So-called gig-economy workers currently don’t qualify for SEC exemptions that allow private firms to offer equity compensation to their employees and contractors. Firms including Uber Technologies Inc.—before it went public—have lobbied the regulator in recent years to allow them to do so.
The SEC’s proposed rule would allow internet-based platform companies to pay as much as 15% of a gig worker’s annual compensation in the form of equity, up to a limit of $75,000 over three years. It would be limited to workers who provide bona fide services through the company’s platform, rather than people who use apps to sell goods.
“Workers who participate in the gig economy have become increasingly important to the continued growth of the broader U.S. economy,” SEC Chairman Jay Clayton, a Trump appointee, said. “The rules we are proposing today are intended to allow platform workers to participate at a measured level…in the growth of the companies that their efforts support.”
The proposal marks the latest move by Mr. Clayton and one of his top deputies, former Silicon Valley deals lawyer William Hinman, to expand access to private securities. It is unlikely to advance in its current form, however, because the 60-day public comment period won’t allow the SEC to complete the rule before Mr. Clayton departs around the end of the year. His successor will be appointed by the administration of President-elect Joe Biden, a Democrat.
Critics of the gig economy say platform companies’ push to pay their workers in stock reflects a desire to reap the benefits of employing, in some cases, thousands of people while avoiding the responsibilities, such as offering benefits and paying the minimum wage.
“They want a loyal and committed workforce, which is why they seek a change to [SEC rules] that would align their platform workers’ compensation with the companies’ stock price,” Laura Padin, a senior staff attorney at the National Employment Law Project, wrote in a 2019 letter to the SEC. “Yet, by labeling their workers as independent contractors, they seek to deny them the many legal protections and benefits that attach to employees.”
The SEC’s two Democratic commissioners, Caroline Crenshaw and Allison Herren Lee, voted against the proposal, saying that the subset of companies chosen to benefit from the new exemption appeared arbitrary.
“We cannot find any principled basis for the policy choice to single out a specific platform-based business model for a particular competitive advantage,” Ms. Crenshaw and Ms. Lee said in a joint statement.