DApps: A Potential Answer to On-Demand Contractor-Employee Questions?

Image via descryptive.com/

Image via descryptive.com/


A regular topic in today’s discussions of tomorrow’s workplace is whether on-demand workers in the gig economy should be classified as independent contractors or employees. But it is fair to wonder whether continued innovation—specifically, blockchain “DApps” or decentralized applications—might cause some classification questions never to arise in the first place.

We have previously blogged on opportunities and challenges in the gig economy. The myriad risks—from independent contractor-employee misclassification to confidential information and privacy protection missteps—are ever present because fast-growing players in the gig economy are attractive targets for potential plaintiffs seeking a deep pocket and a novel factual or legal issue that might evade a fast or easy resolution. 

Meanwhile, we have also started to address discrete blockchain-driven questions on wage-hour issues, such as the payment of wages or other compensation through cryptocurrency. (Of course, this is just one of many questions driven by the technology.)

But futureenterprise issues don’t exist in a vacuum. As the gig economy continues to expand, so too does the adoption and use of blockchain technology. And it is exciting to consider where and how the two might intersect. One possibility is that developing blockchain platforms will lead many of today’s questions regarding the proper classification of the on-demand workforce to vanish.

For many on-demand companies, litigation regarding worker classification is unfortunately a question of when, not if. Legislative reform revisiting wage-hour laws enacted for a different time simply have not kept pace. (Consider, for example, that the implementing regulations of the Fair Labor Standard Act—enacted in the Great Depression era—still reference a “whistle to whistle” workday.) Given potential exposure in class cases alleging misclassification, plaintiffs’ attorneys routinely allege that on-demand workers, despite the freedom they enjoy, are employees.

Every on-demand entrepreneur must account for the risk, if not likelihood, of wage-hour litigation. And regardless of that risk, one reality remains: workers want the gig economy. The on-demand workforce continues to grow and shows no signs of slowing.

To serve that workforce without confronting the sort of wage-hour risks noted above, one possibility is that blockchain “DApps” could enable certain players in the gig economy to evade worker classification (and other wage-hour questions) altogether.

The idea behind DApps—or decentralized applications—is to eliminate the need for a centralized intermediary between, for example, a consumer who needs a ride and a worker who wants a fare. DApps, which utilize blockchain transactions and smart contracts, enable entirely independent contracting where consumers can find and contract directly with workers and pay them without the need for a broker. Wage-hour risks that can impose such significant costs for mainstream on-demand companies never enter the picture.

There are already DApps that seek to do what more “traditional” on-demand companies already do so well. An intriguing question to ponder is whether the newcomer’s decentralized, seemingly low-risk format will allow it to fly smoothly in areas where mainstream companies have faced turbulence. Just as intriguing is the question of whether government and the courts—neither known for acting quickly or innovatively—will catch up to an evolving workplace to create smoother air on thorny legal questions facing mainstream companies.

What services and industries might be disrupted all over again in the future by a DApp-enabled gig economy? The answer may lead us to update a refrain from ten years ago sooner than we think: there’s a DApp for that.


Cassie Peterson