gig-economy-business-risksEveryone wants in on the shared economy. The peer-to-peer model has transformed the way people work, travel, shop and more. It’s convenient and flexible, but it’s not perfect. If you’re thinking about participating in the shared economy, beware of these business risks.

Risk #1: Labor Laws

Workers in the shared economy, often called gig workers, are generally classified as independent contractors, but this has been challenged in recent years. In 2018, the California Supreme Court issued what’s become known as the Dynamex Decision, which requires a strict three-part test to determine whether a worker can be considered an independent contractor.

There have been other court cases involving worker classification. The Verge reports that Uber has agreed to a $20 million settled in its worker classification lawsuit.

According to Forbes, some states – notably California – are writing laws that could restrict of even end the gig model, while other states are making things easier for gig companies to operate. If your company uses gig workers classified as independent contractors, prepare for changing laws and the possibility of lawsuits.

Risk #2: Reputation

Gig workers often act with little supervision. Often, companies use gig workers who don’t even work for them, but instead work for a third-party company. At the same time, these workers are representing your company.

To see how this could create risks, let’s imagine a customer orders food from your restaurant, and it’s delivered by a gig worker. The gig worker takes a long time, and the food arrives cold. Some of it appears to be missing. The customer writes a bad review – of your restaurant.

Businesses often take great care to screen and then train new employees. When dealing with gig workers, similar care must be taken. If a third party is used, it must be vetted thoroughly.

Risk #3: Liability

While some mishaps could result in a bad review, others could result more serious problems. To see how, let’s look at the previous example with the gig worker delivering food. What if the food makes the customer sick? It could be the result of a foodborne illness caused by a long delivery time and poor temperature control. It could even be the result of food tampering. Regardless, proving that the problem developed after the food left the restaurant could be difficult.    

When using gig workers, businesses must verify that good quality control measures are in place. It’s also important to have clear contracts that address liability issues and responsibility.

Risk #4: Auto Insurance

A lot of gig work involves driving. Gig workers usually use their private vehicles, and many keep their personal auto insurance policy. If they get into a crash while working, however, their personal policy might not cover them.

If this happens to a gig worker providing services for your company, the other party may come after your business – and its supposedly deeper pockets – for compensation.

The issue of insurance cannot be ignored. Companies using gig workers must ensure that proper coverage is in place. Have questions about how your business should be insured? Contact us.

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