Two weeks ago, California legislators passed a bill that requires Lyft, Uber, and other similar service platforms to treat the workers that provide services through them as employees rather than independent contractors. Other states are likely to follow suit.
However, ruling on whether “gig” workers are employees or contractors just highlights the inadequacy of the traditional binary classification of workers in today’s economy. The truth is that they may be neither.
It is important to recognize that marketplaces for products or services choose a position on a continuum defined by how much control they exert over the interactions or transactions they enable. At one end of the continuum are pure marketplaces, which exert little or no control over the terms of the transactions between independent suppliers or professionals and customers (e.g., Airbnb, Craigslist, eBay, Poshmark, TaskRabbit, Thumbtack, Turo, Upwork). At the other end of the spectrum are resellers that buy products from suppliers and resell or rent them on terms they completely control to customers (e.g., iTunes, Netflix, Wayfair, Zappos, Zipcar) and employers that hire professionals providing relevant services and almost entirely control how those services are delivered to customers (e.g., Hello Alfred, Infosys, McKinsey). Many firms have chosen to occupy intermediate positions along this continuum (e.g., Apple’s App Store, Gerson Lehrman Group, Handy, Lyft, Postmates, Uber, Wag).
The notion of control over supplier-customer interactions has many dimensions: price, equipment, how the relevant product or service is presented or advertised, how the product or service is delivered or performed, work schedule, and so on. What’s more, the stringency of the rules governing each of these dimensions can vary all over the map. As a result, there is a fine-grained spectrum of intermediate business models between pure marketplace and pure retailer or employer. For example, Postmates has full control over the delivery price charged to customers, but its couriers can choose to use any vehicle they wish for performing their deliveries (including bicycles, cars, and trucks) as well as their work schedules.
Marketplaces are driven to adjust the control dials for the various elements of their business model by a number of different factors: the importance of consistency of the buyer experience (across different sellers), the extent to which the platform vs. the suppliers have better information relevant for different choices (e.g., demand information for setting prices or marketing activities), whether the platform has some cost advantage of centralizing certain activities, and so on. In particular, there may be very good efficiency reasons for choosing different levels of control across various elements: for details, see our previous work here, here and here.
In this context, trying to force-fit all marketplace companies into one of only two categories will lead to over-inclusive employee classifications in some contexts and under-inclusive employee classifications in others. As firms inevitably adjust in order to avoid being misclassified, this will lead to several inefficiencies, as we discuss in depth in a recent research paper on this issue.
First, firms will most likely “run for the corners” by choosing either a pure marketplace model with as little control as possible over how workers conduct transactions with customers or a pure employment model with full control over workers. This will likely eliminate many intermediate business models (with intermediate degrees of control), which could be more efficient.
The California bill, for instance, heavily favors the employment model — i.e., even companies that are quite close to the pure marketplace model may have their workers classified as employees. For certain services, it may indeed make sense to give workers more benefits and training, and employ them, so they can be dedicated and committed to the service they provide on behalf of the company. This is the approach chosen by Hello Alfred, whose home managers provide a wide range of in-home services. However, forcing companies to do that for all services defeats many of the advantages and efficiencies of the sharing economy model, which in cases like ride sharing and delivery, provides a way for many individuals to pick up extra work, if and when it fits their schedules.
Second, when businesses that would have preferred to choose an intermediate model are categorized as employers (which comes with 20% to 30% higher costs), they are likely to take more control over how workers interact with customers (following the California bill, Lyft has already informed its drivers that it may soon restrict them to specific time shifts and geographic areas). This results in less flexibility for workers and will almost certainly penalize workers that wanted the flexibility of running their own schedule and moving freely between different jobs. This explains why some Uber and Lyft drivers (nearly half of whom drive less than 10 hours a week) are unhappy with the new California law.
Third, when businesses that would have preferred to choose an intermediate model are driven to the pure marketplace model by the threat of higher costs associated with the employment model, they might cease investing in activities that would have made workers or customers (or both) better off. Two examples are worker training (e.g., Postmates offers its drivers free access to online college course and professional certifications) and group health care plans (such as the one offered by Uber): Because providing training and health care coverage are among the criteria that make an intermediary more likely to be classified an employer, companies that wish to remain marketplaces will become more reluctant to provide such benefits, to the detriment of workers.
Fourth, specifically in the case of transportation platforms like Lyft and Uber, it is important to recognize that this is a very competitive industry, mainly due to the fact that drivers have the ability to “multi-home,” i.e. drive for two or more platforms, as many do. However, if Lyft and Uber drivers are classified as employees, then each platform will be able to legally restrict its drivers from driving for a competing platform. Perversely, this would limit drivers’ choices (again, following the California bill, Lyft has informed its drivers that it may soon require them to drive for Lyft only). And ultimately, as the platform that manages to lock up more drivers becomes more attractive for riders through lower wait times, and more riders attract more exclusive drivers, it could lead to tipping whereby one platform dominates (in any given city).
In an ideal world, firms would be able to choose among all possible intermediate steps between pure marketplace and pure employer — subject to the constraint that their costs (including the benefits paid to workers) will increase relative to some aggregate measure of the control exerted.
Needless to say, this is not practically feasible: There are just too many possible intermediate configurations, and it would be prohibitively complex to assign a different legal status to each of them. But it is not too much to ask for the introduction of at least one intermediate step such as “dependent contractors,” for whom firms would cover some costs but not others (such a third category already exists in Canada, Germany, Italy, South Korea, and the United Kingdom).
Critically, any worker expenses or benefits that the new category requires firms to cover should be proportional to the work that these workers actually do with each of the firms (e.g., the number of hours worked or the value of the jobs carried out). Any expenses or benefits that are fixed irrespective of the actual work carried out would make engaging workers for short shifts unattractive and incentivize the firms to engage their workers exclusively to prevent rival firms from free-riding on their investments.
A case in point is the requirement that gig workers be paid a minimum wage per hour they are available on the marketplace rather than based on the actual work carried out. A recent case in Australia illustrates the point, in which a Uber Eats driver claimed she was not receiving the minimum wage because she worked as long as 96 hours in some weeks — most of it spent waiting for orders to be placed via the Uber Eats app — but earned as little as $300 for those periods. However, the Fair Work Commission in Australia rejected her claim, pointing out that she had rejected more than 550 food delivery requests and cancelled a further 240 after having accepted them. Requiring a minimum wage that is based on the hours a worker is available on the platform would almost certainly push each firm to require that workers meet a minimum number of hours on its platform and that they do not work for rivals during these “shifts”.
Yes, there would still be the problem of drawing the boundaries between the intermediate status and the other two. Nevertheless, this would be a big step forward in terms of freeing firms to explore a variety of intermediate business models and arrangements with their workers.
The latest offering on the Stockhouse DealRoom is a peer-to-peer (P2P) marketplace app that seamlessly connects trusted independent contractors or “experts” to consumers with everyday home maintenance needs.
Founded in 2018, HeyBryan Media Inc. (CSE.HEY, OTCMKTS: HEYBF, Forum) is a publicly-listed company on the Canadian Securities Exchange. The app is named after beloved Canadian HGTV personality and home maintenance expert, Bryan Baeumler. Every expert is background checked to ensure a safe experience for consumers and payments are securely processed through the app. HeyBryan accommodates busy schedules by allowing the independent workforce and consumers to communicate and work together.
The HeyBryan app eliminates the middleman and, finally, puts the power back into the hands of the public. Capitalizing on the exploding gig economy, the global peer-to-peer marketplace is now estimated at an incredible $340 billion.
HeyBryan instills trust, eliminates the constraints of time, and handles the money exchange for you. This allows the independent workforce and consumers, who value time, the ability to work together. The HeyBryan app is free to download and is available on both Apple and Android devices.
Customers can now book and complete tasks in anything from home cleaning, appliance repair, junk removal, plumbing, painting, electrical, or general handyman services – to name just a few.
Here’s the Deal:
The Subscriber acknowledges (on its own behalf and, if applicable, on behalf of each person on whose behalf the Subscriber is contracting) that the Units subscribed for by it hereunder form part of a larger issuance and sale by the Corporation of Units at a subscription price of $0.041 per Unit for maximum gross proceeds of up to $350,000 (the “Offering”). There is no minimum aggregate Offering amount. Each Unit is comprised of one Offered Share and one Warrant.
Each Warrant will entitle the holder thereof to purchase one Warrant Share at a price of $0.06 at any time prior to 4:30 p.m. (Vancouver time) on the date that is 24 months from the date of the issuance of the Units. The Corporation has the right (the “Acceleration Right”) to accelerate the expiry date of the Warrants by giving notice to the warrant holders if the Corporation’s common shares have a closing price on the CSE (or such other exchange on which they may be traded at such time) of greater than $0.08 per share for a period of 10 consecutive trading days, In such event, the Warrants will expire on the 30th day after the date on which such notice is given, which notice shall be deemed to have been delivered to the holders three business days after it has been sent by the Corporation to the holders by regular mail.
Private Placement Terms (Highlights):
$0.041 per Unit
Up to $350,000
The Common Shares will be listed on the CSE under symbol HEY.
No prospectus will be filed with any securities regulatory authority to qualify the Common Shares for distribution to the public.
Securities issued pursuant to the Offering shall be subject to a four-month hold period commencing on the Closing Date (as defined below) under applicable Canadian securities laws.
For experienced retail investors, this deal equates to “ground floor” opportunity. It can also often translate into a real-world, high-value investment. HeyBryan Media Inc. has already positioned itself as an established operator and major player in the peer-to-peer app sector and is reaching out to new investors who are looking for real value and opportunity in this exploding marketplace.
HeyBryan Media’s DealRoom financing provides access to a publicly-listed company in game-changing industry, an experienced management team, and…at a very attractive valuation.
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That’s what irreverent and satirical comedian Hannibal Buress brings to the stage.
Nowhere was this comedic aesthetic more on display than at one of Buress’ favorite Northeast Ohioappearances. His memory of the 2013 show at the Grog Shop in Cleveland Heights remains as vivid as ever.
“At the time, I was doing my song ‘Gibberish Rap,’” said Buress, calling from the Chicago. “I was really into the production of it, so we hired a lot of local costumed characters in each city. In Cleveland, we got this Incredible Hulk who was really dancing. I think we also had a Mario.
“(Lorain-based comedian) Ramon (Rivas II) had a couple of friends agree to come on stage and do balloon animals. It was chaos. That was a fun one. I had a great time.”
Getting his start nearly 20 years ago, the Windy City-based comedian’s resume includes brief stints writing for “Saturday Night Live” and “30 Rock.” He also appeared in the hilarious “The Eric Andre Show” and feature film “Spider-Man: Homecoming,” as well as made the late-night talk show rounds.
That turned out to be just fine because the timing of his most recent special “Miami Nights,” which debuted on YouTube this summer, couldn’t have been any more apropos considering the current climate in the country.
The centerpiece of the special is his unlawful 2017 arrest in Miami.
“There are some people in those positions, police officers, who aren’t really emotionally suited to be in the spot — including this guy that I interacted with,” Buress said. “With everything that’s happening, it forces them to really look within at how people are being evaluated when they go into those positions, because it’s a very important position. You want folks who are stable.
“The thing with [the police officer who arrested him] is he had been disciplined. He had off-duty incidents where he ran from the police. He was a fugitive, and I got arrested by him somehow. It’ll take some time for things to fix themselves, but there’s a lot of work being done and there’s a lot of work to do.”
Speaking of work, Buress remains as busy as possible during the pandemic. Not only did he recently release the first episode of his new gambling-centered podcast, “Splitting 10s,” but he’s also looking to get back on the road.
Buress’ “Let’s See How This Goes” drive-in theater tour kicks off in Northeast Ohio with a gig Sept. 22 at North Ridgeville’s Auto-O-Rama Twin Drive In.
Mind you, Buress admitted it’s been decades since the last time he visited a drive-in theater, but everyone has to get a bit out of his or her comfort zone these days.
“I saw that Marc Rebillet and Bert Kreischer did a drive-in theater tour, so I decided to try it out,” Buress said. “It’s something new. Some comedy clubs are open, but you’re not really able to do full capacity. The drive-in-show experience is still something that’s kind of fresh, so I think it’ll be dope for people.”
While fans attending the show can expect new material, there’s one fresh topic he won’t be talking about. Buress said he doesn’t have any COVID-19 material.
“Hell, no,” Buress laughed. “Nope. No pandemic jokes. People don’t want to hear that.”
Are gig workers — think Uber drivers or Door Dashers — seeking to trade their flexible occupations for a full-time, 40-hour-week job?
Two recent surveys suggest they’re not interested. A survey of 1,000 on-demand drivers, commissioned by Uber and conducted by a duo of polling firms representing clients on the political left and right, finds that 85 percent prefer some version of their current flexible arrangement. Another survey — this one of 1,000 independent contractors, and commissioned by Lyft — concluded that 71 percent want to retain their current status.
Both surveys suggest that workers are happy with their “gig.” Don’t tell that to labor unions and their allies. To bolster their opposition to Proposition 22 — an initiative on the fall ballot that would solidify on-demand drivers’ and shoppers’ status — labor has pointed to a handful of comforting studies suggesting that gig workers are exploited.
The first, released through a San Francisco city commission, claimed that most gig workers work full-time schedules and earn poverty-level wages while doing so. But records requests, reported by the Washington Free Beacon, discovered that this conclusion was based on a convenience survey of respondents identified by a labor group–many of whom were paid for their answers. The study organizer acknowledged that the survey–which was drafted to “support organizing” — was “not representative” of gig workers’ experiences.
Speaking of unrepresentative: Labor and its allies have also hinged their case on a 2019 working paper from Veena Dubal, a law professor at the University of California-Hastings. In her paper, Dubal dismisses the numerous statistical surveys showing that on-demand drivers don’t want to be employees. Her own conclusions are based on “unstructured conversations with drivers in driver organizing meetings” — among other unrepresentative sources.
Got that? Having sought out the unhappy few among the on-demand shopper and driver community, Dubal concludes that all drivers in the state must feel similarly.
This anti-empirical stance by labor and its academic allies, and their unwillingness to acknowledge that shoppers and drivers prefer their “gigs,” has dangerous consequences. In a recent legal brief, rideshare company Uber described in damning detail what would happen should it be forced to convert its independent drivers into full-time employees.
An estimated 75 percent of current drivers would lose access to the Uber employment model–resulting in one million lost employment opportunities. (The legal brief notes that these facts are undisputed by the company’s opponents.) Prices would increase for riders by anywhere from 20 to 120 percent; the company further explains that “at least a quarter of rides would no longer be available, with certain cities experiencing a decrease of 40-60 percent.”
The stories behind these statistics are heartbreaking. The Uber brief recites the story of one driver who uses the app to support her two children. One of her children has special needs, which means she can’t work a traditional schedule. If Uber in its current form was no longer available, she wouldn’t be able to support herself.
Another driver is the caregiver for her ailing husband and uses the on-demand app to earn extra income. Yet another has a wife in poor health and couldn’t work a 40-hour-per-week job even if he wanted to. The brief cites several other stories, noting that hundreds of thousands of other drivers have their own personal reasons for working in the gig economy.
The data are clear: For gig workers, flexibility is a perk of the job, not a bug. California legislators, and their constituents, should base their decisions about the future of the gig economy based on robust surveys that reflect this opinion — rather than flawed reports that tell their funders what they want to hear.
Jeff Joseph is a professor at the George Washington University School of Business