Here’s one way to measure the impact of smartphone-enabled on-demand service platforms: Less than seven years after the founding of the largest company in the space, Uber, Washington is buzzing with talk of how to overhaul labor law to fit the new category of workers it claims to have created.
That might seem like a long time. But the main corpus of regulations governing the work experience hasn’t changed substantially for more than 60 years, so for broad reform proposals to be circulating at this point is basically warp speed.
“It’s going to be very difficult for government to keep up,” says former Domestic Policy Council chairman Bruce Reed, who’s been tapped by the Aspen Institute to run an Initiative on the Future of Work. "This issue will be an interesting clash of the can-do mentality of Silicon Valley with the 'let’s not and say we did' mentality of Washington.”
Within a year, the Aspen outfit expects to have some ideas for how things should change to protect the not-quite-employees-not-quite-contractors in the on-demand or “gig” economy, while not constraining the growth of services that consumers seem to love. They’re kicking off next week with a discussion of the “portable benefits” idea raised last month by a collection of tech executives and worker advocates looking to provide safety net services to people who hop from employer to employer.
Meanwhile, this Thursday the Department of Labor will convene a “Future of Work Symposium” in Washington to discuss how the government ought to adapt to new forms of employment relationships. The day before that, the Hamilton Project at the Brookings Institution plans to host a morning of panels to discuss a new paper on the subject by President Obama's former Council of Economic Advisors chairman Alan Krueger and Seth Harris, a lawyer who served briefly as U.S. Secretary of Labor in 2013.
All of the activity is motivated by a sense that, although infinitesimal right now — the number of people working through online intermediaries in the United States is estimated at 600,000 — the category could grow exponentially. Courts have been all over the map in deciding whether those Uber drivers and Handy cleaners are really employees or independent contractors, with on-demand companies insisting that their business models would be toast if they had to treat them as the latter.
Already, those who are plugged into this debate have separated into camps. There are those, found mostly among the labor union-oriented left, who believe that most of these workers are being misclassified as independent contractors and ought to receive all the benefits and protections of employeehood — workers compensation, tax withholding, contributions to social security, unemployment insurance, overtime, minimum wage, etc. To even talk about creating a new category for the on-demand economy is at best a distraction from the real problems most workers face.
“I don’t see what it is about the technology that can’t be successfully deployed through an employment relationship,” says Craig Becker, general counsel of the AFL-CIO. “It’s really hard to say that companies of the size that some of these are, with all their savvy, couldn’t provide the value which they’re clearly providing, and still comply with what are the minimal obligations of U.S. employment law.”
And then there are those, like the conservative R Street Institute, that want to to create a “safe harbor” for on-demand companies to experiment with offering employment-like benefits without having to convert their workers over to employee status — essentially freeing them from regulation entirely. “We believe employer-employee relations should be defined by individual contract, rather that relying on statutory, regulatory and common law definitions,” writes the Institute’s director Ian Adams.
Into this ferment steps Harris and Krueger, two former college buddies who’ve been talking about how to update labor law for a while now. (Krueger co-authored a study with Uber’s data a year ago that described how workers typically use the platform.) They approached the Hamilton Project about putting together a policy proposal earlier this year, and this week have produced something that has a little bit for both sides. The paper outlines a new category of “independent workers,” operating through either online or offline “intermediaries,” who would be entitled some of the benefits and protections of employees — but not all.
“Compared to the status quo, they are required to pay most of the benefits that traditional employers provide,” Krueger says of the intermediaries, "except for the ones that don’t make sense.”
So, for example: Anti-discrimination laws would be extended to cover independent workers, who would also be allowed to unionize (independent contractors are currently barred from doing so). Intermediaries would be required to provide tax withholding, pay payroll taxes for Social Security and Medicare, and contribute to support health insurance subsidies on the exchanges set up by the Affordable Care Act.
Intermediaries would not, however, be required to offer workers compensation; instead they would be allowed to do so through insurance pools in exchange for immunity from lawsuits without running the risk of having to reclassify their workers as employees. They also wouldn’t have to deal with the hours-based costs like overtime pay and unemployment insurance, since intermediaries never explicitly set schedules for their workers.
“At its core, being an employee means the worker gives over to the employer control over hours of work, in exchange for a modicum of economic security,” says Harris. "An independent worker fundamentally doesn’t do that."
Still, some worry that existing employers will fashion themselves as intermediaries in order to lessen their regulatory burden.
“We think developing a whole new category of workers, especially to respond to what is a tiny part of the labor market, would engender a race by other businesses to reclassify their workers in order to avoid accountability,” says Rebecca Smith, deputy director of the National Employment Law Project.
In response to an outline of the paper, Lyft declined to comment on the record, and Uber sent a short statement saying “we look forward to continuing this discussion with policymakers, experts, and most importantly the people who use Uber to make money and improve their lives.” Krueger notes that, in a workshop session where they solicited feedback from interested parties, representatives from on-demand platforms also weren’t happy, particularly about parts of the proposal that would allow workers to collectively bargain.
“We think we’ve perfectly found no-man’s land,” Krueger joked. "We in the Obama administration were great at crafting the exact policy that gets all the tradeoffs right and makes nobody happy.”
Actual legislative language is likely still a long ways away. But any legislator who might like to offer it is getting a lot more to work with.