"Sharing Economy" Jobs Share Same Independent Contractor Issues as "Regular Economy"

By: Doug Hass

March 31, 2015

A CNN op-ed piece caught my eye recently as it discussed some of the difficulties the so-called millennial generation is having in Silicon Valley and elsewhere when it comes to finding gainful employment. It paints a very grim picture about “sharing economy” jobs like Uber, Lyft, or Instacart. The writer opines that “[t]he sharing-economy jobs are even worse than minimum wage jobs because they offer no stability or protections for workers. Sharing economy jobs aren't really jobs at all; they’re freelance gigs.” It refers to the sharing-economy as the “share the scraps” economy. Those are strong words, and the author doesn’t even touch on the wage and hour implications of the “sharing economy.”

As I mentioned last week on Twitter:

Instacart, other "#sharingeconomy" companies likely to see more misclassification suits. New twist on old wage & hour problem #FLSA #payroll

— Doug Hass (@WageHourInsight) March 25, 2015

Both employers and employees fool themselves if they think that a sharing economy job is the new small business. From a wage and hour standpoint, they appear to be nothing more than a twist on the independent contractor/employee classification issues that we discuss regularly here on the blog. Employers who might be drawn to the “sharing economy” business model gain neither loyal employees, nor control over the product or business they want to grow (witness Uber’s recent issues with assaults by drivers). Depending on how a court or agency applies the law, signing up workers for these services could be an unlawful agreement to pay less than minimum wage, while practically giving workers neither the advantages of having a job nor those of owning a business. Unsurprisingly, the “sharing economy” has started to attract attention.

Last week, two different California federal judges highlighted the wage and hour problems inherent in the “sharing economy” model in two class action lawsuits brought against two different ride-hailing companies, Uber and Lyft. The two cases each allege that the drivers are not independent contractors, as the companies claim, but should be classified and paid as employees. The classification triggers both federal and state law obligations - under the FLSA and various related state laws. Simply adopting “sharing economy” buzzwords does not magically transform employees into contractors. In both cases, the courts rejected the companies’ arguments on summary judgment and allowed the cases to proceed to the roll-of-the-dice of a jury trial (assuming you can even really “win” these cases as an employer, of course). And, it’s not just Uber and Lyft, either.  Instacart and Postmates (personal shopping), Homejoy (home cleaning), and Handy (repair), just to name a few all face similar lawsuits.

The cases are good reminders to employers about how difficult it is to apply laws drafted in the mid-20th century to the new 21st century business models that have sprung from the advance of technology. As the judge in the Uber case wrote, “many of the factors in that test appear outmoded in this context.” Yet, these are the tests that we have and that courts apply. Unsurprisingly, Uber and Lyft drivers fall smack in the middle of the gray area in wage and hour law. In some ways, the drivers resemble contractors because, for example, they can choose their work hours and their passengers. In other ways, drivers resemble employees because of the degree of control the companies exercise over them. With ambiguity in the law that even new regulations are unlikely to resolve, employers should think carefully (and get good legal counsel) before simply assuming that they can crowd source work that employees do.