“Crowdsourcing” is a relatively new phenomenon, the term only coined in 2006 . Like many recent economic paradigm shifts, the idea of taking a single job and outsourcing it to a large, undefined group of people is really only possible because of the connective power of the Internet.  And like other technology-driven changes, the law can be slow to catch up.  

In fact, there is very little legal regulation of online crowdsourcing at all at this point.  Most websites that facilitate the activity govern it through “shrink-wrapped” click-to-agree agreements, and government regulation is paying little attention to this employment market.  Though whether this is a bad thing or not may depend on whether you consider online crowdsourcing to be or an “elegant business idea ” or a  “virtual sweatshop .”

Systems like Mechanical Turk , run through Amazon.com, are mainly for seemingly menial tasks (but the sort that computers can’t do), and they won’t get you rich.  Others like CrowdFlower  or CrowdSPRING  might involve more sophisticated work.  Either way, there are definite economic advantages to companies using systems like these, including low transaction costs and high flexibility.  But they also lose the control that comes with traditional employment contracts.

Legally, it’s unclear how these crowds of workers should be treated.  Does traditional labor law apply?  Are the workers independent contractors?  Does it make a difference if the website involved sets a wage floor?  What sorts of tax implications exist?  On its face, crowdsourcing seems like a smart idea and an easy way to create a sustainable business force – but it also has the potential to be abused.  

If you undertake a crowdsourcing project, be sure to read the agreement carefully.  And for companies considering taking advantage of the online crowd, be sure to consider the tax and labor law implications and possibly discuss them with your attorney.  It may be some time until regulatory law catches up to this new technology-driven business paradigm, but until then, it will be interesting to see how the economics of the crowd play out.