Tag Archives: Collabrus

The Gig Economy Eco System

Employment in the Gig Economy

As the politicians debate the implications of the gig economy, they typically just talk about jobs.  They lament that so many gig workers don't have benefits and are being taken advantage of by those running the powerful digital platforms. As I have said here often, they seldom mention the professional gig economy workers, 91% of whom have self selected this career path.  But perhaps the bigger oversight is that they fail to recognize the jobs that are being created serving the new needs of the gig economy and its workers.

Take a recent press release from ShiftPixy. http://www.shiftpixy.com This app is a way for

From the ShiftPIxy website

From the ShiftPixy website

companies in need of shift workers to recruit contingent gig workers to fill their scheduling gaps. This means that a small business can use this app, rather than trying their luck at all the digital sites. what Kayak did for travel, it is doing for low-end contingent labor.

Employment Laws and the Gig Economy

Moreover, the Shift Pixy guys have paid attention to the employment law issues that have bedeviled some of the large talent platforms like Uber and Handy.  ShiftPixy employs the gig workers on behalf of its clients.  By employing them, it enables them to accrue enough part-time hours from various clients to qualify for benefits typically only accorded to full-time employees.

In case you are wondering, I don't have an investment in Shiftpixy so this is not a commercial.  It is recognition that someone has solved not just one but two key problem with the gig economy. First they just bit the bullet and made the employment call. Since the laws are murky ( another favorite subject of mine) they built an employment infrastructure that is easily accessible via an app that takes the employment risk away from their clients.  "You want a shift worker to bag groceries, great, they would have to be an employee.  Since you don't want them to be your employee, we will handle that. " Most of the digital platforms put the onus on the buyer to figure out the employment law issues, so ShftPixy took that off the table, making it safe for any size company to engage a gig worker. In the spirit of full disclosure I  think that is especially brilliant idea, since I did the same thing 15 years ago, when I started Collabrus, a company designed to employ consultants when they need to be employed by nature of the work or as a risk management strategy.

ShiftPixy is solving another more intractable problem though, by creating a structure that consolidates part-time hours to enable benefits eligibility.  It sounds straightforward, but it is actually a pretty complicated business model.

In the end, Shift Pixy is a small start-up with a little staff, but none the less, they are themselves a job creator.  They have their own employees, but they will also be creating opportunities for various part-time workers to get additional shifts in a way that suits their lifestyle and financial needs.

So as the politicians lament the loss of traditional jobs, I say lets applaud the innovators who are creating the economic infrastructure to strengthen the new world of work.

I am Uber the Uber Lawsuit

Uber Lawsuit and The Independent Contractor

Last month, Uber settled the  class action lawsuit involving its drivers in Mass and CA. The court papers reveal that the settlement was $84 million, while some estimates put actual damages, had they lost as trial at anywhere from $750 million to $4.1billion.  Is anyone surprised they settled?

Part of me hoped that the case would continue to the courts, since such a case might  have brought some needed clarity to the mess that is independent contractor  versus employee regulations.

In 1993, I started a firm, Collabrus, because of this very ambiguity.   Collabrus acted as an employer for consultants during a project when the nature of the work or the client’s risk profile warranted that structure. It offered health insurance as well as specialized benefits designed for consultants, like low cost errors and omissions insurance. In setting up and running that business I learned more about independent contractor compliance than I ever cared to know, hence my interest in the Uber case.

I thought, had it continued, the Uber case could go either way. One of the reasons that this is such an ambiguous area is because “independent contractor” is an undefined term in the law. Much of our employment law is derived from British master servant laws which date back to the 14th century. In fact, they were developed following the massive carnage of the bubonic plague; since so many had died, laws were needed to define who of the remainder were the masters and who were the servants. Back then independent contractors (ICs) were not part of the picture.

Since there is no legal definition of an IC, though some states have done so, tests have been developed that take into account agency law constructs as well as other factors. The IRS has put the most widely used framework together in its “20 Points” that define an independent contractor. These include things like having their own tools, being able to experience a financial loss, and receiving no training. Unfortunately, not all of the conditions need to be met, and some are more important than others. This makes for a very murky picture of who may be an IC and who may be an employee. In the last 20 years, the two key things that businesses have drawn from the “20 Points” are that the most important considerations are direction and control. If you direct and/or control the work of someone, they are likely your employee.

So lets consider the Uber driver. One thing Uber has going for them is that they don’t train their drivers; drivers come to them knowing how to operate a vehicle. Uber may certify that the driving record be clean, but this wouldn’t be considered training or direction. The fact that drivers can set their own schedule is also a plus for Uber, since it reduces that sense of control. The fact that so many drivers are very part-time, i.e. less than 10 hours, is also a plus for them. Technology, though, muddies the picture. Drivers are given an iPhone by Uber to be able to hook up to their ride-haling platform. As such, Uber is providing the tools to some extent. Perhaps the biggest issue, and the one that an Administrative Law Judge highlighted in a ruling in 2015 where he deemed a Southern California driver an employee, is that Uber sets the pricing of all rides. As such, this is preeminent control over the driver.

Given my interest in the subject and being a very regular customer of Uber, I quiz every driver about their thoughts on the lawsuit.  I have yet to encounter a driver who wants to be an employee.  Most are teachers or students or retirees, who want the flexibility of time. The one suggestion I did get was that Uber could have done a better job helping the driver prepare for the tax implications of being an IC; as one teacher said, he'd always been a W2 employee, so it never occurred to him that he needed to save all of his receipts.  So maybe Uber just needs a wonderful flyer, brochure or even app, entitled"Making the Most Money with Uber  - How to Manage your Business Expenses."  That seems like it would be a lot cheaper than another court case.

 

Independent Contractors and the Bubonic Plague

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.

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