At core, there is a real question of worker misclassification in the on-demand marketplace. In labor law, there are certain litmus tests to determine whether a supposed contractor is actually a misclassified employee. The employer has a strong incentive to claim that the worker is a contractor, because that allows the firm to sidestep taxes, legal liability, and the purchase and upkeep of equipment (like cars, insurance, and gas, in the case of Uber). If the worker is controlled directly by the company — is told how and when to provide services (like Homejoy’s scheduling appointments instead of its ‘contractors’ making those arrangements, what tools or equipment to use, and specific procedures to follow (like the Lyft fistbump) — then misclassification becomes more likely.
Consider the level of control that Handy — a Homejoy competitor — applies to ‘contractors’:
Handy tells its cleaners how to dress, but it also tells them when to knock or ring the doorbell, whether to shake a customer’s hand (always), whether to ask if they should take off their shoes (always), whether they can talk on the phone during the cleaning session (never), and more, the suit says. Those specifications likely make customers feel secure and at ease.
They also violate many of the IRS standards for independent contractors, which say that they can’t be told when, where and how to do the work.
Uber claims its drivers prefer being contract workers. However, the company doesn’t offer the alternative of full-time employment for drivers, so the experiment to prove their claim hasn’t been run. Whether drivers believe they are employees or contractors — many hold other jobs, and some preclude other ’employment’ — is a factor in the analysis, but may be moot in the final analysis, since so much of the control of the work is in the hands of Uber.
On-demand work has risen in the national conscience to the point that presidential candidates are senators are asking difficult questions. Hillary Clinton recently said that she plans to ‘crack down on bosses who exploit employees by misclassifying them as contractors or even steal their wages.’ Senator Mark Warner gave a talk at a DC-based think tank, New America, in which he supported the idea of a third category of worker, saying,
For many of these online and contingent workers, they’re operating without any safety net below them. They may be doing extraordinarily well — until they’re not, and then there is nothing to catch them until they end up, candidly, back on the taxpayer’s dime.
The third worker class has many possible facets, like a way to have a freelancer’s clients contribute on a pro rata basis toward the sorts of benefits that full-timers receive. For example, the half of social security that employers pay for their employees is paid for freelancers, along with the employees half. In a ‘hours bank’ model, clients would pay a share. So if a freelancer worked 10 hours for company X, they would contribute one quarter of that week’s employer-side social security contributions, and other clients would two.
Some on-demand companies have simply accepted the status quo, and for many reasons are simply refactoring the on-demand workers into traditional full-time employment, as Shyp has done, and as others — like Zirx and Luxe — are contemplating.
At any rate, Homejoy has determined that it may not prevail in its mounting legal battles, and investors have recoiled from the risks involved. Note that Google stepped right in, and hired the tech team there (see Homejoy calls it quits, Google scoops tech team). Google is gearing up to enter the field of online service connection, and may employ a Homejoy-like model. We’ll have to see, since they are talking much, yet.
But Homejoy and Uber are only one segment of the on-demand market, and the various sorts are quite different:
On-demand displacers — Services like Uber, Homejoy, and Handy are operating in marketplaces where there established companies use a blend of contractors and employees to provide conventional services, like home cleaning or limo/taxi driving. These newcomers are polarizing the debate — and winding up in court — by attempting to maximally displace liabilities, expenses, insurance, regulatory fees, and taxes onto workers (and local governments) while maximizing their control on the way the work is done. These companies want everything to benefit them, for maximum control and profits.
On-demand brokers — Companies that act as on-demand brokers for actual independent freelancers, like eLance and UpWork, are paid for their market-making services, and fulfill a necessary service for a growing population of freelancers and those contracting for their services. There are legitimate points of contention about the impact of freelancing on society, but these brokers are clearly not involved in labor misclassification.
On-demand networks — Likewise, apps like Directly, that harness the skills of a network of people as a way to offset corporate costs, are unlikely to come into the crosshair of labor boards. Directly is an app that other companies use to leverage the knowledge of a network of their expert users to improve customer support and cut support costs. The expert users they pull into these networks are motivated by personal interest, and the funds they receive for helping other less expert users are likely a very small part of their total income. This is not like HomeJoy’s model in the least.
These three sectors of the on-demand economy are quite different in most ways, but are being lumped together, and that can be unhelpful, especially since it is only the displacers that are engaged in practices that raise the big questions about labor law and corporate responsibilities to the communities in which they operate.