In the last week alone, two companies in the on-demand and just-in-time delivery economies reclassified their workers as "employees" and gave up the "independent contractor" model that has generated litigation and protest from workers. At the same time, industry behemoths Uber, Lyft, and Amazon are spending millions to defend their questionable practices. How these arrangements shake out will have huge implications for workers and their families, employers who play by the rules, and our public tax and insurance coffers.
The pivotal question of employee-or-not is heating up, and the stakes are high. In the last week:
- Honor, a Hollywood-backed home care company using an online platform for hiring and placement, which opened to much fanfare and labeled its workers independent contractors, reversed course and announced it will instead treat its home care workers as employees.
- 3PD Inc., a last-mile delivery company based in Georgia, settled a class action case brought by its Chicago-based drivers, called independent contractors, who deliver from Macy's and other big-name retail warehouses to customers' homes. 3PD will pay $2.8 million and reclassify its drivers as employees.
- Lyft, Inc. agreed to pay $12.5 million in a settlement to drivers seeking protections from unlawful terminations, but will not reclassify its drivers as employees, for now.
- Uber continues to classify its drivers as independent businesses, spending huge sums on high-powered litigators and lobbyists to defend this questionable practice, even as Morgan Stanley warned investors of the risks of its model.
- Amazon was sued by drivers seeking unpaid wages from one of its last-mile just-in-time delivery companies. Amazon persists in calling these drivers independent contractors.
These companies' ability to provide the highly profitable services they promise depends entirely on the low-wage workers they engage. None of these workers are really in business for themselves, which is what it means to be an independent contractor. But Uber, Lyft, Amazon, and other behemoths like FedEx set up their businesses on this model and defend it with billions in public relations, litigation, lobbying, and settlement payouts to workers.
FedEx has paid out millions over the years to its drivers and to states investigating its so-called independent contractor arrangements, but hasn't changed its drivers' classifications. Amazon's Prime Now drivers sued last fall too, claiming they are really employees, and those suits are pending, racking up attorneys' fees and lost goodwill that Amazon is willing to swallow.
These companies pay these relatively paltry amounts to preserve the lucrative non-employee models that permit them to evade payroll taxes, workers compensation and unemployment insurance payments, and minimum wage and overtime laws. By calling workers independent contractors, they can save up to 30 percent of payroll costs. And that doesn't count the health and safety, anti-harassment and discrimination, and other workplace protections the schemes allow companies to evade, even as other businesses play by the rules and provide these protections to their employees.
Companies like UPS have long recognized that the men and women who drive its delivery trucks are employees and deserve to be treated as such. That's not just the right thing to do; it's the law. Now, more companies like Honor, Shyp, and Instacart are joining other firms in the on-demand economy, such as Hello Alfred and Managed by Q, in acknowledging that nothing about online platforms for hiring workers and distributing assignments permits undermining the employment relationship, robbing workers of basic protections, or giving on-demand companies a free pass when it comes to following the law.
We all would be better off if all companies, regardless of their size or the "economy" in which they operate, treated their workers responsibly, fairly, and legally, rather than funneling the profits workers create into forging special carve-outs for cheats that don't want to play by the rules.
NELP is calling attention to independent contractor abuses in the on-demand economy, promoting ways to better protect outsourced workers, generally and in abuse-prone sectors like the temp and home care industries.