SEC Proposes Equity Compensation for Gig Workers

The Securities and Exchange Commission has introduced regulations that would permit both publicly traded and privately held companies to provide equity-based compensation to individuals working in the gig economy.

This development in rule-making follows closely after voters in California affirmed a proposition that invalidated prior legislation. That legislation would have categorized gig workers as employees. The proposition instead established a new framework requiring gig economy businesses to provide a minimum earnings guarantee equivalent to 120% of the minimum wage during active work periods, a reimbursement of 30 cents for each mile driven while engaged in work, a healthcare allowance, insurance coverage for work-related accidents, safeguards against discrimination and sexual harassment, and auto accident and liability insurance, as detailed by TechCrunch. It’s important to note that these earnings guarantees and expense reimbursements are calculated based on time actively working, excluding periods spent waiting for assignments or between deliveries.

The Securities and Exchange Commission is now introducing an additional potential benefit, allowing companies to offer stock to gig workers as a form of payment.

Commissioners Elad Roisman and Hester Peirce explained in a joint statement, “As the nature of our economy and employment arrangements changes, we must demonstrate a willingness to adapt our regulations accordingly.”

The suggested rules would authorize stock compensation for gig workers for a period of five years. Throughout this timeframe, companies issuing stock will be required to submit data to the Commission to evaluate the effectiveness of the regulations.

These SEC guidelines also incorporate specific measures to confirm that stocks given to gig workers represent compensation and are not misinterpreted as a means of raising capital.

The SEC has stated that these new rules are available for feedback from gig platform workers.

According to the proposed guidelines, individuals who offer services through an online marketplace are eligible for stock compensation; customers utilizing those services are not. The commission is also evaluating the possibility of extending the stock compensation program to individuals who sell goods through these platforms.

“The gig economy is a permanent fixture of the modern workforce. We are proposing a focused adjustment to our securities regulations to enable the many Americans who rely on gig work for essential current income to also create long-term investments,” the commissioners stated. “As the country’s economy recovers from the pandemic, numerous individuals who are underemployed or unemployed will be drawn to the flexibility and income potential that gig work provides. We believe this proposal will enhance benefits for these vital workers and demonstrate the significant role our capital markets can play in building financial security for retirement and for future generations.”