A New Way to Think About Work and Innovation

Since bursting into the marketplace earlier this decade, the so-called “sharing economy” has changed the way we eat, sleep, shop and get around. For consumers, the benefits couldn’t be clearer. Less talked about, but no less transformative, are the effects these innovations are having on workers, who are now empowered to earn income in entirely new ways.

By seizing the opportunities of an evolving employment model, workers like those who drive for ride sharing platforms Uber or Lyft enjoy a level of freedom that would have been unthinkable even 20 years ago. They have complete control over their schedules and the flexibility to drive as much or as little as they want, or to simply not at all.

Such freedom and flexibility has lead to a seismic shift in the way we think about work, especially as the United States continues to recover from a period of economic stagnation. Statistics tell the same story: more and more of us are now embracing such flexible work opportunities. A recent report by Requests for Startups found that 34 percent of all U.S. workers are freelancers today, with 40 percent of those freelancers surveyed saying they work for two or different companies.

Significantly, a large proportion of ride-sharing drivers – about 80 percent in Lyft’s case – use the platform 15 hours or less each week, reflecting the fact that they are either earning money from another job, or have a family or other life pursuits around which they schedule their driving. Indeed, many drive to supplement their earnings, to help them get by while they look for other work opportunities or to support a lifestyle as a student, artist or entrepreneur. Flexibility is the common factor that makes this on-demand work attractive and valuable to those with diverse life situations.

Take Anders Young, a freelancer production manger in the entertainment industry, who also drives for Uber and Lyft in order to spend more time with his three young children. He said recently that, “I drive 30 to 50 hours a week, but I am able to work around my wife’s schedule. … Putting the kids in daycare is really cost-prohibitive, so to be able to work when my wife can take care of our kids and changing around her schedule has been perfect for us.”

Whether ride-sharing or Airbnb, the companies pioneering these new services have proven to be disruptive forces in the transportation and lodging sectors, and beyond. They offer workers like Anders unprecedented control and flexibility, and provide consumers with convenient new choices at the touch of a smart phone button. But for those reasons, they also threaten established companies and challenge traditional ways of working.

Those concerned with this disruption are fighting back with a wave of class action lawsuits that seek to apply industrial-era labor laws to today’s mobile-driven sharing economy. Their goal is to reclassify independent contractors who drive on ride-sharing platforms, or work with other sharing economy companies, as employees and require these companies to give employment benefits. Judge Vince Chabbria, who is presiding over one of the pending cases in federal court in San Francisco, likened this glaring mismatch of old laws and new ways of work to being “handed a square peg and asked to choose between two round holes.” Undoubtedly, the architects of our 70-year-old employment laws never envisioned a workforce that enjoyed so much flexibility.

Unsurprisingly, the litigation could have a number of adverse consequences, and it is likely to be the workers themselves who suffer most. For example, reclassifying drivers from contractors to employees may see companies impose schedules or minimum work requirements to negate the costs of managing payroll and benefits, taking away the flexibility that attracted drivers in the first place. And those who work for multiple, competing platforms or have jobs that prohibit outside employment would see their ride-sharing work curtailed if not eliminated altogether.

Consumers who have come to enjoy the convenience of ride-sharing services would also feel the impact of reclassification. Many estimate that employment and benefit requirements could raise the price of labor as much as 30 percent, costs that would be passed on at least in part to passengers in the form of higher fares. It is also important to remember that ride-sharing companies are still in the early stages of developing their businesses, and a major change in their models would impede their ability to enter new markets and may threaten their viability in established ones.

Last, ride-sharing companies are delivering important societal and economic benefits such as reducing drunk driving, easing urban congestion and providing much-needed competition to the heavily regulated, and un-innovative, taxi industry. And there is growing evidence that ride-sharing is enabling a significant number of families to downsize their car ownership, further reducing pollution and traffic.

These consequences are significant. Policymakers, passengers and others with a stake in these issues must all understand the serious and very real threat of overregulation. They should also look at how to best to support these growing businesses instead of allowing outdated and irrelevant labor laws to kill them off.

Fortunately, there is hope in the form of an alternative path: a broad coalition of companies, labor organizations and experts recently issued an open letter advocating for collaboration and a responsible, balanced course that protects innovation while giving workers the flexibility they desire. The New York Times observed that it may be time for the “creation of a new kind of worker status,” one that provides “a middle ground between contract worker and employee.” This discussion is just beginning, but let’s hope that policymakers are paying attention so that we can keep ride-sharing services and their drivers on this better course.

Glenn Manishin is a Managing Partner at ParadigmShift Law and Senior Legal Analyst at Project DisCo.

Morning Consult