Today the Commission voted to propose rules that, on a trial basis, would allow public and private companies to offer equity compensation to their gig workers.[1]  Taking a cue from the flexibility that the gig economy provides to its platform workers, the proposal demonstrates the Commission’s willingness to open the door to opportunities for gig workers to participate in the growth of the companies that sign their checks.  As our economy and work arrangements evolve, we must be willing to experiment with concomitant changes to our regulations.

For decades, the Commission has provided a limited exemption from registration for private companies (Rule 701) and a specialized form for public companies (Form S-8) for certain compensatory securities transactions with employees.  The proposed rules would expand these well-understood and widely used vehicles for compensatory securities transactions to certain gig-workers for a five-year time period.  During that period, participating issuers would furnish information to the Commission so that we can assess the utility of the rules and determine whether such changes should expire, be extended, or be made permanent.  The proposal includes guardrails to ensure that issuances to gig workers are compensatory in nature and not conducted for capital-raising purposes.  We look forward to the input of gig workers and other interested parties. 

As proposed, only platform workers that provide services through an issuer’s marketplace platform are eligible to receive equity compensation.  Should we permit platform workers that sell goods through an issuer’s marketplace platform to participate?  Consider, for example, the many individuals who have begun offering artfully sewn (and even custom designed) masks during this pandemic, selling them to customers on third-party platforms.  Is sewing custom clothing similar enough to driving that mask-makers ought to be allowed to participate in a program like this?  We would have been willing to propose the inclusion of such workers.  We are also interested in expanding upon the proposal to include other types of alternative workers, beyond only those who provide services through internet- or technology-based platforms.  We hope to engage with interested parties to determine the appropriate scope of the temporary rules.

The gig economy is here to stay. We are proposing to tweak one discrete area of our securities laws to allow the many Americans who engage in gig work because it provides a much-needed source of current income also build longer-term investments.  As our nation’s economy heals from the pandemic, many under- or un-employed individuals will be attracted to the flexibility and income opportunities that gig work can offer.  We view today’s proposal as a way to improve benefits for these important workers and to introduce them to the powerful role that our capital markets can play in building a nest egg for retirement and for passing along to the next generation.