If you were hoping to get shopping delivered via Shipt today, you may be out of luck.
Shipt, which is owned by Target, pays gig economy workers to deliver goods from brick-and-mortar stores to consumers’ homes around the country. Those workers aren’t staff, so they don’t get a salary or hourly wage. They’re paid by the job. Shipt is now planning to expand its use of an algorithm to determine how much they get paid. It’ll take into account a lot of factors, like how busy a store is and how bad traffic is. But the calculation is opaque, and workers believe they’ll end up with less than the commission they currently get and are boycotting the app today.
I spoke with Marketplace’s workplace culture reporter, Meghan McCarty Carino. The following is an edited transcript of our conversation.
Meghan McCarty Carino: Generally, these kinds of gig jobs are piecework, where workers are paid by the outcome and not for their time. In quarantine, some of the relationships have kind of gotten a little wonky. Because say a [Shipt] shopper gets an order and they spend a bunch of time looking for all the items, and they’re all sold out. They wouldn’t get compensation for all that extra time, so there are ways in which changing the compensation model for this type of gig work might make sense under the current circumstances, and maybe be a bit more fair.
Jack Stewart: I know you’ve been reporting this out and talking to a lot of gig workers. And it does seem like, in general, when these algorithms are changed, they end up giving workers less money, not more. Or at least that’s their perception, right?
McCarty Carino: There’s definitely that perception. I know Shipt workers have complained that they have piloted the system in some cities and they say that pay went down by as much as 30% in some cases. And a lot of gig workers for other platforms say that companies just use these algorithms as a way to cut pay without saying that they’re actually cutting pay. There’s no real way to verify these things because they’re what’s called a black box algorithm. It becomes really difficult to have any predictability around what your wages are going to be for a day or for a week, or how much time you should count on spending doing the work.
Stewart: If workers hate them so much, why do the companies say they’re necessary?
McCarty Carino: There’s a complicated market manipulation that these apps are trying to do where they want to keep as many workers logged into the apps as possible, so that when you order an Uber or order Instacart that you have access to as many workers as possible to fill that order as quickly as possible, but also minimize the cost of labor. There’s this delicate dance that the algorithms perform to try to create market efficiencies and match labor with demand at the minimal cost to generate profits for these apps.
Stewart: Uber has been doing this type of algorithmic pricing, I guess we’ve known it best as surge pricing, for years now, so I imagine this is legal. Do workers have any comeback against this?
McCarty Carino: It’s interesting, because it’s definitely legal for a private company to use these algorithms to determine pay or to dispatch work. What actually comes into question right now is whether that constitutes a change to the classification of gig workers. This has been a big issue in the world of the gig economy, whether gig workers should be classified as independent contractors, as they currently are, or whether they should be classified as employees. The state of California passed a law that basically sets a criteria that would make them employees. One of the criteria that the law in California, and which many other states are kind of looking to imitate, is whether they’re able to set their own working conditions, one of which is pay. Actually, Uber has changed things up in California. Just last week, for the entire state, it instituted a new policy where drivers can set their own rate when they log on to the app as an attempt to say, hey, they are independent contractors. They’re setting their own rates. Whereas when these algorithms determine which jobs they get served and what the rates are, there is a question as to whether this is a correct classification of them as independent contractors who generally would be able to set their own pay.
Related links: More insight from Jack Stewart
Meghan spoke to Carlos Ramos, a ride-share driver in San Diego, as part of her reporting. “I really compare it to like the wizard behind the curtain in ‘Wizard of Oz,’ ” he said, talking about these algorithms.
California’s law, AB-5, which reclassified gig workers as employees, has already had sweeping impacts across the state, and not everyone’s happy. There have been lawsuits, social media campaigns and a ballot initiative challenging it, sponsored by Uber, Lyft, Postmates and DoorDash. AB-5 means workers get a lot of the protections that conventional employment brings, like overtime, minimum wage and workers’ compensation. It would also mean unemployment insurance, which gig workers actually get anyway at the moment because of expanded federal benefits due to the pandemic. But they won’t last forever.
Of course, all of that is expensive for businesses, and it’s not just the big tech platforms that get swept up in AB-5. It’s also independent yoga studios and playhouses, for example. The Los Angeles Times profiled some of them.
Other states are already looking to follow California’s lead. Yesterday we heard that Massachusetts is suing Uber and Lyft over the status of drivers. That state’s attorney general says they should be employees. Uber and Lyft vow to fight it, saying that the vast majority of their drivers actually want the freedom to work independently, set their own hours and work flexibly.
The pandemic has highlighted just how essential some gig economy workers are. Gig jobs like grocery delivery have been a lifeline for people who have lost other work because of the shutdowns. As a piece in the Harvard Business Review says, gig workers are here to stay. The model is only going to get more entrenched. Now is the time to think about how we’d like it to work.
A federal court in Los Angeles on Friday dismissed a lawsuit by Uber Technologies Inc. (NYSE: UBER), Postmates Inc. and two drivers that claimed California’s AB 5 law was unconstitutional, according to court records. However, the plaintiffs have until Oct. 9 to file an amended complaint on some portions of the claim.
“The court’s order granted us permission to amend our complaint,” Uber said in a comment to the San Francisco Chronicle newspaper. “The enactment of even newer bills granting several additional exemptions to AB 5 makes it crystal clear — now more than ever — that this law is irrational and unconstitutional, and we look forward to presenting those arguments to the court.”
The suit against AB 5 — the California state law that aims to get tough on independent contractor misclassification — had been filed in December. It included two drivers as plaintiffs, Lydia Olson and Miguel Perez. Olson had argued that by working through Uber as a driver she had the flexibility to care for her ailing husband. Perez, a former truck driver, argued working for Postmates allowed him to earn more and spend more time with his family.
The lawsuit is Lydia Olson, et al, v. State of California, et al., and is separate from another AB 5 lawsuit filed against Uber and Lyft Inc. (NASDAQ: LYFT) by California Attorney General Xavier Becerra. A California judge ruled the companies must stop classifying drivers as independent contractors but another court ruling allowed the companies to continue operating with independent contractors as they appeal the lawsuit.
Uber, Lyft and others are also backing a California ballot measure that brings the questions to the state’s voters over whether drivers should be independent contractors. If voters approve the measure, it would override AB 5.
State lawmakers gave final approval Wednesday to a bill that could mean sweeping changes for more than a million freelance and independent workers across a wide range of California industries.
Uber and Lyft dispute that the new law will turn their drivers into employees who earn benefits and have vowed to fight the law if the changes go into effect.
Members of the state assembly followed the senate’s lead and overwhelmingly passed AB5 after fierce negotiating and the addition of many amendments that will exclude a variety of workers from the new protections.
“Something is wrong with the way we have allowed these companies to operate and the people who pay are you and me,” said Assemblymember Lorena Gonzalez.
Doctors, graphic designers and artists are some of the professions that are not covered by the deal.
Gov. Gavin Newsom has promised to sign the bill.
Uber believes that its current treatment of drivers was already in compliance with state rules, the company’s attorney Tony West told reporters on Wednesday. West said Uber will also pass the stricter test that governs who’s a contractor and who’s an employee.
Yet, he said he’s disappointed that legislators and Newsom rejected a compromise pushed by Uber and Lyft that included benefits and a $21-per-hour rate for drivers.
“We’re not arguing for the status quo,” said West. “Our proposal avoid the potential harm of forcing drivers to become employees whether they want to be employees or not.”
He added that “the vast majority” of drivers do not want to be reclassified as employees.
West says Uber will try to negotiate a deal in Sacramento. If that fails and the courts find their drivers are employees under the new law, the rideshare companies will go to the ballot box next year to try to overturn it.