Honeymoon over for on-demand apps, contract workers

Jennifer Van Grove
San Diego Union-Tribune

San Diego — The gig is up.

The independent-contractor workforce is ballooning thanks to the rise of on-demand apps. But after a honeymoon period, lawyers and politicians are now being forced to consider the real humans behind these virtual businesses.

These workers participate in what’s sometimes called the “gig economy.” They’re technically working for themselves, picking up gigs from an expanding digital marketplace where technology companies link them to customers to perform individual tasks.

They drive for Uber or Lyft and take you from point A to point B, contract with DoorDash or Postmates to bring you takeout, and even work “flex” jobs for Amazon to deliver packages to your doorstep in a matter of hours.

Most of the companies in the gig economy let workers set their own schedules, as well as allow them to accept as many or as few jobs as they want — or even take gigs from competing providers.

Conversely, these companies set wages that can be changed at a whim or they control whether the worker can receive tips. Sometimes they decree, as is the case with Uber, that workers must maintain high customer approval ratings to avoid repercussions such as temporary deactivation.

Exactly who is responsible for protecting these workers’ rights — and determining what those labor rights should be — is an increasingly heated conundrum.

“The current situation … is fraught with ambiguity and uncertainty,” said Seth Harris, of Cornell University’s School of Industrial and Labor Relations, and the former deputy secretary of the U.S. Department of Labor. “We’re seeing the emergence of a new structure of work relationships that is quite different from traditional employment and from traditional independent contract work.”

Gig economy workers are the backbone of an expanding on-demand world where nearly anything you might want — a ride, a massage, a bottle of wine, a doctor’s visit — is just a push of a button away on your smartphone.

Estimates vary, but gig economy workers currently account for 1 percent of the U.S. working-age population, according to a 2015 McKinsey Global Institute report.

These gig workers look like regular employees. But they also look like independent contractors. The law, which allows for two classifications of workers — employees or independent contractors — seemingly overlooks them.

Thus, the group is at risk of being treated unfairly by companies that take a cut of a worker’s earnings, whether intentionally or otherwise.

With independent contractors, employers are not on the hook to reimburse expenses, pay minimum wage or cover overtime. Gig workers also have to manage their own tax withholding, don’t have access to employer-subsidized health care, aren’t legally authorized to form unions and don’t have access to federal statutory anti-discrimination protections.

You could put Laurence Brown, 40, of San Diego, in the category of gig workers who might deserve additional protections. He’s seemingly locked into a full-time arrangement with Uber, but his non-professional driving career didn’t begin that way.

The actor was drawn to both Uber and Lyft last year because the work offered him a flexible way to make money and also attend auditions.

Happy with the part-time work, Brown decided to consider another offer from Uber. The offer was for a new car, which he could lease through Uber’s new non-prime lending company, Xchange Leasing, a wholly owned subsidiary of Uber. He could return the car at any time with two weeks’ notice and forfeiture of a $250 deposit. Brown liked the idea of not having to worry about how many miles he racked up while driving, a typical term included in vehicle leases.

On Halloween, Brown decided to go through with an Xchange lease for a 2015 Toyota Prius. Brown’s payments would be $181 a week, which adds up to about $784 a month and $9,412 a year. He was content with the deal because he knew he could easily make the payment, automatically deducted from his Uber earnings, with just a day’s worth of work.

Then Uber changed its fare structure in January, reducing fares for its most affordable options by 30 percent, in hopes of boosting demand for its drivers during a seasonally slow period.

“It went from one day of work to three days of work to make my payment,” Brown said.

Before the fare change, Brown says he was driving 50-60 hours a week and pocketing $1,000 after Uber’s 20 percent take. Now, he says he’s lucky if he nets $700 a week. And he is, of course, still on the hook for the $181 weekly lease payment.

Brown’s request is simple. He wants Uber to return fares to previous rates. The company, which initially said the cheaper prices were temporary, has not indicated if or when it will increase fares.

Harris co-wrote a proposal with Princeton economist Alan Krueger that advocates for creating a new legal class of worker called the “independent worker.” It would apply to all gig workers, not just those working for tech companies, and give them a limited selection of benefits, including collective bargaining rights. Also, companies would be required to provide tax withholding services to independent workers, and contribute 5 percent of workers’ earnings to support health insurance subsidies. In addition, companies could pool workers to offer better deals on health insurance.

Dan Eaton, a business ethics lecturer at San Diego State University, said, “There has to be some sort of adjustment in the law to account for this new breed of worker.”

Legislative response will vary based on outcome of lawsuits alleging technology companies are illegally classifying workers as independent contractors.

Uber doesn’t accept that its drivers are employees.