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The rules, such as they are, seem fairly straightforward. If, in the case of outfits like Handy and Uber and Instacart, the "employer" is laying down rules, re

The rules, such as they are, seem fairly straightforward. If, in the case of outfits like Handy and Uber and Instacart, the "employer" is laying down rules, requiring certain performance, setting the price, and enforcing metrics, they are an employer and the person doing the work is an employee who should be treated as such. If, in the case of outfits like Redbeacon, the site is collecting leads and distributing them while letting the two parties work out the arrangement for themselves, the site is a referrer and the contractor is a contractor. Redbeacon doesn't require that the contractor who I hire to paint a room show up in Redbeacon attire, only do work through Redbeacon, charge what Redbeacon dictates, and follow Redbeacon's rules for how the work is done. In the former case, people don't say "I hired J. Q. Driver to take me from my office to the airport," they say "I got an Uber." It's not "Local Delivery Service, LLC delivered my groceries today," it's "Instacart brought the milk." Being a part-time or irregularly-scheduled employee doesn't make someone any less of an employee than a 40-hours-per-week office worker. The problem is one of enforcement. Just like how Uber got its nose under the tent by bullying through existing rules, companies like these exploit the fact that state Departments of Labor are politically hesitant (can't be crushing those small businesses, after all) and the federal DoL is limited.

alwaysdoit 12y ago
So if I hire someone to play Princess Elsa at my daughter's birthday party, requiring her to wear a certain uniform on a certain day during certain hours and setting a price, then she is therefore an employee? Aren't setting prices and terms of contract a standard part of any contract? If you are providing a marketplace for people to find contracts between parties, and you are in any way filtering what you will or will not allow on that marketplace, aren't you setting terms of that contract?
- jedrek 12y ago
  No, but if you hire her through an agency that you pay (and not her) then yes, her agency is her employer.
- Retric 12y ago
  http://www.careerusa.org/resources/career-files/100-resources/career-files/12g3-w2-or-1099/281-1099-vs-w-2-an-irs-checklist-.html http://www.careerusa.org/resources/career-files/100-resource... The IRS uses a 20 item check list. Reading though the list "So if I hire someone to play Princess Elsa at my daughter's birthday party" would clearly be a 1099. However, if they work though an agency then they might qualify as a w-2 for that agency.
  - nulagrithom 12y ago
    Great link! I can't help but think this could be the root of the problem: This 20-point checklist is only a guideline; it does not guarantee that a person is correctly classified. Most agencies and courts typically look to the totality of the circumstances and balance the factors to determine whether a worker is an employee.
    - smacktoward 12y ago
      No, the root of the problem is companies that want staff who they can work like employees but who they don't have to pay like employees, provide benefits to like employees, or accept liability on behalf of like employees. There's nothing remotely new or novel about that; it's a dodge that companies have been trying to get away with for as long as labor law has existed.
      - alexqgb 12y ago
        The premise of Uber is that there were tremendous and ill-gotten gains being nefariously produced by taxi cartels. By busting them up, they could provide people with better service at an equal or lower price - all while ridding cities of a nasty bunch of operators in the process. Behold the righteous cleansing power of creative destruction! Turns out that their case was a bit overstated (to put it politely). Sure, this was a problem with the medallion model, and Uber is providing a breakthrough solution. But they're not stopping there. To achieve the growth that will justify their valuation, they've got to undermine perfectly reasonable labor laws as well. So maybe not so socially beneficial after all. Sociopathic tendencies of the leadership aside, one has to wonder if the real problem isn't the VCs who poured their funds' money into a business that could only win by undermining clear, reasonable, historically necessary, and broadly popular legislation. Had they limited their investment to an amount that could be returned simply by attacking cartels, that would be one thing. But insisting that Uber illegally strip-mine their work force may have flipped a once-good thing into the extractive menace column occupied by outfits like...well, taxi cartels.
- VLM 12y ago
  A pity you're getting downvoted because its a valid point, although wrong. The problem with your example is it fails the common language "none of your business" test. Obviously if the work is illegally portraying a trademarked disney character at a party, the time and clothes are kind of important for accomplishing that task. The "none of your business" test failed in the linked article where the two young women were subject to numerous rules having nothing directly to do with cleaning things. For example the electrician who installed the high power wiring to my air conditioner condenser, teamed up with an apprentice. As a contractor its absolutely none of my business, I pay a fee for a service and he can bring 50 apprentices on the jobsite, as long as he gets the job done in a workman like manner up to building code following all safety laws, etc. I can provide no input on the tools he uses or the time he takes as long as there's no OSHA/EPA violation, pass the municipal inspection, etc. I'm trading money for fit for purposes accomplishments, not renting a slave to be bossed around.
  - alwaysdoit 12y ago
    I can't imagine that asking a contractor not to bring 50 extra people into your home is "none of your business", as it would potentially be pretty inconvenient if you were there at the time. Similarly, having stipulations like "don't listen to music out loud while cleaning", is also IMO a reasonable thing to require (as someone who often works from home). For the record, I do think that it's a problem that many companies are getting around the social safety net that employers are required by labor law to provide. But I think that's a problem better solved by decoupling our social safety net from employment--which I think unfairly ties people to their employers.
will_brown 12y ago
>The rules, such as they are, seem fairly straightforward. The laws are anything but straightforward. For starters there are 50 States with each one having different laws. Take Florida where I have personally represented employers and employees/Independent contractors in these types of matters. The FL case law establishes, what in my opinion is the very worst kind of law, a factors test. So essentially there are a number of factors the courts put forward, I believe 7 factors by my last count, and in each instance a court would have to analyze each case on its own merits, and by case I am referring to each employee/Independent Contractor not each company as a whole. One of the most heavily weighted factors is who the company pays...does the company pay the employee/independent contractor individually or pay a company formed by the individual. It would be evidence enough to simply determine which start-ups have a policy against paying any individual and requiring all individuals form companies. If start-up does't require their Independent Contractors to set up separate entities the start-ups deserve what is coming to them, a finding by the Courts these were employees.
- tptacek 12y ago
  The rules the parent commenter is referring to are federal, and extraordinarily well-known, because several generations of businesses have tried to come up with ways to skirt them to avoid taxes. As far as I understand the rules, the "most heavily weighted factor" you cite is in fact not an IRS employee classification factor at all. A contractor can still be classified as an employee even though they bill through an LLC. BigCo's worry about this so much that they will sometimes withhold taxes from LLCs.
  - will_brown 12y ago
    Even upon rereading OP it is not clear it was referring to Federal Law, there is even mention of both State and Federal Departments of labor, so I think use of the word rule was an all encompassing term for classification law. Still it only adds to the problems with this area of the law, after all it is not only possible, but common, for an individual to be classified as an employee/independent contractor on the federal level and then classified the opposite at the state level. Nevertheless, while the federal classification 20 factors have been around for about 30 years, since the enactment of the Revenue Act the IRS has been prohibited from issuing regulations and rulings with respect to the employment status of any individuals. As a result the IRS acknowledges the same subjectivity going so far as to admit different IRS agents may reach different conclusions, the Courts are no different and hence my calling factors tests the worst kind of law. >As far as I understand the rules, the "most heavily weighted factor" you cite is in fact not an IRS employee classification factor at all. A contractor can still be classified as an employee... This is likely due to the IRS being prohibited from issuing rules and regulations, and as a result in the words of the IRS, "Previously issued guidance may not reflect current case law, statutory changes, or changes in workplace situations." However, you are correct that this factor, under FL case law, though weighted more heavily is not determinative by any means.
logicallee 12y ago
you say it seems straightforward, but your first standard for the case of a de facto employer matches what you explicitly list under a true contractor: First you state: >If, in the case of outfits like Handy and Uber and Instacart, the "employer" is laying down rules, requiring certain performance, setting the price, and enforcing metrics, they are an employer and the person doing the work is an employee who should be treated as such. Then you state: > If, in the case of outfits like Redbeacon, the site is collecting leads and distributing them while letting the two parties work out the arrangement for themselves, the site is a referrer and the contractor is a contractor. Redbeacon doesn't require that the contractor who I hire to paint a room show up in Redbeacon attire, only do work through Redbeacon, charge what Redbeacon dictates, and follow Redbeacon's rules for how the work is done. So the standards you've listed start by saying an "employer" can't lay down rules and ends by giving an example of "true contractors" that follow Redbeacon's rules for how the work is done. If you can't even write four paragraphs without a blatant contradiction[1] perhaps the case doesn't seem nearly as simple as you make out at all! [1] (No offense, I spotted it because I was reading carefully for guidance and your two sentences were strikingly parallel and started with the exact words "if, in the case of outfits like" [a] and then [b], where you listed the difference.) EDIT: I misread the second sentence as "Redbeacon doesn't require a, only b, c, and d."
- amputect 12y ago
  I think you missed the presence of the word "doesn't" in the sentence about Redbeacon. "Readbeacon DOESN'T require that the contractor who I hire to paint a room show up in Redbeacon attire, only do work through Redbeacon, charge what Redbeacon dictates, and follow Redbeacon's rules for how the work is done."
  - logicallee 12y ago
    I didn't miss it! The sentence is actually ambiguous :) I read ONLY as a change in sense!! The sentence reads "Redbeacon doesn't require a, only b, c, and d." I actually read this as: Redbeacon DOESN'T REQUIRE THAT the CONTRACTOR who I hire to paint a room SHOW UP in Redbeacon attire; ONLY (THAT THEY) DO WORK through Redbeacon[1], CHARGE what Redbeacon dictates[2], and FOLLOW Redbeacon's rules for how the work is done.[3] It's clear that this isn't what you meant. But not so clear that I didn't misread it. Rules against disintermediation, arbitration of disputes, terms and conditions, are all things that make contractors seem more like employees... [1] i.e. not disintermediate by connecting directly off-site and cutting out redbeacon [2] i.e. what is advertised on Redbeacon's site [3] i.e. terms and conditions
murbard2 12y ago
You're correct in your distinction, but you are giving the impression that this is a bad thing. If some companies like Uber and Instacart can nullify a nefarious law using loopholes, this is a Good Thing. In general, there are strong reason to believe that regulation which restrict the freedom of contract are harmful, and the result of special interests trying to secure a competitive advantage through legislative means.
- rayiner 12y ago
  There's actually two different kinds of laws at play, of which those restricting freedom of contract is only one. The other kind has to do with when a company can be held liable for the conduct of its employees. Companies generally cannot be held liable for the conduct of their contractors, because they don't control that conduct, while they can be held liable for the conduct of their employees. It's uncontroversial, even among most libertarians, that people should be held liable for the hazards created by their profit-making activities. If your business is shuttling people around in 3,000 pound metal death machines, you should be on the hook when one inevitably hits someone. Not just out of concerns of fairness, but because the contrary rule eliminates any incentive on the part of the business to minimize hazards incident to their profit-generating activity.
  - murbard2 12y ago
    Actually no, as Ronald Coase showed, it doesn't matter who the liability falls on initially - If it falls on the driver, the driver will demand higher wages / fares to compensate for the cost of insuring himself. - If it falls on the company, the company will demand higher fares to compensate for the cost of insurance - If it falls on the passenger, the passenger could demand lower fares. However, the company would soon realize that by accepting to take on the liability, they could command a much higher fare. Not only would it relieve the customer of the burden of the liability, but by better aligning incentives, it would also send a credible signal that the cars are safe and the drivers are cautious. What if the liability is on the drivers and they are uninsured and likely insolvent in case of an accident? This is the same scenario as shifting part of the liability on the customer, it likely wouldn't be very appealing. You can make an argument that consumers are irrational and are unlikely to really look into whether or not the cars / drivers are insured, but that's a different argument than externalization, and it is by no means obvious. A single accident where the victim isn't properly compensated could be disastrous for a company.
mc32 12y ago
One of the things I find ironic is how many people in tech, as we as those who leach off tech like the tech press, both hailed this new "sharing" economy as it was framed. Disrupting the old antiquated regulations was good, reducing friction was good, democratization of resources was good. Now suddenly its a surprise that the value of these companies was misplaced. That they arguably bring harm. That in the end they don't care so much about the the resource they are facilitating --all they cared about was making the customer happy. And the customer selfishly will not think that this might have an impact with the potential to bite them back. Basically let me get mine while the getting is good.
- Spooky23 12y ago
  The "sharing" part is a scam, the same tired nonsense that napster tried. The tech press swallows it hook line and sinker because they are trade rags, and pissing off the cool kids will cut off the flow of future stories. Many aspects of Uber and Airbnb's business model are awesome. The problem is that they have growth targets to hit which require breaking a few eggs.

alwaysdoit 12y ago

So if I hire someone to play Princess Elsa at my daughter's birthday party, requiring her to wear a certain uniform on a certain day during certain hours and setting a price, then she is therefore an employee? Aren't setting prices and terms of contract a standard part of any contract? If you are providing a marketplace for people to find contracts between parties, and you are in any way filtering what you will or will not allow on that marketplace, aren't you setting terms of that contract?

jedrek 12y ago
No, but if you hire her through an agency that you pay (and not her) then yes, her agency is her employer.
Retric 12y ago
http://www.careerusa.org/resources/career-files/100-resources/career-files/12g3-w2-or-1099/281-1099-vs-w-2-an-irs-checklist-.html http://www.careerusa.org/resources/career-files/100-resource... The IRS uses a 20 item check list. Reading though the list "So if I hire someone to play Princess Elsa at my daughter's birthday party" would clearly be a 1099. However, if they work though an agency then they might qualify as a w-2 for that agency.
- nulagrithom 12y ago
  Great link! I can't help but think this could be the root of the problem: This 20-point checklist is only a guideline; it does not guarantee that a person is correctly classified. Most agencies and courts typically look to the totality of the circumstances and balance the factors to determine whether a worker is an employee.
  - smacktoward 12y ago
    No, the root of the problem is companies that want staff who they can work like employees but who they don't have to pay like employees, provide benefits to like employees, or accept liability on behalf of like employees. There's nothing remotely new or novel about that; it's a dodge that companies have been trying to get away with for as long as labor law has existed.
    - alexqgb 12y ago
      The premise of Uber is that there were tremendous and ill-gotten gains being nefariously produced by taxi cartels. By busting them up, they could provide people with better service at an equal or lower price - all while ridding cities of a nasty bunch of operators in the process. Behold the righteous cleansing power of creative destruction! Turns out that their case was a bit overstated (to put it politely). Sure, this was a problem with the medallion model, and Uber is providing a breakthrough solution. But they're not stopping there. To achieve the growth that will justify their valuation, they've got to undermine perfectly reasonable labor laws as well. So maybe not so socially beneficial after all. Sociopathic tendencies of the leadership aside, one has to wonder if the real problem isn't the VCs who poured their funds' money into a business that could only win by undermining clear, reasonable, historically necessary, and broadly popular legislation. Had they limited their investment to an amount that could be returned simply by attacking cartels, that would be one thing. But insisting that Uber illegally strip-mine their work force may have flipped a once-good thing into the extractive menace column occupied by outfits like...well, taxi cartels.
VLM 12y ago
A pity you're getting downvoted because its a valid point, although wrong. The problem with your example is it fails the common language "none of your business" test. Obviously if the work is illegally portraying a trademarked disney character at a party, the time and clothes are kind of important for accomplishing that task. The "none of your business" test failed in the linked article where the two young women were subject to numerous rules having nothing directly to do with cleaning things. For example the electrician who installed the high power wiring to my air conditioner condenser, teamed up with an apprentice. As a contractor its absolutely none of my business, I pay a fee for a service and he can bring 50 apprentices on the jobsite, as long as he gets the job done in a workman like manner up to building code following all safety laws, etc. I can provide no input on the tools he uses or the time he takes as long as there's no OSHA/EPA violation, pass the municipal inspection, etc. I'm trading money for fit for purposes accomplishments, not renting a slave to be bossed around.
- alwaysdoit 12y ago
  I can't imagine that asking a contractor not to bring 50 extra people into your home is "none of your business", as it would potentially be pretty inconvenient if you were there at the time. Similarly, having stipulations like "don't listen to music out loud while cleaning", is also IMO a reasonable thing to require (as someone who often works from home). For the record, I do think that it's a problem that many companies are getting around the social safety net that employers are required by labor law to provide. But I think that's a problem better solved by decoupling our social safety net from employment--which I think unfairly ties people to their employers.

will_brown 12y ago

>The rules, such as they are, seem fairly straightforward. The laws are anything but straightforward. For starters there are 50 States with each one having different laws. Take Florida where I have personally represented employers and employees/Independent contractors in these types of matters. The FL case law establishes, what in my opinion is the very worst kind of law, a factors test. So essentially there are a number of factors the courts put forward, I believe 7 factors by my last count, and in each instance a court would have to analyze each case on its own merits, and by case I am referring to each employee/Independent Contractor not each company as a whole. One of the most heavily weighted factors is who the company pays...does the company pay the employee/independent contractor individually or pay a company formed by the individual. It would be evidence enough to simply determine which start-ups have a policy against paying any individual and requiring all individuals form companies. If start-up does't require their Independent Contractors to set up separate entities the start-ups deserve what is coming to them, a finding by the Courts these were employees.

tptacek 12y ago
The rules the parent commenter is referring to are federal, and extraordinarily well-known, because several generations of businesses have tried to come up with ways to skirt them to avoid taxes. As far as I understand the rules, the "most heavily weighted factor" you cite is in fact not an IRS employee classification factor at all. A contractor can still be classified as an employee even though they bill through an LLC. BigCo's worry about this so much that they will sometimes withhold taxes from LLCs.
- will_brown 12y ago
  Even upon rereading OP it is not clear it was referring to Federal Law, there is even mention of both State and Federal Departments of labor, so I think use of the word rule was an all encompassing term for classification law. Still it only adds to the problems with this area of the law, after all it is not only possible, but common, for an individual to be classified as an employee/independent contractor on the federal level and then classified the opposite at the state level. Nevertheless, while the federal classification 20 factors have been around for about 30 years, since the enactment of the Revenue Act the IRS has been prohibited from issuing regulations and rulings with respect to the employment status of any individuals. As a result the IRS acknowledges the same subjectivity going so far as to admit different IRS agents may reach different conclusions, the Courts are no different and hence my calling factors tests the worst kind of law. >As far as I understand the rules, the "most heavily weighted factor" you cite is in fact not an IRS employee classification factor at all. A contractor can still be classified as an employee... This is likely due to the IRS being prohibited from issuing rules and regulations, and as a result in the words of the IRS, "Previously issued guidance may not reflect current case law, statutory changes, or changes in workplace situations." However, you are correct that this factor, under FL case law, though weighted more heavily is not determinative by any means.

logicallee 12y ago

you say it seems straightforward, but your first standard for the case of a de facto employer matches what you explicitly list under a true contractor: First you state: >If, in the case of outfits like Handy and Uber and Instacart, the "employer" is laying down rules, requiring certain performance, setting the price, and enforcing metrics, they are an employer and the person doing the work is an employee who should be treated as such. Then you state: > If, in the case of outfits like Redbeacon, the site is collecting leads and distributing them while letting the two parties work out the arrangement for themselves, the site is a referrer and the contractor is a contractor. Redbeacon doesn't require that the contractor who I hire to paint a room show up in Redbeacon attire, only do work through Redbeacon, charge what Redbeacon dictates, and follow Redbeacon's rules for how the work is done. So the standards you've listed start by saying an "employer" can't lay down rules and ends by giving an example of "true contractors" that follow Redbeacon's rules for how the work is done. If you can't even write four paragraphs without a blatant contradiction[1] perhaps the case doesn't seem nearly as simple as you make out at all! [1] (No offense, I spotted it because I was reading carefully for guidance and your two sentences were strikingly parallel and started with the exact words "if, in the case of outfits like" [a] and then [b], where you listed the difference.) EDIT: I misread the second sentence as "Redbeacon doesn't require a, only b, c, and d."

amputect 12y ago
I think you missed the presence of the word "doesn't" in the sentence about Redbeacon. "Readbeacon DOESN'T require that the contractor who I hire to paint a room show up in Redbeacon attire, only do work through Redbeacon, charge what Redbeacon dictates, and follow Redbeacon's rules for how the work is done."
- logicallee 12y ago
  I didn't miss it! The sentence is actually ambiguous :) I read ONLY as a change in sense!! The sentence reads "Redbeacon doesn't require a, only b, c, and d." I actually read this as: Redbeacon DOESN'T REQUIRE THAT the CONTRACTOR who I hire to paint a room SHOW UP in Redbeacon attire; ONLY (THAT THEY) DO WORK through Redbeacon[1], CHARGE what Redbeacon dictates[2], and FOLLOW Redbeacon's rules for how the work is done.[3] It's clear that this isn't what you meant. But not so clear that I didn't misread it. Rules against disintermediation, arbitration of disputes, terms and conditions, are all things that make contractors seem more like employees... [1] i.e. not disintermediate by connecting directly off-site and cutting out redbeacon [2] i.e. what is advertised on Redbeacon's site [3] i.e. terms and conditions

murbard2 12y ago

You're correct in your distinction, but you are giving the impression that this is a bad thing. If some companies like Uber and Instacart can nullify a nefarious law using loopholes, this is a Good Thing. In general, there are strong reason to believe that regulation which restrict the freedom of contract are harmful, and the result of special interests trying to secure a competitive advantage through legislative means.

rayiner 12y ago
There's actually two different kinds of laws at play, of which those restricting freedom of contract is only one. The other kind has to do with when a company can be held liable for the conduct of its employees. Companies generally cannot be held liable for the conduct of their contractors, because they don't control that conduct, while they can be held liable for the conduct of their employees. It's uncontroversial, even among most libertarians, that people should be held liable for the hazards created by their profit-making activities. If your business is shuttling people around in 3,000 pound metal death machines, you should be on the hook when one inevitably hits someone. Not just out of concerns of fairness, but because the contrary rule eliminates any incentive on the part of the business to minimize hazards incident to their profit-generating activity.
- murbard2 12y ago
  Actually no, as Ronald Coase showed, it doesn't matter who the liability falls on initially - If it falls on the driver, the driver will demand higher wages / fares to compensate for the cost of insuring himself. - If it falls on the company, the company will demand higher fares to compensate for the cost of insurance - If it falls on the passenger, the passenger could demand lower fares. However, the company would soon realize that by accepting to take on the liability, they could command a much higher fare. Not only would it relieve the customer of the burden of the liability, but by better aligning incentives, it would also send a credible signal that the cars are safe and the drivers are cautious. What if the liability is on the drivers and they are uninsured and likely insolvent in case of an accident? This is the same scenario as shifting part of the liability on the customer, it likely wouldn't be very appealing. You can make an argument that consumers are irrational and are unlikely to really look into whether or not the cars / drivers are insured, but that's a different argument than externalization, and it is by no means obvious. A single accident where the victim isn't properly compensated could be disastrous for a company.

mc32 12y ago

One of the things I find ironic is how many people in tech, as we as those who leach off tech like the tech press, both hailed this new "sharing" economy as it was framed. Disrupting the old antiquated regulations was good, reducing friction was good, democratization of resources was good. Now suddenly its a surprise that the value of these companies was misplaced. That they arguably bring harm. That in the end they don't care so much about the the resource they are facilitating --all they cared about was making the customer happy. And the customer selfishly will not think that this might have an impact with the potential to bite them back. Basically let me get mine while the getting is good.

Spooky23 12y ago
The "sharing" part is a scam, the same tired nonsense that napster tried. The tech press swallows it hook line and sinker because they are trade rags, and pissing off the cool kids will cut off the flow of future stories. Many aspects of Uber and Airbnb's business model are awesome. The problem is that they have growth targets to hit which require breaking a few eggs.