Shar­ing econ­omy gets wake-up call

Uber, Airbnb and other start-ups are ner­vous af­ter a la­bor agency rul­ing.

Los Angeles Times - - BUSINESS - By Tracey Lien, Tif­fany Hsu and Daina Solomon

Sil­i­con Val­ley has cre­ated a new breed of Amer­i­can worker: nei­ther em­ployee nor con­trac­tor, in­dis­pens­able to the com­pany but free to work as much or as lit­tle as they please — with no real boss.

To­gether, com­pa­nies in­clud­ing Uber, Airbnb, TaskRab­bit, GrubHub make up the so-called shar­ing econ­omy, a bur­geon­ing mar­ket­place of dig­i­tal plat­forms con­nect­ing free­lance providers with cus­tomers want­ing a ride, a place to stay, ran­dom er­rands or gro­cery de­liv­ery.

As the com­pa­nies pro­lif­er­ate, gov­ern­ment reg­u­la­tors are scram­bling to rein them in. City and state of­fi­cials are push­ing to pro­tect worker rights while star­tups — in­sis­tent that they are merely pro­vid­ing the tech­nol­ogy for a net­work of inde- pen­dent work­ers — want to be left alone.

The so­lu­tion, la­bor and tech watch­ers say, may have to be a com­pro­mise: A new class of work­ers, pro­tected by laws that take into ac­count the emerg­ing busi­ness model. Some ad­vo­cate a new cat­e­gory of worker — the “de­pen­dent con­trac­tor,” tech­ni­cally self-em­ployed but re­liant on in­come fun­neled through a third party. Ger­many and Canada have spe­cial pro­tec­tions in place for such la­bor­ers.

“Our le­gal sys­tem is set up so we’re ei­ther one or the other — an em­ployee with a whole lot of rights, or an in­de­pen­dent con­trac­tor with al­most no rights what­so­ever,” said Janelle Orsi, ex­ec­u­tive di­rec­tor of the Sus­tain­able Economies Law Cen­ter. “We now have a whole sec­tor of work­ers who are in­de­pen­dent in the way that they choose to work. Yet, they are de­pen­dent on a sin­gu­lar plat­form for their liveli­hood.”

Some work­ers rel­ish the new ar­range­ment.

Uber and Lyft driv­ers, for in­stance, as­sume most of the risk, us­ing their own ve­hi­cles and work­ing with­out ben­e­fits. But they also love the f lex­i­bil­ity of work­ing when­ever they want — or not.

“That’s where the en­tre­pre­neur­ial spirit comes in,”

said Kin­dred Shep­pard, 48, who drives his Toy­ota Prius around the San Fran­cisco Bay Area for Uber. “I don’t need Uber to tell me when to take days off. No one’s forc­ing you to drive — if you don’t want to drive, get a job.”

The start-ups are ner­vous, es­pe­cially af­ter a Cal­i­for­nia La­bor Com­mis­sion rul­ing this week that de­clared one Uber driver an em­ployee of the com­pany rather than an in­de­pen­dent con­trac­tor. Although the de­ci­sion sets no im­me­di­ate prece­dent, it sets the stage for court ap­peals that could re­sult in much broader reg­u­la­tion.

Re­stric­tive new rules could crip­ple many on-de­mand start-ups. They rely on low over­head, mak­ing their money by tak­ing a small per­cent­age of each trans­ac­tion be­tween work­ers and cus­tomers.

Com­pa­nies fear that their as­tro­nom­i­cal val­u­a­tions could slump if their costs rise with man­dated em­ployee ben­e­fits, in­sur­ance and overtime. They would prob­a­bly en­dure even more le­gal chal­lenges and, in some cases, could be forced to shut down if their cus­tomers won’t ab­sorb nec­es­sary price in­creases.

In the near term, they could be on the hook for back wages, overtime claims, old ex­penses and ex­tra taxes. Weaker busi­nesses may strug­gle and be swal­lowed up by their stronger ri­vals.

“Their eco­nomic struc­ture, their fi­nan­cial struc­ture, their cor­po­rate struc­ture, how they or­ga­nize their busi­ness model is all built upon as­sump­tions that they’re not em­ploy­ing peo­ple di­rectly,” said Stephen J. Hirschfeld, chief ex­ec­u­tive of the Em­ploy­ment Law Al­liance. “If the courts come down and de­ter­mine that you have to treat them as em­ploy­ees, these com­pa­nies are prob­a­bly go­ing to have to rein­vent them­selves.”

Reg­u­la­tion would also af- fect mil­lions of work­ers. Such com­pa­nies now ac­count for an es­ti­mated 2 mil­lion to 3 mil­lion peo­ple out of a to­tal 30 mil­lion in­de­pen­dent con­trac­tors in the U.S.

In the­ory, com­pa­nies such as Uber en­able work­ers to earn a liv­ing at their own pace.

For peo­ple left job­less or un­der­em­ployed af­ter the re­ces­sion, it’s an op­por­tu­nity to sup­ple­ment skimpy pay­checks.

Any ma­jor change to how these work­ers are clas­si­fied is a thorny process, in­volv­ing changes at the Depart­ment of La­bor and the In­ter­nal Rev­enue Ser­vice and del­i­cate nav­i­ga­tion through a patch­work of min­i­mum wage, sick pay and ter­mi­na­tion reg­u­la­tions that vary from state to state.

Some ex­perts sug­gest al­low­ing rideshare driv­ers and sim­i­lar work­ers to union­ize or to make over the com­pa­nies as co-op­er­a­tives. Oth­ers say that rules should be writ­ten on a case-by-case ba­sis, as they have been in the past for sa­lon work­ers in Cal­i­for­nia and ho­tel work­ers in Los An­ge­les.

Politi­cians want some kind of stan­dard­iza­tion, say­ing that hazy def­i­ni­tions of work­ers can lead to em­ployer abuses.

The gov­ern­ment has “a re­spon­si­bil­ity to pro­vide clar­ity and pre­dictabil­ity in­stead of al­low­ing in­con­sis­tency and con­fu­sion as these is­sues are lit­i­gated on a caseby-case and state-by-state ba­sis,” U.S. Sen. Mark Warner (D-Va.) said this week.

Although Uber says its main role is run­ning the smart­phone app that con­nects driv­ers and pas­sen­gers, the com­pany con­trols which driv­ers can be al­lowed into the sys­tem af­ter pass­ing a back­ground check, what kind of ve­hi­cle they may drive and how much they can charge for rides.

“Uber has toed that very blurry line of be­ing an em­ployer,” said Jeff Ten­nery, CEO of Moon­light­ing, a hir­ing plat­form that con­nects in­de­pen­dent con­trac­tors to cus­tomers. “An Uber driver can’t re­ally dif­fer­en­ti­ate them­selves — it’s like sit­ting in a deli line. They can’t do any­thing but wait to be called.”

The is­sue is also a com­pli­cated one for work­ers, who of­ten see it as a clash be­tween free­dom and sus­tain­able pay. Santa Mon­ica res­i­dent Lee Bax­ter, 28, has ex­pe­ri­enced both sides.

Bax­ter works for Post­mates, a de­liv­ery ser­vice that clas­si­fies its work­ers as in­de­pen­dent con­trac­tors, as well as Clut­ter, a mov­ing ser­vice that he said re­cently be­gan treat­ing its work­ers as em­ploy­ees in or­der to pro­vide work­ers com­pen­sa­tion to in­jured la­bor­ers. He also in­de­pen­dently rents out au­dio-vis­ual equip­ment, re­pairs com­put­ers, works a tem­po­rary of­fice job and is con­sid­er­ing be­com­ing an Uber driver.

“I’m just grate­ful for the op­por­tu­nity,” he said, “whether it’s through em­ploy­ment or be­ing an in­de­pen­dent con­trac­tor.”

‘We now have a whole sec­tor of work­ers who are in­de­pen­dent in the way that they choose to work. Yet, they are de­pen­dent on a sin­gu­lar plat­form for their liveli­hood.’

—Janelle Orsi, head of the Sus­tain­able Economies Law Cen­ter

Katie Falkenberg Los An­ge­les Times

UBER DRIVER Joseph Youssef in down­town L.A. He and other driv­ers as­sume most of the risk, us­ing their own ve­hi­cles and work­ing with­out ben­e­fits.

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