Sharing The On-Demand Economy

Danielle Beurteaux

Joining on-demand start-ups Shyp and Instacart, meal delivery service Sprig just switched its contractors—i.e. 1099s—to employees. The motivation? To better train and develop its workforce, said CEO Gagan Biyani.Two female coworkers talking in office --- Image by © Jon Feingersh Photography Inc./Blend Images/Corbis

These are the changes that are happening in the sharing or on-demand economy—and it’s beginning to look like the normal economy. Can the on-demand economy survive the shift from 1099s to employees? Or are we about to see changes in existing labor laws that are more amenable to gig providers and workers?

On-demand house-cleaning service Homejoy closed up shop in July, pinning the decision on lawsuits from former contractors who claimed the company was misclassifying workers. But Homejoy didn’t wait for the legal outcome of the case. Another recent instance is Zirtual, a virtual assistant company. It also blamed reclassification—it switched from 1099s to employees last April—and the accompanying costs. It’s been acquired by Startups.co, but is now facing a class-action lawsuit from former employees.

In both cases, the core business models have been critiqued and it looks as if other factors were in play.

Getting organized

Not as in unions (not yet, anyway). In the UK, the on-demand trade organization SEUK, which stands for Sharing Economy UK, was recently launched. Airbnb and ZipCar are amongst the 21 founding companies that helped create this effort with the mission to “provide a central code of conduct for sharing economy businesses,” according to its website (more details here). And in partnership with Oxford University’s Saïd Business School it will also create a “Trustmark,” a stamp of ethics akin to the Fairtrade mark.

By the way, Uber wasn’t allowed to join because it’s not considered part of the sharing economy, a notion that was recently upheld by a court in California in a decision that supported a former driver’s claim that she was misclassified. Uber is appealing the decision.

Keep the old laws, or make new ones?

Some say existing labor laws don’t need to be changed because they were written to provide protections to employees—and they contend that that’s exactly what’s happening right now. There has also been a raft of lawsuits when companies have reclassified their employees as contractors to save money. In July, the Department of Labor issued a 15-page memo detailing worker classification. As a result, some now say that classifying workers as 1099s will now be more difficult.

Others are thinking of new classifications that will take into account the on-demand economy, offering a level of security for contractors. Gigs aren’t careers, and they won’t power a healthy economy. There’s the Twenty-First Century Social Contract, as created by Nick Hanauer and David Rolf, which includes a “Shared Security Account” that travels with the worker, prorated and with portable benefits.

Some think we need a new class of worker, but the details on what that would actually be are a bit hazy. Senator Mark Warner wrote this post on Medium, and he includes ideas like hour banks.

Empowering workers

Then there are businesses like Peers.org, created to help those working in the gig economy to manage their gigs. The company offers a platform to find and manage work (it includes this handy page that details average earnings for many of the biggest companies).

A similar site is Australian-based Compare and Share’s directory, which is broader in scope and includes things like crowdfunding sites, although it doesn’t include average earnings.

Maybe we’ll end up with a hybrid—a new set of protections for the many who pick up gigs on an as-needed basis—and maintain existing laws for anyone who fits into the traditional model.

And maybe more on-demand companies will follow in Shyp’s footsteps as more companies recognize that employee loyalty and culture translate directly to the bottom line.

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Danielle Beurteaux

About Danielle Beurteaux

Danielle Beurteaux is a New York–based writer who covers business, technology, and philanthropy. Her work has appeared in The New York Times and on Popular Mechanics, CNN, and Institutional Investor's Alpha, among other outlets.