withholding money owed to workers without consent can violate Section 5’s prohibition against unfairness.35 Gig companies often advertise hourly pay to prospective workers or promise a specific amount or range of pay to existing workers for completing a gig.36 Yet fewer than half of gig workers understand how their pay is determined, and misleading or unsupported claims about their earnings can leave workers in a financial bind.37 Deceptive earnings claims and opaque compensation criteria can also impede competition by preventing workers from accurately comparing opportunities presented by gig companies.
The Commission has initiated rulemaking proceedings to strengthen its ability to detect and deter deceptive earnings claims and has sought comment on the prevalence of deceptive earning claims relating to gig work.38 In the meantime, misleading earnings claims remain prohibited by Section 5 of the FTC Act.39 Likewise, pursuant to the Franchise Rule or the Business Opportunity Rule, gig companies that require new participants to make required payments may need to disclose any claims they make about potential earnings and have a reasonable basis for, and written materials on hand to support, those claims.40 The Commission has also issued Notices of Penalty Offenses related to earnings claims and testimonials41 to place gig companies, among others, on notice that the Commission is working to deter misleading representations throughout the gig economy, including by seeking civil penalties where appropriate.42
Undisclosed Costs or Terms of Work. By the same token, deceptive claims or nondisclosures about startup costs, training fees, other expenses, or other material terms can violate Section 5,43 and the failure to make required disclosures can violate the Franchise Rule or Business Opportunity Rule.44 When a firm requires consumers to make one or more required payments to sign up for a work opportunity, that arrangement may fall under the Franchise Rule
or the Business Opportunity Rule.45 The Rules require accurate, upfront disclosures—including information about the franchise or business opportunity, other workers, and prior lawsuits—before consumers make any commitment.46
Gig workers may lack key information about their working conditions, and can be subject to onerous contract terms and arbitrary evaluation requirements. Increasingly, gig workers are managed by algorithms, which use extensive data collected from workers and other consumers to make important management decisions using undisclosed criteria. Multiple laws enforced by the Commission may apply when these practices are deceptive, unfair, anticompetitive, or otherwise unlawful.
Unfair or Deceptive Practices by an Automated Boss. Section 5 of the FTC Act prohibits unfair or deceptive practices in any form, including practices involving artificial intelligence (“AI”) tools or algorithm-based decision-making.47 In the gig economy, companies may employ algorithms to govern how gigs are made available to workers, how workers are paid, how worker performance is rated, and when workers are suspended or terminated from the platform. Firms may deploy surveillance technology to monitor workers’ every move without
transparency about how it impacts worker pay or performance evaluation.48 Workers report unexpected drops in their performance ratings,49 unexplained changes in their pay,50 assignment of impossible or dangerous delivery routes,51 or other arbitrary evaluations that could lead to wrongful terminations.52 Companies are responsible for fulfilling their promises to their workers, even if they use automated management technologies.53 Gig companies that employ algorithmic tools to govern their workforce should ensure that they do so legally.54
Unfair Contractual Terms & Restrictions on Mobility. Restrictive contract terms may constitute unfair or deceptive acts and practices in violation of Section 5 of the FTC Act if they unfairly harm workers, render a gig company’s representations misleading, or prevent fair competition for workers. Gig companies often present workers with nonnegotiable contracts that may include lopsided provisions.55 Such take-it-or-leave-it provisions may, for example, hinder workers from seeking other jobs during or after their time with a company, bar negative reviews,
or waive fundamental protections.56 If those provisions cause substantial injury that is not reasonably avoidable and not outweighed by countervailing benefits, they may constitute an unfair act or practice under Section 5(n) of the FTC Act.57 The Commission has used its unfairness authority to prohibit certain one-sided clauses in credit contracts,58 to stop abusive use of a one-sided clause allowing a financing entity to obtain uncontested judgments against small businesses,59 to prevent contractual clauses suppressing negative consumer reviews,60 and to invalidate illusory choice-of-law and venue-selection clauses that, in very fine print, left the forum state undetermined.61 The Commission will continue to scrutinize potentially unfair terms companies impose on gig workers or other consumers.
Certain unfair terms may also implicate the antitrust laws and raise concerns about unfair methods of competition with respect to gig labor markets. The Commission will continue to investigate the effects on workers and competition of any non-compete clauses in the gig economy. Non-compete provisions may undermine free and fair labor markets by restricting workers’ ability to obtain competitive offers for their services from existing companies, resulting in lower wages and degraded working conditions.62 These provisions may also raise barriers to entry for new companies.63 Such provisions may violate Section 1 of the Sherman Act64 and the FTC Act’s prohibition on unfair methods of competition.65 The Commission will also investigate contractual limitations, such as liquidated damages clauses66 or nondisclosure agreements,67 that may be excessive or overbroad and effectively operate as non-compete provisions. Moreover, the Commission recognizes that companies may be able to effectuate the same harmful results through imposing a variety of other restraints that restrict worker mobility.
Anticompetitive mergers or practices may prevent gig workers from obtaining competitive compensation or more favorable terms or working conditions. Such conduct may also lead to higher prices or fees, diminished service, or less favorable contractual terms for customers or businesses. Firms that undertake such conduct may run afoul of the antitrust laws, and the Commission will focus its resources on investigating potential unlawful conduct by or
linked to lower job satisfaction” and do not correlate with greater pay or training); see also FTC Comm’r Noah J. Phillips, Prepared Remarks at FTC Workshop on Non-compete Clauses in the Workplace, at 2–3 (Jan. 9, 2020) (“When you can exit a job, you have greater leverage to improve the terms of your employment.”); FTC Comm’r Rebecca Kelly Slaughter, Prepared Remarks at FTC Workshop on Non-Compete Clauses in the Workplace, at 5 (Jan. 9, 2020) (prioritizing investigation into “potential restraints that may be inhibiting competition for labor” and noting that non-compete clauses can “affect people’s livelihoods and ability to earn a living”).
63 See, e.g., Matt Marx & Lee Fleming, Non-Compete Agreements: Barriers to Entry ... and Exit?, 12 Innovation Pol'y & Econ. 39, 51 (2012) ('Non-competes assist in preserving the firm's competitive position by discouraging entry.'); see also U.S. Dep't of the Treasury, The State of Labor Market Competition, at 16 ('Lower worker mobility increases recruitment costs for all firms as fewer workers are seeking to switch jobs than otherwise would, absent the post-employment restrictive employment agreement.').
64 15 U.S.C. § 1.
65 See, e.g., Statement of Interest of the United States at 6, Beck v. Pickert Med. Grp., P.C., Case No. CV21-02092 (Nev. Dist. Ct. Feb. 25, 2022) (“Non-compete agreements between employers and employees constitute concerted action properly subject to scrutiny under Section 1 of the Sherman Act.”); see also U.S. Dep’t of the Treasury, The State of Labor Market Competition, at 16 (“[R]estrictive employment agreements can both result from and reinforce employer market power.”).
66 See, e.g., Wegmann v. London, 648 F.2d 1072, 1073 (5th Cir. Unit A 1981) (“The contract clauses to which plaintiff object are, given the prohibitive magnitudes of liquidated damages they specify, de facto covenants not to compete . . .”).
67 See, e.g., Brown v. TGS Mgmt. Co., 271 Cal. Rptr. 3d 303, 319 (Cal. Ct. App. 2020) (“Collectively, these overly restrictive [confidentiality] provisions operate as a de facto noncompete provision . . .”).
among gig companies, from wage-fixing to the unlawful consolidation or exercise of market power.68
Wage-Fixing & Coordination. The Commission will investigate evidence of agreements between gig companies to fix wages, benefits, fees, or other terms relating to gig work that should be subject to competition.69 The Commission will also investigate evidence of no-poaching agreements, where companies agree not to solicit or hire each other’s workers, and agreements to share competitively sensitive information that might suppress compensation for workers.70 The Commission may further examine any use by gig companies of technology-enabled methods of collusion or exclusion. Agreements among gig companies that anticompetitively harm workers violate Section 1 of the Sherman Act and may be challenged by the Commission directly, and, in the case of wage-fixing or no-poaching agreements, may be referred to the U.S. Department of Justice (“DOJ”) for potential criminal prosecution.71
Market Consolidation & Monopolization. The Commission will review and, as appropriate, challenge mergers and other combinations of gig companies that may substantially
lessen competition between or among gig companies.72 The Commission will also investigate any exclusionary or predatory conduct by dominant firms that may unlawfully create or maintain a monopoly (a dominant seller) or a monopsony (a dominant buyer or employer), resulting in harm to customers or reduced compensation or poorer working conditions for gig workers. Such conduct may include the use of exclusive contracting, predatory pricing, or other forms of monopolization, and may be subject to legal action by the Commission as a violation of Section 2 of the Sherman Act.73
In addition to robust enforcement, the Commission addresses issues in the gig economy through policy work, outreach, and partnerships with other law enforcement agencies.
Governmental Collaboration. The FTC’s Regional Offices have spearheaded the agency’s efforts to identify law violations, develop policy, and collaborate with government partners in this space. The Commission is also partnering with other agencies on broad labor initiatives and individual enforcement actions. In December 2021, the FTC and DOJ hosted a workshop to promote competitive labor markets and worker mobility.74 And in July 2022, the FTC and National Labor Relations Board signed a Memorandum of Understanding that deepens the agencies’ collaboration around issues facing gig workers through sharing information, conducting cross-training for staff at each agency, and partnering on investigative efforts within each agency’s authority.75
Ensuring Equity. The FTC’s Equity Action Plan reaffirms the Commission’s commitment to protecting the public, including meaningfully addressing barriers that historically underserved communities face in participating in and benefiting from a fair and thriving marketplace.76 As outlined in the Equity Action Plan, the FTC’s Bureau of Consumer Protection is focusing resources to aid staff in assessing whether certain communities are disproportionately affected or targeted by unfair or deceptive practices, including in the gig economy.77 Similarly, the Equity Action Plan outlines the FTC’s Bureau of Competition’s commitment to consider more explicitly the impact of mergers and anticompetitive conduct on workers, particularly low-wage workers.78 The FTC will address any such harms through robust law enforcement, community outreach, and new initiatives to better understand and address the impact of emerging technologies in the gig economy and elsewhere on historically underserved communities.
Public Participation. The Commission continues to seek input from consumer and labor groups, industry, and experts on challenges facing gig workers through monthly Open Commission Meetings79 as well as targeted workshops like those on dark patterns80 and labor-market competition.81 Gig workers harmed by unlawful practices should continue to file reports at ReportFraud.ftc.gov so the Commission and other governmental agencies can promptly identify and take action against deceptive, unfair, and otherwise unlawful acts and practices.
Successfully addressing the range of consumer protection and competition challenges associated with the gig economy requires innovative and collaborative approaches by governmental enforcers that are responsive to the public's concerns and input. The Commission will continue to capitalize on its broad jurisdiction and interdisciplinary expertise to combat unlawful practices that harm gig workers.