These days, everyone I know has an Uber app on their phone. With the rise of Uber, Postmates, Luxe and Sprig, it seemed as if the on-demand economy would only continue its meteoric explosion.
With its reliance on independent contractors (instead of employees) to do the necessary work, these companies do not have to worry about paying payroll taxes, social security benefits, vacation time or other fees. Which of course, has a positive impact on their bottom line. As a small business owner, I'm sure you would want to replicate this business model which seems to be the most efficient and profitable way to meet the needs of your customers in the 21st century.
Well, before you make that decision, you should note that there has recently been some push back against this approach to doing business. According to Tess Townsend, this tends to come in the form of a lawsuit centered around whether or not the workers for these companies should really be defined as “employees” (instead of independent contractors). As we previously discussed, there are a series of factors that courts look at to define this distinction. And, so far, it seems as if they are not buying the independent contractor designation used by the on-demand companies. Here is Townsend’s quick report regarding the current status of these legal battles:
1. Companies That Gave In:
o "Sprig have decided to switch from the ubiquitous 1099 form for independent contractors to employee W-2s, arguing that it makes for better quality service to customer."
o "Instacart was slapped with a lawsuit alleging [it was mis-classifying its independent contractors] so... [in] June, the company announced it would offer part-time shoppers in Boston and Chicago the option to become employees."
2. Companies That Are Still Fighting
o "Uber is still fighting [though the] California Labor Commission's Office ruled in June that a driver who had sued the ridesharing service startup must be treated as an employee as opposed to as an independent contractor. Uber has appealed the decision. Now, a judge is weighing whether to allow another lawsuit to proceed to class-action status, reports Wired."
3. Companies That Lost
o " Homejoy lost the battle…[T]he on-demand cleaning services company was facing four lawsuits over worker classification last month when it shut down, according to Re/code. "
As you can see, the situation is still very much in flux in the courts. But there was a recent change in government regulations that seem to be on the side of the workers in this matter. So, if you are a business that relies on the work of independent contractors, now is a time for you to be on guard.
