Background:

Ethical Dilemma:  Are On-Demand Workers Really Employees? The ascendancy of Uber and Lyft was both rapid and widespread. Over the course of a few years, these rideshare companies leveraged the ready availability of mobile technology to create a new type of service that was faster and more convenient for many passengers than calling a taxi dispatch office. Rideshare systems link people in search of rides with people who sign up to drive their own cars. In fact, the drivers registered with rideshare firms not only use their own cars; they also pay all maintenance and insurance costs. There are no time cards, supervisors, career paths, or health insurance arrangements, because the companies have not considered the drivers as employees at all. Instead, they are independent contractors, members of the “sharing economy” that links them to online work portals for one-off interactions with customers. Other organizations, such as the delivery service Postmates, Amazon’s Mechanical Turk, and Handy Cleaning Service, have adopted the same model. A series of ongoing lawsuits asks whether these companies are actually treating contractors like employees. Legally, an employer cannot formally evaluate the performance or direct the work activities of an independent contractor. However, there are some ways in which these companies do exercise control. Uber, for example, has documented cases in which its drivers were “deactivated” because their online customer reviews were too low. Hours are only somewhat flexible because drivers have been told they will be suspended if they accept fewer than 90 percent of the rides sent to them. Evaluating work quality and hours worked both fall on the side of employment rather than independent contractor relationships. What is at stake? Rules and regulations that cover employees go beyond protections offered to independent contractors. For example, independent contractors do not receive the workers’ compensation, overtime wage premiums, health care, paid time off, or mandatory minimum wage coverage that extends to employees. Employers also bear significant tax and legal liabilities for employees that don’t apply to their hiring of independent contractors. Some advocates argue that drivers may have much to gain if they can be classified as employees, because it will bring stability and predictability to their work. The social and ethical consequences of the sharing economy are only beginning to be considered. Organizations that have been built on the sharing economy will all have to face questions about how their policies affect the willingness of the workers they rely on.

Question:

What would you advise HR departments to do about the ethical dilemma organizations like Uber and Lyft face and how might changes in the legal employment status of drivers affect companies like Uber and Lyft? Do you think these organizations would be able to survive in relation to their competition of, say, traditional taxi companies and to what degree do you think employers have a responsibility to these independent contractors as well as what changes might these organizations consider regardless of legal requirements, if you feel there is an ethical obligation that remains unfulfilled?