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What happens to workers when a ‘gig economy’ company folds?

Workers continue to enter the “gig economy” in large numbers. According to a 2016 report by the McKinsey Global Institute, up to 30 percent of workers in the United States and Europe take part in some form of independent work.

For some, the work may be side jobs, but others rely solely on one or more of these gigs for their entire income. In many cases, the workers are independent contractors, meaning they don’t have as many rights as employees. So what happens if the company goes out of business?

Startups are volatile, and many fail. In a recent example, a company that matched babysitters with families in a dozen cities ran into financial troubles. The company is now looking to file for bankruptcy, and more than 100 people who worked as contractors say the company owes them, collectively, around $85,000.

The workers are trying to determine how to recover their unpaid wages.

Legal precedence

The gig economy is still a new concept. While companies often end up shutting their doors in the early stages, there isn’t a long track record of how to navigate what happens to workers who are owed unpaid wages.

New York has clear regulations regarding contract workers. However, cases like the one mentioned are complex and have few clear answers. In some instances, the company may have incorrectly classified workers as independent contractors when they should have been employees.

It requires nuance to navigate employee and independent contractor cases, especially as more workers move into the gig economy.

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