Gig Worker: Employee or Independent Contractor?

Some folks may recall that I wrote a prior Tip on the issue of whether a worker would be, for tax purposes, classified as an Employee (EE) or an Independent Contractor (IC).  The reason for the prior note on this subject was the interest that had been generated in many states as to how the government was choosing to treat a worker that argued that he or she was not an EE, but rather, the worker was an IC.

Who cares?  The resolution of this issue and demarcation of an EE or IC is important in many areas.  However, as to the tax issue, the matter can be very important for employment taxes that are owing for an EE, but not owing for an IC.  The determination is also important as to withholding by employers on the income paid to EEs, fringe working benefits, retirement obligations, and much more.

It was an important issue in a few major cases in California compared to some delivery drivers.  This issue was closely followed by governments in California as well as companies, such as Uber.  In fact, only a few years ago, Uber had communicated to the California legislature that it was withdrawing its Uber services in California unless there would be a determination that Uber would not be treated as the employer of the Uber drivers.  In turn, the Uber drivers would be treated as IC and not as EEs.

 The matter was, at least for now, addressed by the legislature in California by allowing the treatment of the drivers as IC and not EEs.  (The State did not want to lose the Uber services used by so many people in the State.)

 What has recently been released by the US Census Bureau are statistics related to Gig workers.  That is, without begging the issue as to whether a worker is an EE or IC, the Census Bureau has presented its research as to workers that claim to be Gig workers—translation:  IC.  These numbers collected by the Census Bureau show how important this demarcation is that Gig workers are in many areas of work in our society.

The Census Bureau stated that the Gig economy is prevalent throughout the USA and in many industries.

Consider the following from the Census Bureau:

“Any time you use a rideshare app, order food for delivery or hire musicians for a party, you’re contributing to a growing financial sector: the gig economy.

Several North American Industry Classification System (NAICS) sectors contribute to the gig economy, which relies on workers who provide on-demand work, services or goods. Most of these sectors are included in the U.S. Census Bureau’s Nonemployer Statistics (NES) economic program.

NES is the most comprehensive public source of data on the gig economy, which is a subset of the nonemployer universe and primarily consists of individual (sole) proprietorships. Sole proprietorships make up a large portion (approximately 86.4%) of nonemployers and of the total number of establishments in the U.S. economy (67.8%). Note that not all nonemployer businesses are included in the gig economy.

Industries contributing to the gig economy include, but are not limited to, those listed in the graphic below such as Taxi and Limousine Service, Couriers and Messengers, and Special Food Services.

For nonemployer industries that likely have gig activity, the five industries with the largest number of individual proprietorships in 2023 were:

·       Couriers and Messengers (1,430,708).

·       Taxi and Limousine Services (1,355,360).

·       Janitorial Services (1,072,010).

·       Independent Artists, Writers and Performers (1,043,306).

·       Child Care Services (529,554).”

(This material from authors Adam Grundy and Lucie Alleyne on 7/1/2025 at the Census Bureau.)

There are many Gig workers, and a great deal of money paid to these workers.

Here are some of the recent numbers in this issue of IC.

 Yes, the Jig (Gig?) is up!  There are many such IC workers!

This does not mean that governments will not attempt to address this issue, again, soon, hoping to classify many workers as EEs, thus generating more revenue for governments.

By Dr. Mark Lee Levine, Professor, University of Denver