Virginia Rising

Worker Protection Debate Rages Over Sharing Economy

By Stephen Lee

Aug. 3 — As the Obama administration and congressional Democrats take further steps to clamp down on employer misclassification in the so-called “sharing economy,” their efforts appear to bump into an uncomfortable tension: that even though companies like Uber and TaskRabbit don’t provide full safety and health protections for workers, they have also emerged as important sources of income for many people.

Labor Secretary Thomas Perez said in a July 28 Facebook chat that his department will use its standard test to determine whether workers are employees or independent contractors in the sharing economy. He said the Labor Department focuses especially on industries in which violations are common and workers are afraid to speak up.

Senators, Clinton Raise Questions.

But in a July 16 letter to Perez, Sens. Robert Casey (D-Pa.) and Al Franken (D-Minn.) noted that the sharing economy “has been an important source of jobs and innovation,” signaling that the effort to protect workers in the murky world of the sharing economy without stifling growth is likely to be complicated.

Democratic presidential candidate Hillary Clinton acknowledged the same tension between worker protections and economic growth in a July 13 speech in New York.

“This on-demand, or so-called ‘gig economy,’ is creating exciting opportunities and unleashing innovation. But it’s also raising hard questions about workplace protections and what a good job will look like in the future,” Clinton said.

Third Way?

One way out of the bind is to create a third category of employment to bridge the gap between the employee and independent contractor categories. Such a hybrid category would hold employers responsible for some worker protections but release them from others, thus preserving for workers the flexibility of on-demand work while still extending the most important safeguards, Chris Koopman, a research fellow at the free market-oriented Mercatus Center, told Bloomberg BNA July 16.

“Otherwise you’re given a choice to take a square peg and fit it into one of two round holes,” Koopman said.

Jon Liss, co-executive director of the progressive advocacy group New Virginia Majority, agreed that a hybrid approach could work.

“Conceptually, I think it makes a certain amount of sense to have some category where people get a good chunk of the labor protections that have been built up over the last 150 years,” Liss told Bloomberg BNA Aug. 2.

A False Choice.

But Perez flatly rejected that idea in his Facebook chat.

“Our current law provides a useful framework for understanding the rights and responsibilities of workers and employers,” the labor secretary wrote. “I am concerned that some observers have framed a false choice of protecting workers or promoting innovation in today’s economy. I categorically reject this false choice. There are scores of innovative employers who reject this false choice as well, and are innovating, growing their business and treating their workers fairly.”

The Occupational Safety and Health Administration has also prioritized misclassification under its current leadership. Agency chief David Michaels said last month that several Labor Department agencies have begun looking carefully at the sharing economy, but haven’t yet decided how it should be regulated.

Existing Rules Enough.

Sarah Leberstein, senior staff attorney at the National Employment Law Project, broadly agreed that the existing regulations are adequate.

“We have a pretty comprehensive system of workplace protections, and in many cases it may be that the nature of these jobs actually isn’t all that different, or at least not as different as the companies portray them to be, from standard work, which has always been varied, in some cases flexible and part time,” Leberstein told Bloomberg BNA July 30.

She pointed to a recent decision by the California Labor Commissioner finding that a former Uber driver qualified as an employee, and as such Uber is indeed the responsible party for almost every aspect of the job (Uber Techs. Inc. v. Berwick, Cal. Super. Ct., No. CGC-15-546378, appeal filed 6/16/15).

Looking Beyond Claims.

“I think it’s time for us to look beyond Uber’s claims,” Leberstein said. “Just because you don’t have a boss who’s breathing down your neck doesn’t mean you’re not an employee. I would just question whether there’s anything so unique about getting your assignments through the Internet that would mean you don’t get really basic workplace protections.”

Uber didn’t respond to a Bloomberg BNA interview request, but in January, company spokeswoman Natalia Montalvo told Bloomberg BNA that the company uses cashless payments to minimize the threat of holdups and a dual-feedback rating system that gives both drivers and passengers information about one another before a ride starts.

Existential Threat.

In the view of Mercatus’ Koopman, the existing regulatory and licensing approach can’t simply be grafted onto the sharing economy because doing so would stifle growth and competition.

Koopman further said most federal and state regulators are too hidebound and set in their ways to adapt to the new realities of on-demand work.

“In a lot of ways, the sharing economy doesn’t just pose an existential threat to old ways of doing businesses, but also to old ways of regulating,” Koopman said. “The regulators are saying, ‘They have to be a part of our system if they want to be a part of the market at all.’ This is really an opportunity for state and local regulators to reconstruct their regulatory systems from the ground up, in light of changes in the market.”

Whatever approach policy makers adopt should be minimally invasive, because the sharing economy is evolving so fast that any policy measures are likely to quickly become obsolete, Koopman said.

Bill Cracks Down on Misclassification.

Casey and Franken, along with a group of House Democrats, introduced a bill in both chambers July 29 that would require employers to give workers written notice of their classification as employees or nonemployees.

The bill also makes it a violation of the Fair Labor Standards Act to discharge or discriminate against a worker for opposing any practice concerning his or her classification, allows misclassified workers to sue for lost wages and subjects employers to a $1,100 fine for each misclassification violation.

“Payroll fraud hurts wages, costs workers basic protections and harms economic growth,” Casey said in a statement. “We owe workers a fair shot at good jobs where they can receive basic workplace protections. Too many workers are classified as independent contractors when it’s clear that they are employees.”

Organizing Efforts Under Way.

Leberstein said the public discussion about Uber has helped cast a spotlight on a growing segment of the workforce that “isn’t getting the benefit of basic workplace protections and the social safety net.”

To that end, Liss, who has helped taxi drivers organize for drivers’ rights in Virginia, has also been reaching out to Uber drivers in Virginia.

“People can see a common interest in coming together and writing rules that are more balanced,” Liss said. “Uber drivers are going to be here. We need to figure out a way to work together.”

By Stephen Lee