From Wage & Hour Insights, Doug Hass discusses the sharing-economy and the new business models used by Uber, Lyft or Instacart. He writes:
“Both employers and employees fool themselves if they think that a sharing economy job is the new small business. From a wage and hour standpoint, they appear to be nothing more than a twist on the independent contractor/employee classification issues that we discuss regularly here on the blog. Employers who might be drawn to the “sharing economy” business model gain neither loyal employees, nor control over the product or business they want to grow (witness Uber’s recent issues with assaults by drivers). Depending on how a court or agency applies the law, signing up workers for these services could be an unlawful agreement to pay less than minimum wage, while practically giving workers neither the advantages of having a job nor those of owning a business. Unsurprisingly, the “sharing economy” has started to attract attention.
Last week, two different California federal judges highlighted the wage and hour problems inherent in the “sharing economy” model in two class action lawsuits brought against two different ride-hailing companies, Uber and Lyft. The two cases each allege that the drivers are not independent contractors, as the companies claim, but should be classified and paid as employees. The classification triggers both federal and state law obligations – under the FLSA and various related state laws. Simply adopting “sharing economy” buzzwords does not magically transform employees into contractors. In both cases, the courts rejected the companies’ arguments on summary judgment and allowed the cases to proceed to the roll-of-the-dice of a jury trial (assuming you can even really “win” these cases as an employer, of course). And, it’s not just Uber and Lyft, either. Instacart and Postmates (personal shopping), Homejoy (home cleaning), and Handy (repair), just to name a few all face similar lawsuits.
The cases are good reminders to employers about how difficult it is to apply laws drafted in the mid-20th century to the new 21st century business models that have sprung from the advance of technology…”