The employee is an increasingly tricky idea to define in Silicon Valley’s digital economy, in which large-scale labor platforms enable plenty of work but defy regulations meant for a previous era of jobs. Uber recently lost a California lawsuit alleging that it wrongly classified its drivers as independent contractors when they actually merit employee status, which comes with worker benefits and added HR costs. The on-demand cleaning company Homejoy is also shuttering after seeing signs that its reliance on independent contractors for cheap home cleaning might be fundamentally illegal.
In settling the problem of the contract worker, in fact, we may find that we have to entirely re-define our country’s structure of employment. Such is the driving force behind a push for a third classification of worker somewhere between independent contractor and full-blown employee. Sometimes referred to as a “dependent contractor,” this new category of worker might just benefit start-ups and job-seekers both.
Start-up founders see a separation between contract workers, who sign 1099s that make them responsible for their own taxes, and W-2 employees, a similarly temporary classification, but one that requires employers to take on some payroll taxes like unemployment, as too black and white for the new economy of contingent labor—drivers, cleaners, and caretakers paid by the mile or hour.
“There’s definitely a need for a third option,” says Maren Donovan, the CEO of Zirtual, a virtual assistant provider that converted its contract workers to W-2 employees this year (around 80 percent of the workforce accepted the transition, which I previously covered in this column). “Some sort of combination of both that allows workers to be protected but also allows them freedom and flexibility.”
As Uber appeals the California lawsuit and the controversy between enforcing regulation and allowing workers their flexibility continues, political figures from Hillary Clinton to New York City Mayor Bill DeBlasio have been debating the employment categories in the national spotlight. For Donovan, the need for a new classification is driven by consumer habits as much as politics. “The candidate who can promise and deliver on the third option will be the one who really resonates with the generation who has grown up with on-demand things and flexibility,” she says.
“There’s definitely a need for a third option. Some sort of combination of both that allows workers to be protected but also allows them freedom and flexibility.”
In other words, Millennials (and everyone else) are becoming used to the idea of on-demand service in every facet of life, and it will be hard for legislation to convince them to give that luxury up. We can’t live without our Uber drivers, so why would we support aggressive legislation that curtails the car provider’s ability to exist? But while demand certainly remains high, we have yet to figure out a way of systematically supporting workers in this field.
“Migrant farm workers might be happy working for less than minimum wage, but that doesn’t make the practice legal,” Shannon Liss-Riordan, the Boston lawyer behind several lawsuits against Uber and other digital labor platform companies, writes in an email. “We have to watch out for the rights of the workers that are being left out in this new ‘gig economy.'”
The argument for a third employment classification is that it will provide this missing support. Alfred is a Massachusetts-based business that provides on-demand domestic assistance for mundane tasks like dry-cleaning pick-up and drop-off. The company recently switched from independent contractors to W-2 employees not only due to regulatory compliance, but because under W-2 it was able to offer its workers stability, training, and equipment, in turn allowing them to offer better service.
Still, the entire employment infrastructure presents a problem for Alfred co-founder Marcela Sapone. “My personal opinion is W-2 and 1099 are older constructs of a former version of work that really need to have a class between the two,” she says. “We should be trying to find the best structure for employees themselves.”
Sapone explains what a dependent contractor classification could look like for employers like her company. “Take a 1099 contract, with the ability to have more than one job, work how and for who you want, but require that the employer give you access to all of the things you need to do career planning and life planning—health care, financial planning, 401ks, clear communications around career trajectory,” she says.
The prime difficulty of W-2 is that it doesn’t quite allow for the multiplicity of different jobs and employers that a freelance economy worker will take on in the course of her work. A third option could fill out the range of choices workers have when determining what kinds of jobs are best for them. But when workers already suffer from a lack of regulation, is there truly a need for a legal option allowing for even less?
“There are good regulations in place now, although they are not consistently enforced,” Liss-Riordan says. “I don’t see why anyone would think we should re-write the rules to help out a $50 billion company like Uber.”
Disruptions is Kyle Chayka’s weekly column for Pacific Standard about personal technology and the way it influences our daily lives.
