U.S. tech firms can compensate gig-workers with equity under SEC proposal

[November 25, 2020]  By Michelle Price

WASHINGTON (Reuters) - The U.S. securities regulator on Tuesday proposed a pilot program to allow tech companies like Uber and Lyft to pay gig workers up to 15% of their annual compensation in equity rather than cash, a move it said was designed to reflect changes in the workforce.

App-based gig workers hold a demonstration outside Los Angeles City Hall to urge voters to vote no on Proposition 22, a November ballot measure that would classify app-based drivers as independent contractors and not employees or agents, in Los Angeles, California, U.S., October 8, 2020. REUTERS

The Securities and Exchange Commission (SEC) said internet-based companies may have the same incentives to offer equity compensation to gig-workers as they do to employees. Until now, though, SEC rules have not allowed companies to pay gig workers in equity.

The proposal would not require an increase in pay, just create flexibility on whether to pay using cash or equity. It comes amid a fierce debate over the fast-growing gig economy, which labor activists complain exploits workers, depriving them of job security and traditional benefits like healthcare and paid vacations. The SEC's Democratic commissioners said giving tech giants such flexibility would create an uneven playing field for other types of companies.

"Work relationships have evolved along with technology, and workers who participate in the gig economy have become increasingly important to the continued growth of the broader U.S. economy," said SEC Chairman Jay Clayton in a statement.

The proposed temporary rules would allow gig workers to participate in the growth of the companies their efforts support, he added, capped at 15% of annual compensation or $75,000 in three years.

Democratic SEC commissioners Allison Lee and Caroline Crenshaw opposed the move, saying alternative work arrangements, including independent contractors and freelancers, have existed for decades across a range of industries and it was not clear why tech companies should be singled out for special treatment.

"Whatever the potential merits of equity compensation for alternative workers, the proposal does not establish a basis for selectively conferring a benefit on this particular business model," they wrote in a statement.

(Reporting by Michelle Price; Editing by David Gregorio)

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