Sharing economy gets wake-up call with Uber court ruling

Silicon Valley has created a new breed of American worker: neither employee nor contractor, indispensable to the company but free to work as much or as little as they please – with no real boss.

Together, companies including Uber, Airbnb, TaskRabbit and GrubHub make up the so-called sharing economy, a burgeoning marketplace of digital platforms connecting freelance providers with customers wanting a ride, a place to stay, random errands or grocery delivery.

As the companies proliferate, government regulators are scrambling to rein them in. City and state officials are pushing to protect workers’ rights while startups – insistent that they are merely providing the technology for a network of independent workers – want to be left alone.

The solution, labor and tech watchers say, may have to be a compromise: a new class of workers, protected by laws that take into account the emerging business model. Some advocate a new category of worker – the “dependent contractor,” technically self-employed but reliant on income funneled through a third party.

“Our legal system is set up so we’re either one or the other – an employee with a whole lot of rights, or an independent contractor with almost no rights whatsoever,” said Janelle Orsi, executive director of the Sustainable Economies Law Center. “We now have a whole sector of workers who are independent in the way that they choose to work. Yet, they are dependent on a singular platform for their livelihood.”

Uber and Lyft drivers assume most of the risk, using their own vehicles and working without benefits. But they also love the flexibility of working whenever they want – or not.

“That’s where the entrepreneurial spirit comes in,” said Kindred Sheppard, 48, who drives his Toyota Prius around San Francisco. “I don’t need Uber to tell me when to take days off. No one’s forcing you to drive – if you don’t want to drive, get a job.”

The startups are nervous, especially after a California Labor Commission ruling this week that declared one Uber driver an employee of the company rather than an independent contractor.

Restrictive new rules could cripple many on-demand startups. Weaker businesses may struggle and be swallowed up by their stronger rivals.

“Their economic structure, their financial structure, their corporate structure, how they organize their business model is all built upon assumptions that they’re not employing people directly,” said Stephen J. Hirschfeld, of the Employment Law Alliance. “If the courts come down and determine that you have to treat them as employees, these companies are probably going to have to reinvent themselves.”