For many Americans who care about how workers are treated, their biggest concern about the much-ballyhooed “on-demand” economy is the way that Uber, Lyft, and other “gig economy” companies have rushed to treat their workers as independent contractors. For employers, the advantages of this strategy are huge (as I explain in my deep dive for the Prospect about Uber’s questionable labor practices): You don’t have to follow minimum wage, overtime, or employment discrimination laws, you don’t have to make employer contributions to Social Security, Medicare, or unemployment insurance, and your workers can’t unionize.
A new paper, released on Monday, has some provocative recommendations about how to deal with this phenomenon—the nation’s oh-so-cool on-demand companies scurrying to dodge all or nearly all responsibilities and obligations to their workers. The paper posits that workers who get their work through an app or platform—like Mechanical Turk or Task Rabbit—are a new type of worker. The paper—by Alan Krueger, a Princeton economist who once headed Obama’s Council of Economic Advisers, and Seth Harris, a former deputy secretary of labor—says it’s often maddeningly difficult to determine whether Uber drivers, GrubHub deliverymen, or Task Rabbit workers are employees or independent contractors. They say that many workers fall between the two categories (a notion that some experts, like Harvard Law School’s Ben Sachs, take strong issue with), and they propose that Congress update the nation’s labor laws and create a third category of workers: independent workers.
Krueger and Harris say that under such new legislation, independent workers should have many of the protections of regular employees—they should be covered by employment-discrimination laws, they should have the right to unionize and bargain collectively, and their employers should pay Social Security and Medicare taxes. But Krueger and Harris argue that these “gig economy” workers shouldn’t be covered by minimum wage and overtime laws because, in their view, it’s so hard to keep track of exactly when they’re working since they are often totally free to choose their hours and can sign on and off the app whenever they want.
Their paper left me with numerous questions:
Krueger and Harris say that on-demand companies shouldn’t be required to provide workers’ compensation for their workers; instead the two authors say companies should be able to opt into workers’ comp as they wish. They note that Uber and Lyft drivers are insured by their own car insurance, so they might not need workers’ comp if they get into an accident while driving a passenger. But shouldn’t these drivers have workers’ comp’ coverage in case they, while opening a door for a passenger, slip on the ice and break a hip or elbow? Or if they slip a disc while removing heavy luggage from the trunk? Or if an inebriated passenger punches them out and injures them? And what if a GrubHub delivery worker on a bicycle is struck by a car and sent to the hospital? Or what if a Caviar or GrubHub delivery worker has to go the hospital after being mugged and robbed while making a delivery in a tough part of town? Krueger and Harris say that without workers’ comp, workers can always sue under tort law, but that wouldn’t be a satisfactory alternative in many cases, especially when workers need immediate hospital care and replacement income. (Remember, a high percentage of on-demand workers don’t have health insurance.)
Krueger and Harris say that on-demand employers shouldn’t have to pay into the unemployment insurance system. It’s unclear to me why these employers should be exempt from paying for these “independent workers.” Many Uber drivers work 30 or more hours a week, and many have driven for that company for more than a year. So why shouldn’t they be covered by unemployment insurance, just like regular workers, in case an Uber manager unjustly deactivates them or in case the company suddenly feels a need to cut back the number of drivers in various cities? (If few Uber or Lyft drivers ever qualify for unemployment insurance, then through experience rating, those e-hailing companies would likely be required to make only modest payments into the unemployment insurance system.)
Krueger and Harris write that Lyft and Uber drivers are a “canonical example of independent workers.” But the California and Oregon labor commissioners and many legal experts say that Uber and Lyft exercise such great control over their drivers that the drivers should be considered employees. Uber, for instance, hires, fires, and disciplines drivers, sets (and often resets) the fares, generally takes a 20 percent commission from fares, gives drivers weekly ratings, orders them not to ask for tips, adjudges disputes between drivers and passengers (usually tilting in the passenger’s favor). Yes, the drivers have the freedom to set their own hours, but other than that, how are they independent workers rather than regular employees?
Would this new category of independent workers be covered by the paid sick day laws in various cities? Dedicated drivers who drive 10 or 12 hours a day, often five or six days a week, why shouldn’t they be covered by these sick day laws?
The two authors recommend that on-demand employees have the right to unionize and bargain collectively? Under their proposals, would on-demand workers be protected against retaliation when their company fires or otherwise punishes workers for supporting unionization or speaking out about working conditions, as Uber has sometimes done?
A study that Krueger did, done in conjunction with Uber’s chief of research, found that Uber drivers gross $17.50 an hour on average in 20 cities—including $16 an hour in Chicago and nearly $17 in Los Angeles. (That study of gross earnings was based on October 2014 data, before Uber further lowered fares in 48 cities.) But after subtracting the cost of gasoline, insurance, auto payments, and auto maintenance, many drivers say they net just $10, $11, or $12 an hour. With Los Angeles having approved a $15-an-hour minimum wage and with many Uber drivers netting considerably less than that per hour, why exactly shouldn’t drivers be covered—and protected—by minimum wage laws, especially when Uber's and Lyft's apps can easily calculate how much time drivers spend carrying passengers and driving to pick up passengers?