More employee/contractor cases

Boston lawyer Shannon Liss-Riordan has brought two new lawsuits against on-demand delivery companies, claiming that those doing the deliveries should be classified as employees rather than as contractors. Cyrus Farivar  writes about these newest cases, against GrubHub and DoorDash), while Davey Alba lists the companies sued so far:

  • GrubHub
  • DoorDash
  • Handy
  • Homejoy (now out of business)
  • Washio
  • Postmates (here for these three)
  • Lyft
  • Caviar
  • Instacart (has reclassified part of its workforce as a response)
  • Shyp (ditto)
  • Uber

A federal judge in San Francisco recently granted class action status to a group of four Uber drivers, making this the first case to be certified as a class action.

(If you want some background on these cases, try Susie Cagle‘s illustrated op-ed from June.)

The main argument against employee status has been the flexibility that supposedly comes with service provider status: service providers choose when to work and when not to work. Benjamin Sachs  describes a new Interpretation of the Fair Labor Standards Act by the US Department of Labor, which makes it clear that there is more to the definition than just flexibility:

employee status under the FLSA is to be determined according to an “economic realities” test. With respect to the economic realities test, moreover, the Interpretation emphasizes that the test turns on a determination of whether the worker is “economically dependent on the employer (and thus its employee) or is really in business for him or herself (and thus its independent contractor).

A driver putting in 50 hours a week in a car leased by Uber, to take one extreme, is clearly dependent on Uber. A driver putting in a few hours here or there, and also driving for Lyft, is much less dependent.

More from Sachs:

What is the Nature and Degree of the Employer’s Control”  Control is the last factor in the six-prong test, and it’s the last one the Interpretation discusses, but it may be the most relevant for Uber and Lyft.  Why? Because the Interpretation takes up, and then dispenses with, two of the most common views about why on-demand workers ought to be considered independent contractors. First, the Interpretation states that the lack of direct supervision over how work is carried out is “largely insignificant” when workers work offsite. And, second, the Interpretation states that workers’ ability to determine when they work is also “not indicative of independent contractor status.”  Citing the Third Circuit’s DialAmerica Marketing decision, the Interpretation thus concludes that “the fact that the workers could control the hours during which they worked and that they were subject to little direct supervision was unsurprising given that such facts are typical of homeworkers and thus largely insignificant in determining their status.”  In other words, you can be an employee even if you set your own hours and are never directly supervised.  This is a conclusion with unmistakable relevance to the on-demand debate.

Those defending companies’ rights to classify their workers as independent contractors often warn that if the court cases succeed, then service providers will lose the flexibility that is part of the appeal of “gig economy” work:

“The way we look at it, the laws governing employers require [them] to exert much more control over their employees, monitor, make sure they’re taking break times,” Ted Boutrous, Uber’s lawyer, said in a press conference last week. “It’s inevitable the flexibility and autonomy that drivers crave would have to be limited.” A spokesperson added that managing overtime would be another reason Uber would have to assign shifts.

That’s from Carmel DeAmicis of re/code, who writes very smartly about this. She goes on:

They’re stretching the truth. Labor laws don’t prohibit flexible working conditions. If drivers were legally employees, they could still drive one hour one week and 40 the next. In a business like Uber’s, where apps track when workers are logged in, it would be easy for a company to send a push notification to people after four hours of work, requiring them to take a 15 minute break, or for the app to turn off after a 40-hour workweek to prevent overtime. Monitoring drivers would be easy for a company whose algorithms have optimized pricing at all hours.

Benjamin Sachs also writes about the supposed loss of flexibility that would come with employee status:

If a court determines that these facts are consistent with a finding of employment, the drivers would be “employees.”  But Uber would not somehow then be required to exercise additional control over when and how long the drivers worked, or over other aspects of the job that are currently flexible.  Uber would be required to comply with minimum wage laws, safety and health laws, and anti-discrimination laws, and it would be required to contribute to unemployment insurance and withhold payroll taxes and the like.  But it could do all of this without taking away the flexibility that the drivers currently enjoy.

The big problem for Uber and others is that right now they have a cheap labour force who take all the risks associated with providing the service. Uber’s business model is based on avoiding regulations: it knows full well that most of its drivers do not have proper insurance for the work they do (I am sure this is one of the reasons that they never break down driver expenses in their claims about income), and may or may not pay full taxes on their income.



Sharing Economy: Three Critical Pieces

Nick Carr writes about sharing power drills, following up on (my mention yesterday of) Sarah Kessler’s article about this prototypical sharing transaction, following the drill meme back to its origin and adding some interesting reflections on the complexity of sharing transactions.

A drill is a fairly inexpensive commodity. It’s easy to buy one, and it doesn’t take up much room in your house. And once you own it, you can use it any damn time you please. (The upside of low utilization is high availability.)… Buying and owning a drill, in other words, doesn’t involve much in the way of transaction costs, either up-front or ongoing.

Now if, instead of buying the drill for yourself, you decide to share it with some other people, whether through a neighborhood co-op or some rental arrangement, suddenly you face all manner of transaction costs. You have to hash out the financial arrangements, you have to figure out where the drill happens to be at the moment you need it, and you have to go out and pick it up and bring it home (burning gas, perhaps, as well as time). And if somebody else wants to use the drill at the same time you need it, then you’re in for some negotiations and probably some irritation. And if the drill breaks or gets lost (or a “little screw head” gets misplaced), a whole new set of transaction costs kick in. And, don’t forget, your knuckleheaded neighbor never recharges the battery after he uses the drill, so you’re going to wedge yourself into the closet only to find that the drill is dead. More irritation.

Transaction costs, in this context, might also be called pain-in-the-butt costs, and pain-in-the-butt costs don’t have to get very high before you say, “Screw it, I’m buying a drill.” You accept, even welcome, low levels of utilization in order to avoid onerous transaction costs. And, yes, you are being totally rational. Utilization is not everything.

Read, as they say, the whole thing.

Jathan Sadowski and Karen Gregory have a really good piece in the Guardian asking “Is Uber’s ultimate goal the privatisation of city governance?” It is sparked by Uber’s experiments in shared rides, and schedule rides through fixed stops, in San Francisco. Some have argued that Uber is looking to privatize public transport, but Sadowski and Gregory think there is something else:

the company wants to be involved in city governance – fashioning the new administrative capacities of urban environments. Rather than follow government rules, like any other utility, Uber wants a visible hand in creating urban policy, determining how cities develop and grow, eventually making the city itself a platform for the proliferation of “smart”, data-based systems.

FWIW I think they are on the right track: as cities become data-driven, city governments will increasingly be looking to new software systems to run them; but why should cities continue to be run by governments? Why not just outsource the whole thing to Silicon Valley, and specifically Uber, where the expertise in number crunching and algorithmic delivery lies? So long as we think in terms of a consumer model of citizenship where we consume services, rather than a democratic model in which we participate in the shaping of our cities, the prospect is dangerously tempting.

Finally, Michelle Chen in The Nation tells us “ This Is How Bad the Sharing Economy Is for Workers“. It’s a thorough look at the labour issues around the “gig economy”, built around a new report by the National Employment Law Project (NELP) called “Rights on Demand“. Chen says the report is

focused on regulating the so-called “on-demand economy” of tech-driven gig employment, to put forward concrete policy models that can help restructure the “1099” contractor relationship to offer workers greater protection. One potential model is the statutory employee framework, under which contractors are for certain regulatory purposes considered workers, generally for tax laws. NELP notes that local and state policymakers can expand this structure to provide “portable” benefits by “directly requir[ing] that companies that use IRS-Form-1099 workers abide by labor standards such as the minimum wage and others, and pay into Social Security and state workers’ compensation and unemployment insurance funds.”

She looks at the prospects for workers’ rights in the sharing economy, and with a lot of links she points out some places where action is being taken to push back against the efforts of some sharing economy companies to push all the risk and uncertainty of their business onto the shoulders of their service providers. A valuable resource.



The case of the power drill

The case of the power drill was one of the archetypes of the Sharing Economy. Sarah Kessler has an excellent piece in FastCompany about what’s happened to this original vision: the sharing of under-used possessions, the promotion of access over ownership. It turns out that these efforts have fizzled, which is too bad.

Kessler starts off by looking back:

“How many of you own a power drill?” Rachel Botsman, the author of the book The Rise Of Collaborative Consumption, asked the audience at TedxSydney in 2010. Predictably, nearly everyone raised his or her hand. “That power drill will be used around 12 to 15 minutes in its entire lifetime,” Botsman continued with mock exasperation. “It’s kind of ridiculous, isn’t it? Because what you need is the hole, not the drill.”

After pausing for a moment as the audience chuckled, she provided the obvious solution.

“Why don’t you rent the drill? Or rent out your own drill to other people and make some money from it?”

The power drill became one of the touchstones of the sustainability vision of sharing:

Even companies that weren’t renting power drills proselytized the theory. “There are 80 million power drills in America that are used an average of 13 minutes,” Airbnb CEO Brian Chesky told the New York Times in a 2013 column about the sharing economy. “Does everyone really need their own drill?”

But, Kessler reports:

There was just one problem. As Adam Berk, the founder of Neighborrow, puts it: “Everything made sense except that nobody gives a shit. They go buy [a drill]. Or they just bang a screwdriver through the wall.”

Worth reading the whole thing.

In a similar vein, another Sarah (Lacy) reflected (Pando members only, now) on the failure of Homejoy and the difficulties that TaskRabbit and other home service offerings have had, and suggests that “the only Uber of anything is Uber”. Delivery companies too may have a hard time reproducing the Uber/Airbnb growth curve (right now I’m staying with my mother in the UK: supermarkets do their own deliveries and it works perfectly fine without any sprinklings of Silicon Valley magic dust). As she writes: the thing with Uber and Airbnb is that every time you want to get a ride or a place to stay, chances are it’s a different driver or a different host, so every time you use the service its ability to match you with a service provider is useful. For Homejoy, you really want the same cleaner every time, and for a supermarket delivery there’s no reason to have a different person every time either. The platform doesn’t add much value once you have found the right person.

Which makes me think a couple of things. First, it’s always a good idea to challenge the idea of technological inevitability: sometimes technology-driven solutions work, sometimes they don’t.  For all I try to be a perennial doubter, I didn’t ask hard enough questions about the utility of the underlying sharing model: I thought there must be something there and I just didn’t get it yet.

Second, the Internet is basically a communications medium, and communications is often not the main problem to be solved. Using power drills is not mainly about communications, it turns out it is mainly about convenience:

“For a drill, which by the way now costs $30, and you can get it on Amazon Now and have this thing delivered to you in an hour if you live in New York City—for something worth $30, is it really worth your time to trek potentially 25 minutes to go get something that you spent $15 to use for the day, and then have to trek back?”

In this case, the Internet doesn’t solve the convenience problem at all. Community sharing is still a worthwhile goal, but for many aspects of community sharing, the Internet does not add a lot.

A few updates

I’ve completed my book manuscript, and it’s time to return to blogging. I’m going to change things a bit. Mostly until now I’ve done fairly long-form essays every now and again, but I’m going to try going more frequent and more links than original stuff (so if you get the emails you may want to click that Unsubscribe button). I don’t think there is a place that aggregates Sharing Economy events and commentary, so I’m going to try that for a while.

To start off, here are three interesting pieces. All links open in a new tab.

The indefatigable Ellen Huet highlights Uber’s continual efforts to raise its take of each ride: it has now raised its commission to 25% in five more cities.

In the last few months, Uber has quietly bumped up commissions from 20% to 25% for new drivers in five cities. New York City drivers who joined as of April will pay 25%, as well as drivers in Toronto, Indianapolis, Boston  and Worcester, Mass., who joined as of August, the company confirmed.

San Francisco drivers who joined in the last year still pay a 25% commission. An Uber spokeswoman declined to say whether the 30% commission pilot program has spread to more drivers or markets.

Keeping the higher commission to recent drivers doesn’t actually limit its impact very much. Uber’s workforce is constantly churning and growing: In January, an Uber-conducted study showed a quarter of its active drivers had joined in the last month. It’s unclear if raising the commission deters new drivers from signing up, but if the policy has spread from its first test city, it suggests it makes economic sense.

The churn among Uber’s drivers matches that in Airbnb’s hosts: new people try it out, and a lot decide it’s not for them. You would think that the more Uber takes from each ride, the weaker its claims that it is not responsible (just a technology company) when things go wrong, but it looks like they are confident they can take more money without taking on more risk.

Ilya Marritz in WNYC news reports on city inspectors chasing down potential illegal rentals:

WNYC has obtained detailed records from a year and a half of inspections. Here’s what we learned by reading through all 2,684 reports.

…from October 2013 through April 2015, the city received 1,616 complaints about illegal hotels. In the same period, inspectors made 2,684 visits looking for rentals that violate local laws

While Airbnb is responsible for most, it surprises me how many reports are from non-Airbnb listings. In particular, Priceline has more than HomeAway.

Airbnb – 101 (owned by Priceline)– 40
Portobello Suites – 11
VRBO (owned by HomeAway)– 11 – 10
Tripadvisor – 5
Agoda (owned by Priceline)– 3
Expedia – 3

I do wish she had given us more of the report details, but there are some gems there, like this one:

“Unidentified Woman Opened Door And After Saying She Did Not Live There Attempted To Slam Door On Identified Police Officer. Woman In Back Screamed To Her Dont Let Them In. Male Came And Id Self As Owner Of Multiple Apts And Said We Should Be Going After Real Criminals Not What They Are Doing.”

Stallman on Openness. Don’t be an Ass

In today’s Guardian Richard Stallman writes a call-to-arms against technological surveillance. His form of opposition is to create free/libre software, but that is no solution.

Stallman confronts his readers: “Should you trust an internet of proprietary software things? Don’t be an ass.” He claims that “proprietary software is computing for suckers” and that proprietary software is a virtual synonym for malware. Of course proprietary software can be used and is being used to snoop on users, to shackle users, and to report data to companies. But so is free/libre software. Free/libre is not a magic talisman that protects you from all these harms. An internet of open source software things could be just as intrusive as an internet of proprietary software things.

Stallman writes: “What kinds of programs constitute malware? Operating systems, first of all. Windows snoops on users, shackles users and, on mobiles, censors apps; it also has a universal back door that allows Microsoft to remotely impose software changes.” 

So what about the free/libre alternative Linux, which apparently he wrote (“I developed the GNU operating system, which is often called Linux“), probably right after he “started free software in the 80s”. My Android phone runs Linux, and it spies on me. And all those NSA computers used for spying? They run on Linux. The biggest corporate contributor to Linux is Intel: is Intel morally better than Microsoft as a result of its contributions? (hint: No)

Or what about the databases used to actually store all that snooping information. The Acculumo database that the NSA developed specifically for the purpose and which is now kindly supported by the Apache Foundation; the Hadoop distributed file system that underlies Accumulo; the Java programming language used to write Hadoop and Accumulo? All open source.

In short, free/libre software is no longer an alternative to corporate and state snooping and shackling, it’s part of the problem.

Stallman avoids this conclusion by mixing up two separate things as if they are one. He calls on his readers to resist surveillance “by rejecting proprietary software and web services that snoop or track”. These are two different things. “Web services that snoop or track” can be and often are built on free/libre software.

Stallman also calls on his readers to resist surveillance “by organising to develop free/libre replacement systems and web services that don’t track who uses them”. But again this is mixing up two separate things. “Web services that don’t track who uses them” can be built on proprietary software just as easily as they can be built on free/libre software.

Stallman gets it right in his third call, to resist surveillance “by legislation to criminalise various sorts of malware practices“. The problem is one of practices, not free/libre vs proprietary software. I know some readers will say I am trying to blame the technology, but they will be wrong. And technology is not the answer either. Much as Stallman and others would like to believe that their practices of software development (free/libre versus proprietary) makes them rebellious hackers against an oppressive empire, freedom-loving opponents of surveillance, they do not.