1099ers are still 1099ers
Why the Uber ruling isn’t a crisis for the On-Demand Economy yet.
Following the Uber ruling that made headlines last week, questions came flying at me from around the horn. This came from a good friend.
“Are you following this Uber situation?”
If you’re not familiar, California’s Labor Commission recently ruled that an Uber driver should have been classified as an employee of the popular car service giant rather than as a 1099 contractor. This ruling will require Uber to pay said driver a sum to the tune of $4,152.20 in compensation.
Short answer: Yes, I’ve been following the Uber situation. It’s literally my job to. Of course, she knows that which is why she asked in the first place. She got to the real question next:
Contractors — > Employees?! What does this mean for the freelancer drivers? i.e. those who drive for all of the different services?!
I’m keeping an eye on that too. We should note the most important piece of the judgement has nothing to do with the money. The conversation is really about the potential implications for the ODE (On-Demand Economy) as a whole. Uber, Handy, OrderUp, TaskRabbit, Caviar, and others all generally depend on the 1099 economy to power the various tech platforms that allow us to have food delivered, laundry done, or our sink fixed by someone— all at the push of a smartphone button. Their models are based on the money saved and lack of overhead by using contract workers rather than hiring employees and having to foot the bill associated with a massive employee workforce (benefits like social security and medicare are pricey, to say the least). If these 1099ers have to be reclassified as employees, the bottom line changes for all of these companies.
All that said, we can speculate all we want about if/how this will affect the ODE, but we don’t know anything yet.
Speculation is fun, but we have no clue how this thing plays out. For the time being, this is an isolated ruling that affects one the driver who brought the suit in California — Barbara Ann Berwick — exclusively. There’s really no precedent set by the ruling. Not yet at least. And with Uber appealing this initial ruling, it’s safe to say we’ll be in at least a year or two of appeals before there’s precedent for anyone else. Hopefully by then, some policy will have caught up with the market and we’ll have a better idea on lay of the land and possibly even a hybrid classification — a 1099-U(ber) distinction perhaps — that solves the problem to some extent.
The underlying issue in all of this debate is that the landscape of the workforce has shifted significantly in recent years, but the way we classify our workforce hasn’t kept up. (Surprise — policy is light years behind tech enabled opportunities!) In this case, 1099 current law doesn’t account for the relationship Uber (and similar companies) has with it’s drivers. The way contractors interact with their clients is different than it was when the laws were put in place years ago. As we see the On-Demand Economy grow into a larger segment of the overall freelance economy, we need to push for substantial change in how Uncle Sam views the people making livings by doing small gigs like driving for Uber or on any of the other platforms available these days.
TL;DR — The ruling doesn’t mean anything yet, but it definitely makes things interesting for all parties involved. We need to think long and hard about employment classification in our country and this ruling is going to expedite the conversation, hopefully for the better. In the meantime, we’ll keep an eye out for updates from Uber over the next couple years, but for now 1099ers are still 1099ers. Don’t expect that to change over night.
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