A British employment tribunal has rejected Uber’s appeal on a case involving the employment status of its drivers. While the popular ride-hailing app believes drivers should be considered self-employed, and insists the vast majority of them prefer it that way, the tribunal has ruled that the drivers are employees and thus entitled to minimum wage, overtime/holiday pay, and other protected benefits.
Uber’s appeal came in response to a tribunal ruling last year which reached the same conclusion. Following this rejection, the company says it will take the opportunity to elevate its case to the Court of Appeals or the Supreme Court. Uber is embroiled in other legal battles in the UK, as the company is also in the process of appealing a ban issued by London authorities, who deemed the service unfit due to “public safety and security implications.”
This case has major implications for the gig economy, the long-term viability of which may be called in question due to the potential closing of this employment loophole. Deliveroo and Addison Lee are appealing similar decisions at the moment in the UK, and a similar case is underway in California involving the food-delivery app GrubHub. Additionally, Uber has settled class-action lawsuits on drivers’ employment status in California and Massachusetts, and other states are following suit. Not being on the hook for benefits and regular wages has helped gig economy companies grow at scale while keeping labor costs low and making it easier to deal with fluctuating demand for their services.
The latest measure of the gig economy in the US comes from Intuit, the business and financial software company that owns TurboTax. On an earnings call on Wednesday, Intuit CEO Brad Smith told investors that by his company’s estimates, gig workers now make up 34 percent of the American workforce, a number expected to rise to 43 percent by 2020, CNN Money reports:
Smith was referring to freelancers of all stripes — those on online platforms like Uber and Lyft and also more traditional freelancers like plumbers and electricians. He cited an ongoing research project between Intuit and Emergent Research. It’s the latest sign of the sprawling size of the US freelance economy — a sector the US Labor Department has self-admittedly struggled to quantify. New government data on freelancers won’t be out until 2018.
Specifically driven by the newer online platforms, there are about 4 million quintessential gig workers, research from Intuit and Emergent show. They expect that to grow to 7.7 million workers by 2020. However, it’s hard to get an official government count to know how many work full time as gig workers or just part-time, or whether they have traditional 9 am to 5 pm jobs and do gig work on the side.
Deliveroo, a UK technology company that connects restaurants with delivery workers through an Uber-like gig economy platform, has simplified and changed the terms of its agreement with couriers, removing several controversial provisions that had attracted unwelcome attention from lawmakers, Sky News reports:
The company has removed a stipulation in earlier contracts saying that couriers could not challenge their self-employed status at an employment tribunal – a clause that had been described as legally invalid and which people close to Deliveroo said had never been enforced. The document also includes the explicit clarification that couriers can work for other companies at the same time as they undertake work for Deliveroo – a key change that MPs had urged in a critical report on the so-called “gig economy” earlier this year. …
At four pages, the new “contract” is a quarter of the length of those used by Uber, the ride-hailing service, and one-fifth of those used at Amazon, the internet retail behemoth, according to details submitted this year to the Work and Pensions Select Committee.
The gig economy is an attractive business model for many startups, as well as for the venture capitalists who back them, because independent contractors are typically cheaper to hire and impose fewer obligations on a business than full employees. Some startups, however, have opted out of the gig model, because they find the benefits of full-time employees outweigh the downsides. At Backchannel on Friday, Miranda Katz took a closer look at the startups “that began with 1099 contractors have taken the risky step of converting their workforces to employees — taking on as much as 30 percent more in payroll costs in exchange for legal peace of mind and a trainable workforce”:
Instacart, for example, began offering a full-employee option to workers in 2015, after being served with its first misclassification lawsuit; W2 “shoppers” now comprise about 20 percent of Instacart’s workforce. … In a flurry of announcements over the summer of 2015, several other companies started revamping their workforces entirely. Shyp made the switch that July, citing the desire to be able to train its couriers and provide them with more supervision; it was followed by companies including Luxe (valet parking), Eden (tech support), and Sprig (food delivery), all of which appeared to come to the collective, sudden realization that they needed more control over their workforces. Most of these startups avoided directly calling out misclassification lawsuits as their motivation for making the switch—but given the timing, the rush to change seemed far from a coincidence. …
Puerto Rico’s new governor Ricardo Rosselló signed a bill last week that comprehensively reforms the commonwealth’s employment laws as part of a strategy to revitalize the Puerto Rican economy by lowering the cost of doing business there, the Associated Press reported:
The law approved on Thursday implements flexible scheduling, cuts the amount of a mandatory Christmas bonus, reduces vacation days and overtime pay from double time to time-and-a-half, and implements a nine-month probation period for most workers. It also strikes down a previous law that authorized extra pay for those working on Sundays and allowed businesses to remain closed from 5 a.m. to 11 a.m. on Sundays. …
The law implements some of the changes sought by a federal control board created by Congress last year that said Puerto Rico regulations tied to employee retention, severance pay, flexible scheduling and mandatory vacation days and pensions should reflect U.S. standards.
The new law now allows private employees to work 10 hours a day for four days without earning overtime, and it increases unemployment benefits from a maximum of $133 to $240 a week. However, concerns remain as the island of nearly 3.5 million people struggles to emerge from a deep economic crisis and battles a 12 percent unemployment rate, compared with a U.S. average of nearly 5 percent.
Critics of the law say it will drive skilled professionals to the mainland US and impoverish working-class Puerto Ricans, but economist Gustavo Velez told the AP that even with these changes in place, Puerto Rico would still provide more generous employee benefits under the law than any US state. The change is part of a series of pro-market reforms and austerity measures being enacted by Rosselló to try to pull the island out of compound fiscal and economic crises.
One of the key questions raised by the advent of the ‘gig economy’ is how participants in that economy will obtain critical benefits like health care, unemployment insurance, and retirement savings outside of a traditional employer-employee relationship. Ridesharing platforms Uber and Lyft maintain that their drivers are independent contractors and have fought to keep them from being reclassified as employees, which these companies fear would wreak havoc on their business models by requiring them to provide unemployment benefits, paid vacations, regular work hours, and so forth. Gig economy platforms argue that the people who use them for work enjoy a level of freedom and flexibility that they could not maintain as employees, so everybody wins from the independent contractor model. Since gig economy workers look a lot like employees, but not exactly, some economists have proposed that a new type of classification is needed to account for this type of work.
In the meantime, some gig economy platforms have experimented with ways to provide their user-contractor-employees with benefits without breaking their business models: Last August, Uber piloted a retirement savings program for drivers, and Care.com is trying out a peer-to-peer platform that allows customers who hire caregivers through the platform to contribute to their caregiver’s benefits, much like a traditional employer would. Other companies say they would like to provide benefits to their contractors but don’t, because doing so would risk having them reclassified as employees.
New York State has been trying to develop a legislative solution to this quandary since last year, working from a draft bill circulated by the online home-cleaning company Handy that would establish a model for gig economy workers to receive portable benefits while remaining independent contractors under state law. At the New York Employment Attorneys Blog last month, Harman Firm attorney Edgar M. Rivera explained how the bill would work:
The US economy capped off 2016 with decent December jobs numbers, and according to CareerBuilder’s annual job forecast, many employers are looking to hire in the coming year:
The hiring outlook for 2017 is the best the U.S. has seen in a decade with 2 in 5 employers (40 percent) planning to hire full-time, permanent employees over the next 12 months, according to CareerBuilder’s annual job forecast. Three in 10 expect to hire part-time, permanent staff while half of all employers anticipate adding temporary or contract workers.
The national survey, conducted online by Harris Poll on behalf of CareerBuilder from November 16 to December 6, 2016, also indicates that employers will offer better wages, place emphasis on candidates’ soft skills and reach out to candidates via texts to invite them for job interviews. It included a representative sample of 2,391 hiring managers and human resources professionals across industries and company sizes.