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What California’s New Gig Work Law Gets Wrong About Gig Work

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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.

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Portugal’s gig-economy workers set to become staff

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LISBON, Oct 22 (Reuters) – Portugal has moved a step closer to ordering digital platforms such as Uber and Glovo to employ some of their drivers as staff with formal contracts and benefits, becoming the latest European nation to tackle the gig economy.

The bill, which was approved by the government late on Thursday but still needs to get the final stamp of approval from parliament, aims to grant thousands of riders working rights as employees and not freelancers.

It is likely to be approved as the Socialist government has the support from other left-wing parties. If given the green light, it will be another win for unions worldwide fighting for better pay and benefits for those employed in the gig economy.

Britain’s Supreme Court ruled in February that Uber drivers were entitled to workers’ rights and, a few months later, Spain gave food delivery companies three months to employ their couriers as staff.

Portugal’s Labour Minister Ana Mendes Godinho said the bill assumes that a worker of the digital platform operator is staff with a formal contract whenever there is evidence of relationships between the platform, the worker who provides the service and the customers.

“Fighting precarious employment is one of our top priorities,” Godinho told a news conference.

She said that digital platforms will also have “the obligation to transparently inform the Work Conditions Authority, workers and their representatives, about the criteria of algorithms and artificial intelligence mechanisms used.”

Under pressure to come up with an EU-wide solution, the European Commission launched a public consultation earlier this year to determine couriers’ legal employment status and how to improve their working conditions. read more

The gig economy grew during the COVID-19 pandemic as people around the world needed goods and food delivered to their homes and millions of newly unemployed were eager to work.

But many digital platform workers say they are being exploited by companies that pay low wages, encourage long working hours, while providing little social and health protection.

Reporting by Sergio Goncalves and Catarina Demony; Editing by David Evans

Our Standards: The Thomson Reuters Trust Principles.

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Gig workers in Karnataka too can expect weekly offs, other benefits- The New Indian Express

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Express News Service

BENGALURU: Gig workers with e-commerce platforms can hope for better days with various benefits. With the Union Government proposing to revise the definition of employment to include new types of workforce, the Labour Department in the state is planning to conduct a survey of workers in the unorganised sector, including drivers enlisted with mobile app-based cab platforms, delivery agents and food delivery agents, to ensure that they get benefits like weekly offs and minimum wages.

The Centre is expected to include new forms of workforce, including gig and platform workers, and anganwadi workers, in a new set of reforms under the proposed National Employment Policy that seeks to ensure a fair deal to the workers. Under this policy, these workers will be eligible for minimum wages, weekly offs and other leaves and also other worker-related benefits like Provident Fund and ESI facility. Presently, gig workers, including food delivery agents and mobile-app based drivers, are not employees of the company — they are paid per delivery or trip and they have to bear the cost of fuel.

Speaking to The New Indian Express, State Labour Minister Shivaram Hebbar said, “Though the Centre is yet to finalise the policy, Karnataka will go ahead and conduct a district-wise survey of mobile-based taxi/autorickshaw drivers, delivery agents and also food delivery agents. We can provide facilities to beneficiaries only if we have proper data on them.”

Hebbar said he will discuss the matter with Chief Minister Basavaraj Bommai and other officials concerned and a final decision will be taken after the October 30 bypolls. Meanwhile, over 7 lakh people from Karnataka have registered on the e-SHRAM portal for unorganised workers that was launched last month. Hebbar informed the Assembly in the recent session that there are over 1.6 crore unorganised workers in Karnataka. 

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Why Do Gig Workers Want You To Delete Instacart?

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Robin Pape is a gig worker and Founding Member of the Gig Workers Collective. Errol Schweizer led the Grocery team at Whole Foods Market for 9 years, including during 2015 when the retailer was an early adapter of Instacart.

Errol Schweizer: What’s it like to be a gig worker?

Robin Pape: There’s a lot of uncertainty involved with being a gig worker. You never really know what you’re gonna make, how much you’re going to work. You generally don’t have health care. And there’s no sick pay, no paid time off. There’s just a lot of uncertainty. 

Errol: How is it different than being a regular employee?

Robin: Well, as a gig worker, we’re classified as independent contractors. And we at the Gig Workers Collective believe that that’s an intentional misclassification and that it’s done to specifically skirt the labor laws. So you know, if we worked for the company as a direct employee, we would have access to health insurance and sick pay and paid time off, and they would be paying into our taxes and towards social security. We would be using their vehicles instead of our own. So that there’s a lot of differences in how we’re treated. 

Errol: What’s the issue with the business model? 

Robin: So usually, the pay with these good companies starts out pretty well. And then as time goes on, it’s unsustainable. And it drops and there’s changes to how the pay models work. Initially, they’ll usually start with a very clear and concrete pay model, and then switch to something that’s more of a black-box, an algorithm where we can’t really compute what exactly it is that we’re being paid for, what’s mileage, just the simple base pay for an order. The company makes money by charging extra money to the customers. And in addition to that, they’ll pay service delivery fees to the company.

So getting into these gigs, it can feel initially like you’re making good money, because you haven’t been educated about all of the costs and the expenses involved. But at the end of the day, you’re lucky to break even.

Errol: How have you seen gig work change during COVID-19? What’s it been like?

Robin: There’s been a huge increase in the number of people who are using delivery services. I think that’s tapering off a bit now that people are feeling more comfortable and more people are vaccinated and getting back into the stores themselves. So while there was this huge boom in customer base, Instacart, in particular, cut our base pay, And they hired twice as many shoppers, and they sent us inadequate PPE, the shelves were empty, customers were upset about this, it was taken out on shoppers, it was out of our control. People were frustrated. It went from shopping usually one, maybe two orders at a time to most often shopping three orders at a time, and having to communicate with three different people, while you’re in the middle of a pandemic, and everything is taking so much longer as you’re going back and forth, back and forth, fulfilling requests for three people who aren’t going to get everything that they want. And you know, there were limits. You could only have two bags of frozen vegetables. And, one case of water and people weren’t happy about it.

But people were proud of what they were doing. They weren’t ashamed to say that they worked for Instacart or one of the other gigs, there was some pride. And all of these people were going somewhere that no one else wanted to go, that people were afraid to go. 

But overall, in general, we’ve seen pay cuts from 30 to 50%. And a lot of it is out of our control, a lot of it doesn’t have to be this way. And the things that we’re asking for right now are things that we’ve had in the past that were taken from us so that the company could be more profitable. 

Right now they want to paint this glowing picture, and they either want to sell the company or announce an IPO. And we’re hoping that it’s a lot harder to do that when investors understand just how poorly this company cares for its employees, for its independent contractors. 

Errol: What are the five demands that the Gig Workers Collective has around reforming Instacart and other similar apps?

Robin: All of our demands are things that we we’ve either had, or have been told we have, but it hasn’t really been made clear.

So the first demand that we have is that they return to paying by the order instead of by the batch. So people think of as a batch as one order, but it can actually be one order, or two or three full service orders where you shop and deliver. And in some areas, including mine, it can be as many as five delivery orders. Right now, the minimum pay for a delivery order is $5.00. But if they put five of them together in one batch, there’s still only guaranteeing $5.00. And that’s not a base pay. That’s a minimum pay. So that can include the mileage, that can include heavy order pay.

So that that’s the first one is that they pay us by the order. That’s the easiest way to make sure that we’re paid fairly and at least a minimum wage. The second demand is that they reintroduce item commission; this was removed in late 2018. We used to receive a base pay for an order plus item commission. So you could pretty easily figure out what you’re going to get paid for an order by looking at the number of items in it. In 2018, they change that to a black-box algorithm. At one point they took away the ability for customers to tip. We had to fight to get that back, you know, they stole our tips. They used our tips to subsidize pay, they had to apologize publicly and pay us back tips. So there have been all sorts of issues with tips and pay and commission. So in addition to having batches only contain one order, or if more than one order, have them be fairly priced. we would like them to reintroduce item commission. 

We’d also like them to stop punishing shoppers for issues that are out of their control. So this could look like a lot of different things during COVID-19. We were having, you know a lot of markdowns because things weren’t available in the store, or because people wanted three of something and the limit was one. So there were issues there with things not being delivered on time, and shoppers would be penalized for that. And then, you know, the thing that’s most out of our control is that not all customers are honest. We like to think that most of them are. So all these things together can really have an impact on ratings. Instacart keeps track of the last hundred orders that you shop. So the way that it is right now if you have a perfect five star rating, you get to see the best orders that they’re offering. When I had a 4.98 I was seeing the best offers. I shopped a few orders and didn’t get any ratings. So some of my five stars fell off which gave weight to the four star I have. And that brought me down to a 4.97 and I didn’t see any good orders. Now it could take weeks for somebody to get their ratings back up where it needs to be and it’s really unfair to the independent contractors. 

The fourth demand is that we’re looking for a clear occupational death benefit. The contract says that they may pay death benefits. Just like they said that they may pay for COVID. And it’s still not really clear what they mean by that they may pay occupational death benefits. We’d like them to be guaranteed, We’d like them to be accessible. We’d like to know how they’re accessible, and we’d like them to be comparable to properly classified employees. 

And then the final demand is that they return the default tip to 10%. Currently, it’s 5%. So if a customer tips 10%, or 20%, the next time they go into order, the default tip should be set to that higher percent. And Instacart removed it at one point and replaced it with a service fee that didn’t go to the shoppers but went to Instacart. We had to fight to get them to reinstate it. But when they did, they reinstated it at 5% instead of 10%. The other 5% remains a service fee for Instacart. In some areas that 5% is closer to 8%. And then in other markets for delivery orders that service fee is as much as 15%. And that’s on top of the item markups. You know, when the default tip is set to 5%, people tend to think that that’s the fair amount, the customary amount to tip for this kind of a service. 

All jobs deserve a living wage. If you can’t afford to pay the people who make it happen for you a living wage, then you don’t deserve to be in business.

Right now we’re getting the short end of the stick while Instacart makes money and it’s money that should be in our pockets right now. We’ll just keep getting louder and louder because we’ve got nothing to lose.

Errol: So how can folks support you? 

Robin: So we successfully registered to be a nonprofit. We have a website, it’s Gig Workers Collective.org. You can donate there, you can provide your information to get connected with us and be more aware of what we’re doing and how we’re organizing. You know, we’ve done a boycott, and we’ve done a protest, and we’ve done a walk off, we’ve asked customers to delete the app. We’re not just going to go away until things get better. So delete Instacart, do the curbside pickup, and tip when you can.

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