How does making $18 per hour sound working from the comfort of your own home? For those looking for flexible work hours, a stay-at-home parent, for example, it’s a tempting offer.
But in a first-of-its kind case, the Federal Trade Commission (FTC) has highlighted the perils for consumers lured by promises of big pay in the gig economy.
“The nature of flexible work can definitely appeal to people who have a need for more flexible hours or to work from home,” says Taylor Arana, an attorney with the FTC based out if its Midwest Regional Office in Chicago. “And those things are aspects of work they may not be able to find in other work environments.”
Still, says Arana, buyer beware.
Arana was part of the FTC team that earlier this month won a $7 million settlement against Arise Virtual Solutions, a Florida-based company that connects large, Fortune 500 firms with individual gig workers who perform customer service activities for these companies.
In the suit filed by the FTC, the agency charged Arise with violating the Business Opportunity Act, which requires companies to disclose, among other things, accurate earnings opportunities to potential partners, including gig workers.
According to Arana, 99.9% of workers, or “agents” with the company made an average of just $12 per hour, well below the $18 hourly wage touted in its advertising, which specifically targeted Black women and single mothers. Contractors were also required to pay hundreds of dollars in up-front costs for training, equipment and other “usage fees.”
In its filing, the FTC pointed to internal documents with Arise that showed the company was aware that most of its agents were earning far less than what was being advertised.
“A vast majority of the people who signed up for the opportunity did not make what was promised,” said Arana, adding that gig workers for Arise were 90% women, and 60% of them identified as Black, Latino or multi-racial.
Arise claims to have thousands of “agents” across the country.
In March, the company settled another lawsuit, this one filed on behalf of 180 gig workers in Washington DC, for $3 million. In that case, filed by the DC District Attorney’s office, the company was charged with misclassifying its workers as independent contractors despite the “high level of control” the company maintained over its workforce.
“The economic reality of Arise’s relationship with its agents demonstrates the existence of an employer-employee relationship,” the suit alleged. Comcast, which contracted with Arise, was named a defendant in that case. Other companies known to have used Arise’s services include Disney and AirBnB.
The company has denied wrongdoing in both the DC case and the one brought by the FTC.
“Operating in the ‘gig’ economy is no license for evading the law, and the FTC will continue using all its tools to protect Americans from unlawful business practice,” FTC Chair Lina Khan said in a statement after the $7 million settlement was announced.
The value of the U.S. gig economy, defined as freelance or part-time work typically through digital platforms, is estimated at over $450 billion, with half of all Americans expected to have done at least some gig work by 2027.
Fraud, including wage and identity theft, is a growing concern with some data showing that nearly a third of consumers report having been the victim of a scam while using a gig platform.
The FTC’s suit is the first such case where a company operating in the gig economy has been charged with violating the Business Opportunity Act.
“The whole idea is to require the company to provide information to consumers, so they have more of an idea of what they are getting into before they sign up,” said Arana about the law, which also requires companies to disclose current or former employees in the area who can be contacted by prospective workers to learn about their experience with the company.
The FTC received some 2.6 million reports from consumers in 2023 about potentially questionable marketplace practices. “The more reports that we do get the better we’re able to learn about how best to help consumers,” noted Arana.
Consumers can file reports with the FTC at reportfraud.ftc.gov. The site is available in multiple languages and the FTC has translators available for those with limited English proficiency.
Arana says it’s important for those interested in these types of opportunities to “do your research.” That includes simple steps like an internet search with the company’s name and keywords such as complaints, reviews or scam. Individuals can also try and find past employees – whether or not the company has disclosed them – to learn about actual earnings and possible up-front costs.
“Take a moment and be skeptical,” Arana stresses. “We just say, question promises of big money or profits.”
Money from the settlement will be distributed among past Arise workers, though the FTC must first scan Arise data to determine who is eligible and for what amount. That process could take months, says Arana.
But, she adds, “Every penny we collect goes back to consumers.” (Peter Schurmann/Ethnic Media Services)
