Independence Day? Uber, ICs, and the Two-Sides of 21st Century “Online Work Arrangement Platforms”

It’s Independence Day here in the U.S., so coincidentally a very convenient context for writing this post about work, laws, independence, and the protection of rights of diverging stakeholders in our society and economy.

For those of us who have been studying 21st century “online work arrangement intermediation platforms” (Online Staffing, Crowdsourcing, Online Services platforms, etc.), there has been no doubt that two-sided “car ride” platform businesses like Uber and Lyft are in fact a kind of “work arrangement intermediation platform” like the various online labor platforms we have been calling attention to (2014 Online Staffing Platform Landscape: Can More Be Better? ). “Online work arrangement intermediation platforms” are simply digital platforms that enable the arrangement of work engagements/episodes between buyers and suppliers of labor services—but there are many dimensions to a “work arrangement,” including (as we know in the staffing industry) if and how existing laws may apply.

Two-sided online/digital platform businesses did not really exist before the internet, so we are still trying (often struggling) to figure out how existing laws apply to these platforms and what new laws may be needed (data privacy and data ownership are good examples of where legal chasms have opened up in the platform world). In fact, online/digital platform business models tend to introduce new, unprecedented ways of doing things that not only challenge and change traditional industry business practices, but also can directly or subtly challenge legal and regulatory concepts and frameworks potentially leading to court actions and/or government policy change. Such business and legal turbulence is certainly present around changing work arrangements, where there is a thicket of existing state and federal laws and regulations and diverging economic stakeholder interests.

One key issue is whether these new “online work arrangement intermediation platform” businesses are — as many of them argue — just “enablers” of work arrangements between two other legal parties (buyers and suppliers of labor services) or if they are themselves legal parties to the work arrangement. While some of these platforms have taken steps to try to address legal and regulatory responsibilities with additional services or different business models, many have asserted themselves as “online marketplaces,” pure and simple — or even more radically, as innovative business actors that are enabling new forms of economic exchange in an increasingly digital, networked, and hyper-efficient peer-to-peer and shared-resource economy.

Right now, in the Uber case, the “powers-that-be and status quo interest-holders” are mounting various legal challenges to Uber’s “innovations.” The most recent legal question which the two sides of the argument have squared off on is whether Uber drivers are ICs or employees in relation to Uber. Uber says it is just an “enabler” and the drivers are ICs in relation to the riders requesting rides. The other side says, no, Uber is an employer under existing laws. We will see how this matter, along with the analogous Crowdflower case, gets sorted and resolved further down the road as the wheels of justice and government process slowly turn and some destinations are eventually reached.

The Uber case is certainly about the correct application of existing worker classification laws. But it is also about much more. We are seeing small episode in a longer arc of evolution in the labor economy as technology creates new possibilities for how work can be arranged and conducted.

One very interesting perspective came from an academic researcher at MIT quoted in the Boston Globe:

 “If their drivers are classified as employees then that suddenly makes their business model untenable,” said Denise Cheng, a research assistant at the MIT Center for Civic Media. Cheng studies the growth of the so-called peer-to-peer economy in which companies such as Uber act as middlemen and use software to link customers with service providers, whether they’re drivers, housecleaners, or even fitness coaches. Uber is perhaps the highest profile example of a company that fits into the peer economy category. If these services continue to grow, Cheng said states should consider a new hybrid employment classification for the people providing the labor. “There needs to be a third classification that eases the transition between being a freelancer and being an employee,” she said.

Cheng effectively raises a very interesting question: Has technology and economic reality brought us to a point where we need to start to rethink the “IC vs. employee dichotomy” and drive policy action to allow for a different legal form of work arrangement for independent workers?

The labor situation in the U.S. is certainly problematic, with “employees as percent of population” and “labor force participation” for several years now at their lowest points since about 1960. Work arrangements today are still restricted by 20th century, industrial age employment law, even as it is becoming obvious that our economy cannot (in fact, does not) function effectively within these rigid, over-sized structures and as technology is making it abundantly clear that new work arrangement structures are feasible and can unlock new economic benefits for consumers, businesses, and workers.  We need and can have more efficient, less wasteful and more convenient ways of getting things done, including getting people working.

“Online work arrangement intermediation” platforms are demonstrating how work can be arranged in new flexible, efficient ways around independent workers. But will our legal and tax regime and related infrastructures (such as payment and tax collection) be able to adjust to support a sustainable independent workforce in America?

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