A move by the Securities and Exchange Commission (SEC) to make platform-based private tech companies pay part of their gig staff with equity is unlikely to take effect before it is likely to be withdrawn by the Biden administration, a win for the Representing lawyers representing employees.
In one of its final moves before Chairman Jay Clayton resigns at the end of the year, the regulator recently decided to extend Rule 701, which covers stock compensation, to those who work on a contract basis with internet platform companies.
The change would create a five-year period to test whether these companies can pay up to 15% of their gig workers’ compensation in shares.
Clayton said the change is designed to modernize pay rules to reflect Internet companies’ trust in contract workers. “Workforce [should] have the opportunity to participate in the growth of the business, “he said in a statement.
Critics say the SEC is giving in to technology companies that built their business model on the back of independent contractors. Companies like Uber rely on contract workers to use their online platform to provide services. These companies say share-based compensation is a way to reward employees for their loyalty, but critics say the companies take advantage of employees.
If they really want to help their workers, they should hire them as employees, said Laura Padin, senior attorney with the National Employment Law Project, in a letter to the SEC.
“By labeling their workers as independent contractors, they are trying to deny them the numerous legal safeguards and benefits that come with workers,” said Padin.
Before the rule change can take effect, it must be publicly commented on for 60 days. At that point, Biden would have appointed a new SEC chairman who is unlikely to support the change.
The two SEC Democratic commissioners voted against the change, saying they arbitrarily advocate a certain type of company.
“We cannot find a principled basis for policy choice to highlight a particular platform-based business model for a particular competitive advantage,” said Caroline Crenshaw and Allison Herren Lee in a statement.
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