In a sharing economy, labor laws fall short

Tim Fitzsimons Apr 23, 2015

In a sharing economy, labor laws fall short

Tim Fitzsimons Apr 23, 2015

When it comes to the future of the growing “sharing economy,” things are far from clear. Two California juries are set to decide cases that could have wide-ranging implications on the industry that has grown up around Uber, Lyft, and other car-hire services.

Plaintiffs allege that the companies treat drivers as independent contractors even though they should be considered full employees, which would require Uber to provide sick days, health insurance and other benefits. Judge Vince Chhabria, who is presiding over the Lyft case, wrote that the jurors “will be handed a square peg and asked to choose between two round holes.”

Chhabria wrote that because he believes the labor laws, which employ legal tests to determine whether a worker is a contractor or an employee, are outdated.

For some workers, it’s clear.

Drew Bathe drives for Uber in Richmond, Virginia. He’s an EMT, and he’s usually in his car. “Uber was just a perfect opportunity to continue to use my car,” Bathe says. He says he can “sign on when I want and sign off when I want.”

He usually drives around during periods of high demand, in what’s known as “surge pricing.” Bathe says he can make about $40 an hour. But other workers use Uber, Lyft, TaskRabbit and Mechanical Turk much more frequently, and they more closely resemble full time workers.

Wilma Liebman, former chair of the National Labor Relations Board, says that’s because “we now have work opportunities that no one would have thought of a few years ago.”

“Back when the labor laws were enacted,” Liebman says, “what we generally saw were large, vertically integrated corporations that did all aspects of the work.” Think Standard Oil and U.S. Steel.

Applying the employee/contractor test back then would yield clear results. The person who paints your house is an independent contractor. They have control over the tools, the means to do the job, how the complete the job. Employees are subject to employer-imposed restriction dress, appearance, tools and so on.

In recent years, some corporations have been accused of deliberately miscategorizing their workers as independent contractors in order to avoid the costs of hiring an employee, such as social security and payroll taxes, as well as health benefits. Fedex is appealing a Kansas supreme court ruling that said its drivers are actually employees.

Robert Reich, who was Labor Secretary during the Clinton Administration, says it’s a trend that’s been going on for years.

“As I looked on a case-by-case basis, it was clear to me that some employers were doing it purely to save money and they were doing it as a way of circumventing all of these labor laws,” Reich says.

But what’s going on with sharing economy companies is a bit different, according to Elizabeth Kennedy, a professor of law at Loyola University Maryland.

She agrees with the statement by Judge Edward M. Chen, who is presiding over the Uber case, that it “strains credulity” for Uber to argue it is a tech company and not a car company. But, Kennedy says, it’s important to remember that apps like Uber started out small.

“How do we find this middle ground that recognizes the economic reality of the worker performing the service and also recognizes these businesses can scale up and reach a point where that relationship perhaps changes over time,” she says.

But there might be another way. Back in 2005, Kennedy wrote about how other countries had dealt with this pool of workers who fall between clear-cut employees and independent contractors: a third way, called “dependent contractor.”


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