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After Uber ruling, pressure mounts on companies to reclassify contractors

John Ribeiro | July 2, 2015
The pressure on app-based companies to reclassify their contractors as employees is picking up, with more of them getting sued this week.

The pressure on app-based companies to reclassify their contractors as employees is picking up, with more of them getting sued this week.

The California Labor Commission ruled last month that a driver of Uber Technologies was an employee and not a contractor, when driving for the company, and was hence entitled to reimbursement on certain expenses. The ride-hailing company said it had appealed the decision.

Postmates, Shyp, and Washio were sued by workers this week, arguing that they should be classified as employees and not independent contractors, according to Shannon Liss-Riordan who is an attorney in these cases. The actions against Shyp and Postmates were filed as "class action arbitration" demands in arbitration courts.

The suits all aim to be class actions, according to Liss-Riordan, who has been involved in separate lawsuits against Uber, Lyft and food delivery service Caviar.

On Wednesday, Shyp, an app-based shipping service that was targeted in one of the arbitration cases, said its couriers would now be considered as employees. The company will pay them workers' compensation and vehicle expenses, in addition to their unemployment, Social Security, and Medicare taxes, as it does for its satellite drivers and warehouse employees. Depending on hours worked, Shyp said it will also provide benefits like health care.

"This is an operational decision based on our interest in owning the entire, end-to-end Shyp experience," wrote the company's CEO Kevin Gibbon in a blog post. "It is not in response to recent lawsuits against other technology companies."

A company spokesman said the arbitration demand was received only after the company's Wednesday announcement, and that Shyp's decision to make the transition has been in the works for over a year. He did not comment on the arbitration demand.

"Shyp says it made the decision before it saw the lawsuit," wrote Liss-Riordan in an email. "But I think the attention this issue has gotten recently of companies misclassifying workers as independent contractors in order to save on labor costs has prompted more companies to think about backing away from this business model."

Instacart, an on-demand groceries delivery service, said last month it would give some of its contractors the option to be part-time employees.

The on-demand companies that connect users to services through apps have typically argued that reclassification as employees would mean that people would lose the flexibility that they get from working for these companies. Reclassification could also drive costs up for these companies, with an impact on their business and pricing model.

"It's important to remember that the number one reason drivers choose to use Uber is because they have complete flexibility and control," Uber said, for example, after the ruling by the California Labor Commission. "The majority of them can and do choose to earn their living from multiple sources, including other ride sharing companies."

 

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