A move by the Securities and Exchange Commission (SEC) to let private platform-based tech companies pay their gig workers partially in equity is unlikely to take effect before it is expected to be withdrawn by the Biden administration, marking a victory for employee advocates.
Last week, in one of its last moves before Chairman Jay Clayton steps down at the end of the year, the regulator voted to extend Rule 701, which covers equity compensation, to people who work with internet platform companies on a contract basis.
The change would create a five-year period to test the effect of letting these companies pay up to 15% of their gig workers’ compensation as equity shares.
Clayton says the change is intended to modernize compensation rules to reflect the reliance of internet companies on contract workers. "Workers [should] have the opportunity to share in the growth of the business," he said in a statement.
Critics say the SEC is giving in to tech companies that have built their business model on the backs of independent contractors. Companies such as Uber rely on contract workers who use their online platform to provide services. These companies see equity compensation as a way to reward workers for their loyalty, but critics say the companies are taking advantage of the workers.
If they really want to help their workers, they should hire them as employees, Laura Padin, senior staff attorney at the National Employment Law Project, said in a letter to the SEC.
"By labeling their workers as independent contractors, they seek to deny them the many legal protections and benefits that attach to employees," Padin said.
Before it can take effect, the rule change must be made available for public comment for 60 days. By that time, Biden would have appointed a new SEC chair, who will be unlikely to support the change.
The two Democratic SEC commissioners voted against the change, saying it arbitrarily favored a certain kind of company.
"We cannot find any principled basis for the policy choice to single out a specific platform-based business model for a particular competitive advantage," Caroline Crenshaw and Allison Herren Lee said in a statement.