Disclaimer: This article is intended to provide an opinion on the topic at hand. The authors are not legal professionals and cannot provide legal advice. We are also not licensed brokers. For any legal or financial concerns, please consult a professional. We at Proper Programming are not employees of Reddit, and this article is not endorsed by Reddit.
Reddit, a platform with millions of active users, has recently come under scrutiny for removing Moderators from their subreddit. Their actions inevitably draw attention to some of Reddit’s other business practices. Primarily, this involves their use of a large, unpaid pool of workers to maintain their platform. It is also claimed Reddit moderators do 3.4 million worth of unpaid work each year.4
The central question revolves around whether moderators, who are unpaid and voluntarily curate content on the platform, could potentially be classified as employees. Historically, business owners are not permitted to use unpaid labor, barring some narrowly defined circumstances1. This raises the question of how Reddit, a billion-dollar company, can monetize the work of thousands of unpaid moderators without violating any laws.
What’s more, It can be argued that Reddit maintains significant control over the Subreddits the mods work on. They remove moderators who do not respect the rules, and they supposedly undelete subreddits that moderators remove.5 Moderators have no right to export their subreddits, or take their work somewhere else. Reddit maintaining control over these assets is a key detail in this situation.
Finally, the questions regarding the legality of unpaid moderators is an issue that differs greatly depending on local regulations. While some countries may not allow it, others, like those within the EU, have shown disapproval of such practices through prior rulings.
Surprisingly, there are other legal precedents for this. The case of Reddit appears to be more severe than the following examples.
- Precedents from the tech industry provide some context. In 2000, Electronic Arts faced a lawsuit over their “Counselor” program in Ultima Online, which was essentially a team of volunteer community players. The courts agreed with the plaintiffs who argued that EA imposed obligations on them in the course of their work, which made them more like employees than volunteers.1.
- AOL faced a similar lawsuit when their community volunteer moderators argued that they fell under the scope of employment laws. The court agreed with the volunteers, setting a precedent for the EA lawsuit1.
- Uber, a rideshare company, faced a lawsuit in which drivers claimed they were employees rather than independent contractors due to the level of control Uber exerted over them. The court ruled in favor of the drivers, establishing that the definition of ’employee’ can extend to workers in the gig economy4.
However, these cases may not directly apply to Reddit’s situation. In the past, the main distinction lies in Reddit’s control (or lack thereof) over its moderators’ activities. However, that has since changed with the latest waves of protests.
Reddit’s Loss of Defense
In the past, Reddit maintained that it exercises no control over moderators, and when intervention is necessary, they do so directly rather than ordering moderators to take action. This lack of direction and organization of the moderators’ activities could potentially protect Reddit from having to classify moderators as employees and subsequently having to pay them1.
Some argue that Reddit does exert some control over its moderators, as there are certain guidelines and “requirements” on how to moderate content on the site. However, their argument has demonstratively changed since the API conflict, contrasting their previous position. It is unclear how Reddit can maintain its protective stance amidst these changes, which were previously safeguarding it from potential lawsuits.
Critics argue that Reddit has made extensive demands on their moderators and is exploring new ways to profit from this pool of unpaid labor. It is also pointed out that Reddit can revoke a moderator’s privileges for violating these rules, as well as reverse their decisions, and take control of their subreddits, which some might consider a form of oversight1.
Legal Risks for Reddit
If Reddit was to be found directing moderators or organizing their activities more closely, they could potentially face legal challenges similar to those faced by Electronic Arts and AOL. Additionally, instances where Reddit has asked language communities to translate the site for free or engaged in activities requiring moderation in partnership with brands could also potentially be seen as exerting more control over its moderators and their activities1.
In addition, there are also legal arguments regarding the validity of the contract Reddit establishes with its users upon signup. For instance, the issue of whether merely checking a box could be considered a “signature” has been raised, as under the federal eSign Act, a signature must be affirmatively placed upon the document signed1.
While there is a lot of debate surrounding these issues, it’s important to note that none of them have been definitively resolved in court. Ultimately, the legal status of Reddit’s moderation structure may not be fully determined until a court of law examines these issues.
The Impact on Reddit’s IPO
Given the significant legal risks outlined above, Reddit’s planned IPO could be impacted. Investors typically look for stability and clarity when investing in a company. The unresolved legal questions surrounding Reddit’s moderation structure could cause uncertainty and volatility, which could discourage potential investors. In particular, the fact that these legal issues could lead to substantial financial liabilities for Reddit (should the company be required to start paying its moderators) could impact the company’s valuation and attractiveness to investors.
Moreover, any potential legal battles could also have significant reputational impacts. Depending on the outcome, Reddit could be seen as exploiting its volunteer workforce, which could lead to negative public sentiment and potential user backlash. This could affect Reddit’s user base and, consequently, its revenue and growth potential.
Finally, a shift in the legal status of moderators from volunteers to employees would fundamentally alter Reddit’s business model. The financial strain of having to compensate thousands of moderators could impact Reddit’s profitability, and this risk could make the IPO less appealing to investors.
All of these factors clarify that the legal questions surrounding Reddit’s moderation structure are more than just a theoretical concern. They represent a significant risk that could have tangible impacts on Reddit’s future, particularly as it plans to go public. As always, investors should thoroughly research and consider these risks before deciding to invest in Reddit’s IPO.
The ongoing debate around Reddit’s moderation structure poses significant legal and business risks. As a platform built largely on the free labor of volunteer moderators, Reddit finds itself in a unique position. The legal status of these moderators, whether they should be classified as employees or volunteers, has yet to be definitively resolved in court, and the lack of precedent makes the situation all the more uncertain.
Historical cases such as those involving Electronic Arts, AOL, and Uber suggest that companies exerting control over their volunteer or contract workforce may be required to reclassify them as employees. This could result in significant financial liabilities, which could impact Reddit’s business model and its attractiveness to investors, especially in light of the upcoming IPO.
Moreover, recent changes in Reddit’s policy towards its moderators, along with its claim of ownership over the subreddits, could potentially destabilize the company’s legal standing. This could potentially raise questions about the company’s legal standing.
In conclusion, as Reddit prepares for its IPO, potential investors and the wider tech industry will likely watch closely how these legal debates unfold. The outcomes could not only reshape the future of Reddit but may also set precedents that impact the broader digital economy. As always, it is recommended for individuals to seek legal counsel regarding such complex and evolving issues.
Please note that this article is based on the latest understanding as of June 2023, and the situation may evolve as more legal arguments and precedents are introduced. This article is for informational purposes only and does not constitute legal advice. Always consult with a qualified legal professional for advice on legal matters.