Katy Steinmetz of Time Magazine had a great piece this week summarizing a joint Aspen Institute /Time study on the future of the gig economy. http://time.com/4169532/sharing-economy-poll/?xid=tcoshare She discussed what may be the first attempt to quantify how many Americans are participating in the various aspects of the sharing world, from shared car services, to rented rooms, to odd jobs, as either a buyer or seller. As you may imagine, the numbers are fairly staggering, with more than 44% of Americans taking part.
She also gets into the implications of the employment status of those who offer services. In most cases they are classified as independent contractors (ICs) rather than employees. ICs, of course are not subject to withholding taxes and ineligible for benefits typically accorded employees. Ride sharing giant, Uber, is facing a class action lawsuit, where drivers are claiming they should be employees not ICs, an action now scheduled for June of 2016.
The IC versus employee issue is a murky one and Steinmetz does a good job explaining the accurate and curious fact that there is no one legal definition of an employee. The IRS has 20 points which define employment status, but the primary factor comes down to who directs and controls the work. That subjective framework is why the subject is fraught with abuse from both sides of the transaction.
Later in a brief comment, she explains that the ambiguity of this body of law is inherent in its origins in 18th century England. She didn’t quite get that one right…it was a bit earlier.
Our current employment structures are based on the Master Servant body of English Law which is actually from the 14th century. As the bubonic plague, also called the Black Death, ravaged England, there was a need to identify who was the master of a particular area and who was the servant — hence the name.
Although the Uber case and others in the sharing economy have put the IC vs. employee question in the forefront, it has been an issue for years. Issues can create opportunities; companies like Collabrus Inc., which I founded, as well as others like MBO Partners, have created business models to eliminate the ambiguity inherent in the misclassification of workers.
Issues also create investigations. In the mid 90’s, I testified about the problem at hearings in Sacramento. At the time , the state of California was ardently pursuing anyone who was paid with a 1099 (an IC) versus a W2 (an employee), claiming that those receiving 1099s were just trying to skirt taxes. I explained there in the new world of just in time talent, old employment designations and the social contract that goes along with it were no longer relevant. I ended my remarks pointing out that the bubonic plague ended a long time ago, so maybe it was time to update our regulations,
The wonderful State Senator, Milton Marks , of San Francisco, who served in the California senate for more than 30 years at that point chimed in and said, “She is absolutely right . I know because I am so old, I was there in the Middle Ages.”
I have to smile when I think of that hearing. I also have to agree with my original assertion, it is time to rethink our employment law structures as the gig economy grows. IC status shouldn’t have anything to do with the bubonic plague, rather it should have to do with empowering individual business pursuits.