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The Taxman Cometh for (and Killeth?) the Gig Economy

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The Taxman Cometh for (and Killeth?) the Gig Economy



An interesting tax battle underway in New Jersey, highlighted by Toni Sutton-Deangelico on this site yesterday, has the potential to completely upend the still nascent Gig economy. And it appears to be happening without what many would consider due process for the targeted company.

The Gig economy, powered with brash new technologies and most often represented in discussions of rideshare provider Uber, is at its core free and unfettered capitalism. Technology companies facilitate the partnering of people in need of a service with those who have the capacity to provide it. That’s it.

Or is it?

Everyone knows that there have been challenges brought regarding the employment status of Gig workers. Uber and Lyft have been sued by drivers who voluntarily entered into agreements to provide transportation services, and then decided that they should be considered employees. Unions and taxi services have also been engaged in these court challenges. The Dynamex decision in California, which was codified by the legislature with the passage of AB5, dramatically reforms the way independent contractors are defined. Gig economy companies are girding for a battle over that new law. But at least in California there was a defining court decision and a legislative process in place to redefine what an independent contractor is. In New Jersey, that is seemingly being done by regulatory fiat.

As reported by Sutton-Deangelico:

The New Jersey Department of Labor and Workforce Development (NJDOL) alleges that the rideshare company Uber has been wrongfully classifying its drivers as independent contractors and is demanding that the company pay $649 million for years of unpaid employment taxes for its drivers. The department has sent letters to Uber’s subsidiary Raiser, saying it must pay $523 million in taxes that are past-due over the last four years, in addition to $119 million in interest and penalties on all monies owed.

It should be noted that this move is occurring without any precedent setting court case or legislative decree. It is an agency determining on its own that these workers are not being properly classified. It is a move most likely being watched closely by other states – particularly those with significant budget concerns.

New Jersey just happens to be one of the high tax northeastern states reeling from the flight of some of its wealthiest residents. In 2016, Billionaire David Tepper moved his entire company out of state, declaring low-tax Florida as his new home. The tax revenue generated from his income alone was so significant that legislative budget forecaster Frank Haines warned Tepper’s move to Florida could generate “revenue uncertainty” for New Jersey government. At the time, the State Treasurer reported that “the top 100 filers pay over 5.5 percent of all [gross income tax] payments” that the state receives. Tax reforms instituted under the Trump administration have only exacerbated the revenue problems for New Jersey and neighboring high-tax states.

One has to wonder if the aggressive move on the Gig economy is more of an effort to stem the loss and recover needed revenue. In other words, this action could be intended far more for the benefit of the state than the workers they claim to be protecting.

We certainly understand in the workers’ compensation industry that the burgeoning Gig economy is creating potentially millions of unprotected workers. Those injured while working on these “gigs” risk becoming dependent on the taxpayer since no safety net is in place for them. We recognize that something needs to be done; but trying to classify them all as traditional employees as we understand the category today simply won’t work.

It will instead just kill the Gig economy. We need more innovative solutions.

While the Gig economy now touches dozens if not hundreds of sectors in our economy, transportation is by far the most visible. Road warriors will tell you that companies such as Uber and Lyft have had a profound impact on travel, vastly improving options and service received when “on demand” transportation is needed. Part of that convenience is provided by the “on demand” nature of the business arrangements between the applicable parties. It is not a perfect system, but simply redefining the relationship and applying retroactive taxes is not a solution. Especially when the underlying argument to do so is weak.

New Jersey Labor Commissioner Robert Asaro-Angelo said in a statement that “When independent contractors file for unemployment or disability insurance, their benefits are paid by taxpayers because their employer didn’t contribute.” It is a fair concern regarding disability coverage, but personally I have never heard of an independent contractor applying for, much less receiving, unemployment benefits. I would be very curious to know how much the state has paid to “unemployed’ Gig workers. In the absence of solid statistics, that argument seems like a stretch.

A stretch that justifies the seizure of capital under the guise of legitimate taxation.

Ultimately this represents yet another battle for Gig economy companies. I suspect it won’t be the last. If the state is successful others will follow, and you will see a dramatic change in the way these companies do business, and a severe reduction in the services they provide. In other words, road warriors, prepare to see those dirty cabs with unfriendly drivers once again…..



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Robert Wilson is President & CEO of WorkersCompensation.com, and “From Bob’s Cluttered Desk” comes his (often incoherent) thoughts, ramblings, observations and rants – often on workers’ comp or employment issues, but occasionally not.

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Workers pay price as gig economy avoids regulations, inquiry finds

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Despite being commissioned by the Victorian government, Ms James found the federal government was best placed to drive change, given its responsibility for the national system of workplace laws.

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She recommended the development of a code of conduct to better protect on-demand workers, the removal of barriers to collective bargaining, and a one-stop-shop support agency to help workers when disputes arise.

If the federal government would not lead, Victoria should work with other states to drive legislative changes to offer greater fairness for platform workers, she said.

While he would not comment specifically on the recommendations, state Industrial Relations Minister Tim Pallas said there was a clear need for laws to be tightened to support gig workers.

“The gig economy is relied upon by millions of consumers and workers across the country, but there are holes when it comes to industrial relations that put workers’ rights to fair pay and conditions at risk,” he said.

Previously, Mr Pallas had indicated the state could act alone to bolster protections for gig economy workers.

On-demand workers are more likely to be young, urban and male. People who speak a language other than English at home are 1.5 times more likely to be platform workers.

An estimated 40 per cent of on-demand workers surveyed as part of the inquiry were not even aware of their rates of pay.

“Platforms have been deliberate in framing their arrangements with workers,” Ms James found.

“This enables platforms to avoid the operation of close and detailed labour regulation while other businesses are carrying the costs of complying with those requirements.”

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Those pressures are becoming more acute as the economic effects of the COVID-19 pandemic tear through every aspect of society, Ms James told The Age and The Sydney Morning Herald.

“What we have is a large number of people in need of income, looking for work in a labour market which has now become even more competitive,” she said.

“So the gig economy has provided invaluable access to work for people, but also under terms and conditions that are not regulated. And so what we have is vulnerable people with very little leverage in the labour market really, with little or no capacity to have a say in what the arrangements are in place in order to access this work.”

Zaheer Qazi spent three years working for Uber and Deliveroo while he completed his degree in Melbourne. During that time he was also the national welfare officer for the Council of International Students Australia.

Mr Qazi said he had been told horror stories about international students working for food delivery sites being attacked but having little recourse to workplace support or compensation.

“People are feeling more fearful with COVID,” he said. “They can’t afford to lose work and these companies know it.”

Zaheer Qazi says "fearful" gig workers "can't afford to lose work and these companies know it".

Zaheer Qazi says “fearful” gig workers “can’t afford to lose work and these companies know it”.Credit:Joe Armao

Freelancer.com chief executive Matt Barrie said while other platforms limited the amount of pay workers received, his company “liberates workers”.

“The gig economy is not one homogenous industry with a uniform business model,” he said.

“Any legislation must be cognisant of that and should be at the federal level, not the state level.”

Airtasker chief executive Tim Fung said the gig economy comprised a number of different platform types. “The needs of workers on each of these different platforms should be prioritised when considering how best to apply a regulatory framework.”

A Deliveroo spokeswoman declined to comment. The Age and The Sydney Morning Herald also approached Uber for comment but did not receive a response before deadline.

A spokesman for Attorney-General Christian Porter said given Mr Porter had not seen the report, he could not comment on its findings or recommendations.

In January, Mr Porter said: “The evolution of the gig economy also presents challenges which the government is committed to addressing.”

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GIG Car Share Chooses the Ridecell Platform for its Expansion into Seattle | News

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SAN FRANCISCO, July 8, 2020 /PRNewswire/ — Ridecell Inc., the leading platform provider for shared mobility operators, today announced that GIG Car Share, powered by AAA Northern California, will use the Ridecell High-yield Mobility Platform for its expansion to Seattle. Gig already uses Ridecell for its other operating cities, including Sacramento and the San Francisco Bay Area. The Ridecell platform enables Gig to operate its fleet efficiently while giving members a frictionless experience, including quick reservation on the Gig app plus keyless entry and Gig free parking locator within the app. Ridecell also keeps track of cars for easy service, cleaning and return, minimizing downtime and maximizing profitability.

Gig Seattle will begin with 250 brand new Toyota Prius XLE hybrid cars that seat five comfortably and provide outstanding fuel efficiency. The Ridecell platform provides Gig with end-to-end automation, instant driver verification, payment processing, on-demand scheduling, and custom analytics. In addition, the platform tracks vehicle locations to ensure safety and speedy service when needed.

“Gig has grown to be the largest* free-floating car sharing service in the country, despite the tough times most transportation services are facing,” said Aarjav Trivedi, CEO of Ridecell. “Gig’s great customer service orientation combined with our platform, has helped the company continue to succeed where other companies have faltered. We’re proud to continue our partnership with them as they enter the Seattle market.”

Ridecell offers the world’s only end-to-end platform for all types of mobility, including car sharing, ridehailing, and short-term vehicle subscriptions. The platform is designed to create high-yield mobility businesses for greater profitability. For more information, visit www.ridecell.com

About Ridecell

Ridecell helps companies build and operate profitable mobility businesses. With the company’s High-yield Mobility™ SaaS toolkit of intelligent software, business services, and ecosystem partners, Ridecell customers maximize three key profit drivers: customer experience, fleet utilization, and operational efficiency.

Founded in 2009, today, Ridecell powers some of the most successful mobility services in cities across Europe and North America. These services include ZITY from Ferrovial and Groupe Renault, Gig Car Share from AAA Northern California, and Blu Smart EV ride sharing service.

Ridecell is headquartered in San Francisco, California, with more than 170 employees in offices across the globe.

About GIG Car Share
GIG Car Share, a service from AAA Northern California, is the largest free-floating car share in the nation.* In three years, Gig has grown to more than 65,000 members and operates more than 1,000 cars across Northern California (Oakland, Berkeley, San Francisco, Sacramento) and Seattle, Washington. The service launched in 2017 as the first venture from A3Ventures, AAA’s innovation lab based in Berkeley, Calif. Learn more at gigcarshare.com.

*Based on the size of its fleet as of 6/1/2020

Media Contact:
Jane Gideon
Tel: 415-682-9292
Email: press@ridecell.com

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Gig workers say pay decided by algorithm is unfair

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Same-day delivery has been a growing part of Target’s business during the pandemic. But Target employees don’t do most of the work picking up merchandise from stores and delivering it to customers’ homes. Instead, it’s mostly handled by gig workers hired through a platform called Shipt.

This week, some of them are protesting its new pay structure. Instead of being paid a set rate per order, an algorithm will weigh how busy a store is, how bad street traffic is and other factors to set the pay for an order.

Algorithms are foundational to how gig platforms like Uber or Instacart do business. Most users are familiar with surge pricing, where prices vary depending on demand. But that’s just part of a complex web of algorithms that affect everything from which jobs a gig worker is offered to how much they get paid for them.

“I really compare it to like the wizard behind the curtain in ‘Wizard of Oz,’” said Carlos Ramos, a ride-hailing driver in San Diego for the past three years. “Stuff is happening back there, and you have no idea what’s going on.”

Ramos has noticed some patterns: When he first logs on, he seems to be offered a lot of shorter, less lucrative rides until he decides to call it a day and head home.

“And then I’ll get a request for a hundred-mile trip in the other direction,” he said. “This has happened time and time again.”

He thinks it’s because of Lyft’s algorithm, but he can’t be sure because companies keep their software secret.

“We have no idea,” said Veena Dubal, a professor at the University of California’s Hastings College of the Law. “Everything that we know about the algorithms is based on what workers tell us they experience.”

Dubal has surveyed hundreds of gig workers to tease out how the algorithms work, and she’s concluded they’re designed to keep workers logged on for as little pay as possible.

“They therefore cannot predict their income on any given day or any given shift,” she said.

These systems cause financial uncertainty that puts workers at a disadvantage, said Kate Crawford, the co-founder of the AI Now Institute at New York University.

“These algorithmic systems are essentially increasing the power asymmetry between workers and employers to quite an extreme degree,” she said.

While each platform has unique algorithms, they all have a common objective, she said: to maximize profits, often at the expense of workers.

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