Tag: 1099

More employee/contractor cases

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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

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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.