SEC proposal could turn gig workers into stockholders

The commission has proposed a set of rule changes that's now open to public comment for 60 days.

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Mariella Moon
November 25th, 2020
Washington Dc: US Securities and Exchange Commission building exterior.  The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government. The SEC holds primary responsibility for enforcing the federal securities laws, proposing securities rules, and regulating the securities industry, the nation's stock and options exchanges, and other activities and organizations, including the electronic securities markets in the United States.
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The Securities and Exchange Commission has proposed a set of rule changes that would give internet platforms like Uber the option to give gig workers equity as part of their compensation. As Axios noted, companies like Uber and Airbnb have been asking the SEC to modify its rules so that they can give company stock to their drivers and contractors for quite a while now. However, previous commission heads were opposed to the idea.

Under the proposed changes to Rule 701, a five-year pilot program would allow internet platforms to issue equity to their workers, so long as it’s no more than 15 percent of the value of their compensation within a 12-month period. It must also be no bigger than $75,000 in value within a 36-month period. Companies would also be allowed to offer their workers registered securities using Form S-8 under the proposed amendments.

Internet platforms relying on gig workers are getting flak not just for low pay, but also for not providing health insurance and vacation or sick time. The ability to compensate workers in stocks could be a way for them to offer bigger compensation without actually having to fork out cash. It could also be a way to get gig workers invested in a company’s performance, even if said company doesn’t offer them the usual employee benefits.

In the SEC’s announcement, the agency wrote:

“The proposed rules reflect the significant evolution that has taken place in the composition and participation of the workforce since the Commission last substantively amended Rule 701 or Form S-8, particularly the development of the so-called "gig economy," which has resulted in new work relationships.”

Its proposal is now open to public comment over the next 60 days. Take note that two SEC commissioners are opposing the rule changes, though. Commissioners Allison Herren Lee and Caroline A. Crenshaw said in a statement: “[W]e cannot support this proposal because there is no sound policy justification for singling out a subtype of alternative workers for this exemption — those who provide services through internet- or technology-based platforms.” They point out that the rule changes leave out freelancers, temporary help agency workers, on-call workers and other independent contractors that don’t work for internet—based companies.

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