In the Sharing Economy, Are Workers Employees or Independent Contractors?

Fast, flexible and faultless. That's how we want our service, that's what institutions demand from those who would like their custom. It's another way of saying we want what we want when we want it. And if you won't provide, I'll go online and find someone else who will.

So enterprises are attempting to address these requirements by becoming lean and agile. Which means they are keeping costs to a minimum while seizing any opportunity that looks remotely achievable. Sure, I can do that, being the requisite answer to any query involving the potential exchange of goods and services.

The problem is the one that Henry Ford identified over a century ago: if you dont pay your employees or associates or colleagues enough to buy your product, or otherwise make it worthwhile for them do so, you can assume that there probably arent a lot of others around who can afford it either.

The implication is that all those independent contractors are only embracing the opportunity you proffer because they dont have any better options. And that they'll ditch you as soon as one comes along, understanding that you'll do the same to them in a trice.

To those who claim this is about competitiveness, the question would be, for what? Because the contractor scrambling for some hours is also the consumer who has to make judgments about what he or she can afford. Which is exactly why Walmart and McDonalds now find themselves with declining revenues.

The issue of who is an employee - or not - will be settled in the courts, because that is the way we do business now. But the question of what is best for the economy will be settled in the marketplace and separating the winners from the losers is far from certain. JL

Scott Kirsner reports in the Boston Globe:

If the innovation economy produces companies that have hundreds of thousands of “non-employees” who love the lifestyle, but don’t have unemployment insurance or retirement plans, we’re going to have problems as a state and society.

The worker of the future will be fast, flexible, and available the instant a customer clicks a button on a smartphone screen.

But the worker of the future will not be an employee — at least if some of today’s fastest-growing and best-funded startups have their way. They’re positioning themselves as “technology platforms” that simply connect people with independent chauffeurs, house cleaners, or errand-runners. For the most part, the armies of workers that companies like Uber or TaskRabbit are assembling — often after screening interviews, background checks, and training programs — are treated as independent contractors and receive no benefits.

A class-action lawsuit filed this summer in Massachusetts and California courts is challenging that. The suit asserts that Uber improperly classifies its drivers, who own their cars and use Uber’s smartphone app to get work, as independent contractors. No sick time, no health insurance, no 401(k) contributions.
And the case is creating anxiety for other startups providing on-demand services, typically using websites or mobile apps.
Rightfully so, says Russell Beck, an attorney with Beck Reed Riden LLP in Boston. Massachusetts puts the burden on employers to rebut “a strong presumption that the individual is an employee,” Beck explains. The central legal question: whether the individual is performing a task “outside of the usual course of the employer’s business.”
A plumber who fixes a leaky faucet at Uber’s office is an independent contractor. But “anyone who is driving a car for Uber is performing precisely the service that Uber provides in the usual course of its business,” Beck says, and thus is probably considered an employee in the state.
And that may also go for someone who does grocery shopping and deliveries for Instacart, or cleans houses for Handybook.
For consumers, these services can be fantastic. For example, I needed someone to come to my house in a hurry to do some preparty clean-up. I booked a cleaner on Friday night through Handybook, and someone super-competent was at my door at 2 p.m. the next day.
Two hours of cleaning cost me $66, which felt like a good deal given the streamlined process and quick turnaround. (Handybook takes a 20 percent cut of the total, and passes the rest along to the cleaner.)
When you talk to entrepreneurs building these companies, they describe themselves as intermediaries who connect people with service providers. TaskRabbit, founded in Cambridge but now based in San Francisco, can find someone to assemble some Ikea furniture at your home or office. But such a worker and all the company’s other “Taskers” are “simply users of our platform and not our agents, consultants, or employees,” explains Jamie Viggiano, senior director of marketing.
Like Uber, New York-based Handybook offers a customer’s job request to several people in its network, and the quickest worker to respond gets it. “We don’t ever say, you need to do this job at a certain time and price,” says Oisin Hanrahan, Handybook’s chief executive. “It’s not an employment relationship.”
The attorney representing a group of Uber drivers in the class-action suit, Shannon Liss-Riordan, says Uber’s technology may be new, but “what we’re seeing is really just a new spin on this old theme — trying to save labor costs by avoiding having employees.” Liss-Riordan says that employee status affords rights — like the right to unemployment benefits, medical leave, or worker’s compensation.
Uber spokesman Taylor Bennett addressed the lawsuit with a statement: “Uber will vigorously defend the rights of riders to enjoy competition and choice, and for drivers to build their own small business.”
A Boston start-up called Alfred Club is taking a different approach. The company markets a $99-per-month service that has an errand-runner stop by your home twice a week, to drop off dry cleaning or groceries or do light cleaning. Cofounder Marcela Sapone says that once the errand-runners — called “Alfreds” — are working 20 hours or more a week, they can opt to become employees, receiving health insurance and other benefits.
Major reforms are coming to on-demand workforces, Sapone predicts. “One company can either take the lead and pioneer that before they’re forced to,” she says, “or you’re going to see workers unionizing or suing. We think change is definitely imminent.”
If all these start-ups had to hire employees in every city they operate in, their costs would jump — perhaps to the point where they’re not economically viable. And yet if the innovation economy produces companies that have hundreds of thousands of “non-employees” who love the lifestyle, but don’t have unemployment insurance or retirement plans, we’re going to have problems as a state and society.
We may need new ways to categorize someone who is not a full-time employee, but also not truly an independent contractor. “Simply falling back” on existing laws “that could never have anticipated some of the innovation we are seeing today” isn’t wise, says John Pepper, a Boston entrepreneur who cofounded Boloco, the burrito chain. He has dabbled as an Uber driver this year, and blogged about the experience.
I asked Pepper whether we might see a world where most of the new jobs created are not jobs in the traditional sense. “I”m a big fan of evolution on this stuff,” he said, “but there is such a thing as going too far.”
The conversation about where we’re going needs to start now, and not just in the courtroom.