Gig work and worker classification: what changes are coming

Whether you are an employee or an independent contractor is not a detail on a tax form. It decides whether you are owed a minimum wage and overtime, whether you can claim unemployment benefits when the work dries up, whether your employer pays into your social security or pension, whether you are covered if you are injured, and in many places whether you can join a union. For app-based drivers and couriers, freelancers, and a growing number of people in ordinary jobs relabeled as “contractors”, that line has been moving for several years, in different directions in different countries.

This article sets out where the main tests stand in the US, the UK and the EU, with notes on Canada and Australia, then translates them into what changes for a rideshare driver, a courier and a freelancer with a handful of clients, and what you can do now whichever way the rules settle.

Why the tests keep changing

Every jurisdiction faces the same problem. Platforms designed their businesses around contractor status because it removes most employment costs and obligations. Regulators and courts look at the reality of the work, in which the platform sets the price, allocates the jobs, monitors performance and can deactivate the worker, and see something that looks a lot like employment. The result is a decade of litigation, legislation, ballot measures and reversals.

The direction of travel is toward more rights for platform workers, but rarely through full employee status. The more common outcome is a third category or a set of minimum standards (a pay floor, some insurance, protection against arbitrary deactivation) that leaves contractor status in place. Whether that is a fair compromise or a way of locking in second-class status depends on who you ask.

United States: federal rules and the ABC test

At federal level, the question of who counts as an employee under the Fair Labor Standards Act (the law behind minimum wage and overtime) is governed by an “economic reality” test, and the Department of Labor’s interpretation of that test has swung with each administration. A 2021 rule under the previous Republican administration emphasized two “core factors”, control over the work and opportunity for profit or loss, which made contractor status easier to defend. A 2024 rule under the Biden administration replaced it with a six-factor test giving equal weight to factors including how integral the work is to the business and the worker’s investment and skill, which tilted toward employee status. As of this writing the department has signaled that it will not rely on the 2024 rule in its own enforcement and is working toward replacing it, so the federal test is best described as unsettled. Courts apply their own versions of the economic-reality test regardless, so the rule matters most for the department’s enforcement priorities.

The Internal Revenue Service and the National Labor Relations Board apply their own tests for tax and union purposes, so it is entirely possible to be a contractor for one purpose and an employee for another.

State law is where the sharpest lines are. California’s AB5, in force since 2020, wrote the “ABC test” into statute: a worker is an employee unless the hiring business can show (A) the worker is free from its control, (B) the work is outside the usual course of the business, and (C) the worker is customarily engaged in an independent trade doing that kind of work. Prong B catches platforms, since driving is plainly within a rideshare company’s usual course of business. Massachusetts and New Jersey use versions of the same test, and several other states apply it for unemployment insurance purposes.

The platforms’ response in California was Proposition 22, a 2020 ballot measure that carved app-based drivers and couriers out of AB5 in exchange for a guaranteed earnings floor for engaged time, a healthcare stipend for those working enough hours, and some insurance. The California Supreme Court upheld Prop 22 in 2024, so in the state with the strictest test, the largest group of gig workers is exempt from it. Massachusetts reached a 2024 settlement with the major rideshare companies that set a minimum pay rate and some benefits without resolving classification, and Minnesota, New York City and Seattle have set minimum pay rates by statute or ordinance. The pattern is minimum standards rather than reclassification.

AB5 also hit freelancers: writers, musicians, photographers and consultants found clients dropping them rather than risk liability, and the legislature added dozens of exemptions over the following years.

United Kingdom: the three-tier system

The UK is different from the US in having three statuses rather than two: employee, “worker”, and self-employed. Workers sit in the middle. They do not get unfair dismissal protection or statutory redundancy pay, but they do get the National Minimum Wage, paid holiday, rest breaks, protection from unlawful deductions and whistleblowing protection, and they are entitled to be auto-enrolled into a pension.

The landmark case is Uber BV v Aslam, decided by the Supreme Court in 2021, which held that Uber drivers were workers, not self-employed contractors, because of the degree of control the platform exercised over fares, routes, acceptance rates and ratings. The court also said that what matters is the reality of the relationship, not what the contract calls it. Uber subsequently gave UK drivers holiday pay and pension enrolment, though disputes over how “working time” is calculated continue.

The line is not straight. In 2023 the Supreme Court held that Deliveroo riders were not workers, mainly because their contracts allowed them to send a substitute to do their deliveries, and genuine substitution rights are inconsistent with worker status. Two apps, two answers, based on contract terms that most riders never read.

The current government’s Employment Rights Bill, which has been working through Parliament, is mostly about employee rights (day-one protection from unfair dismissal, changes to zero-hours contracts, statutory sick pay), but the government has also said it will consult on moving to a simpler two-tier framework of workers and the genuinely self-employed. Treat it as a proposal until legislation is published.

Freelancers working through their own limited company also face the separate IR35 tax rules, under which medium and large clients now decide themselves whether an engagement must be taxed as employment.

The European Union: the platform work directive

The EU adopted its Platform Work Directive in 2024, and member states have until late 2026 to write it into national law. Two parts matter for workers.

The first is a legal presumption of employment. Where the facts indicate control and direction by the platform, national law must presume the worker is an employee, and it is up to the platform to prove otherwise. The final text left it to each member state to define what triggers the presumption, which was a compromise from earlier drafts that listed specific criteria, so the strength of the presumption will vary from country to country. Spain, which passed its own “Rider Law” in 2021 presuming delivery couriers to be employees, offers a preview of what a strong version looks like, including some platforms leaving the market or shifting to subcontracting.

The second part applies to everyone on a platform regardless of status: rules on algorithmic management. Platforms must tell workers what automated systems are used to allocate work, set pay and evaluate performance; must have a human review significant decisions such as deactivation; and may not process certain categories of personal data. This is the first legislation anywhere to regulate the algorithm rather than just the contract, and its influence is likely to spread beyond gig work into any job managed by software.

Canada and Australia

Canada. Employment law is mostly provincial. Ontario passed the Digital Platform Workers’ Rights Act in 2022, which sets a minimum wage for time actively spent on assignments (not waiting time), requires transparency about how pay is calculated and how work is assigned, and restricts deactivation without notice; its provisions came into force in 2025. British Columbia brought in rules for app-based drivers and couriers in 2024 covering minimum earnings for engaged time, expense compensation and workers’ compensation coverage. Neither province reclassified gig workers as employees.

Australia. The Fair Work Legislation Amendment (Closing Loopholes) Act 2024 created a new category of “employee-like” workers on digital platforms and gave the Fair Work Commission power to set minimum standards for them, including pay, insurance and deactivation protections. It also restored a “whole of relationship” test for distinguishing employees from contractors, reversing High Court decisions that had prioritized the written contract. What the category means in cash terms is still being worked out through the first minimum-standards orders.

What it means in practice

For rideshare and delivery drivers. In most places, the realistic near-term outcome is minimum pay for engaged time, some insurance, and a process before deactivation, rather than employee status. Check how “engaged time” is defined where you work; waiting between jobs is usually excluded and can be a third of your hours. Keep your own log of hours, mileage and earnings; it is what every successful claim and every rate-setting process has been built on. If you are in the UK and your app has been found to engage workers, check that you are actually receiving holiday pay and pension contributions.

For couriers and warehouse or logistics contractors. Contract terms matter enormously. A genuine, exercisable right to send a substitute has decided cases against worker status in the UK and is a strong factor elsewhere. If your “substitution right” exists only on paper, note that; if you have never been allowed to use it, that is evidence.

For freelancers with several clients. The tests are mostly not aimed at you, but you are affected by clients’ caution. Protect your status with the things that genuinely indicate independence: your own business entity or registration, multiple clients, your own equipment, the ability to set your rates and decline work, marketing to the public, and contracts that describe deliverables rather than hours. In the US, be aware that a client converting you to W-2 employment is not necessarily a bad thing; it brings unemployment insurance and, if you are salaried, the protections we cover in salary versus hourly work.

For anyone told they are a contractor in an ordinary job. If you work fixed hours, at the business’s premises, using its tools, doing its core work, under its supervision, with no other clients, you are very likely misclassified in every jurisdiction discussed here, whatever the contract says. In the US you can file with your state labor department or the federal Department of Labor’s Wage and Hour Division; in the UK, an employment tribunal claim for holiday pay or minimum wage can be brought without a lawyer; in Canada and Australia, the provincial employment standards office or the Fair Work Ombudsman is the starting point. Back pay for holiday, overtime or minimum wage can be substantial.

What to do now

Rules will keep moving, but three things are worth doing this month whatever happens.

Write down your actual working arrangement: hours, who sets them, how work is allocated, whether you can refuse, what equipment you use, how many clients you have. Compare it honestly against the tests above. If the reality is employment, you have a decision to make about whether to raise it, and evidence if you do.

Sort out the protections that classification denies you. Contractors in most countries can buy income protection, contribute to a personal pension or IRA, and set aside tax; the unemployment safety net that employees rely on is not there for you, and our guide to handling money between jobs covers what to do instead.

Read the contract you signed, especially any clause on substitution, exclusivity and termination. Those three clauses have decided more classification cases than any statute. If you do not have a copy, ask for one in writing. A company that will not provide it has told you something useful.