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Gig Economy Business Model Dealt a Blow in California Ruling (nytimes.com) 258

In a ruling with potentially sweeping consequences for the so-called gig economy, the California Supreme Court on Monday made it much more difficult for companies to classify workers as independent contractors rather than employees. The New York Times: The decision could eventually require companies like Uber, many of which are based in California, to follow minimum-wage and overtime laws and to pay workers' compensation and unemployment insurance and payroll taxes, potentially upending their business models. Industry executives have estimated that classifying drivers and other gig workers as employees tends to cost 20 to 30 percent more than classifying them as contractors. It also brings benefits that can offset these costs, though, like the ability to control schedules and the manner of work. "It's a massive thing -- definitely a game-changer that will force everyone to take a fresh look at the whole issue," said Richard Meneghello, a co-chairman of the gig-economy practice group at the management-side law firm Fisher Phillips. The court essentially scrapped the existing test for determining employee status, which was used to assess the degree of control over the worker. That test hinged on roughly 10 factors, like the amount of supervision and whether the worker could be fired without cause.
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Gig Economy Business Model Dealt a Blow in California Ruling

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  • by greenwow ( 3635575 ) on Tuesday May 01, 2018 @06:46PM (#56538564)

    for a bad job. It's better to not have a job than one that doesn't pay a living wage.

    • for a bad job. It's better to not have a job than one that doesn't pay a living wage.

      Queue complaints about the federal minimum wage not being a "living wage" in California in 3.... 2.... 1....

      • Re: (Score:3, Informative)

        by Anonymous Coward

        potentially upending their business models

        Good.

        A company's business model should not be based on exploiting people who are desperate for work.

        Pay decent wages and benefits, or, GTFO.

        • by thesupraman ( 179040 ) on Tuesday May 01, 2018 @07:19PM (#56538714)

          I am just wondering what business model that employs any significant number of people you think is NOT based on exploiting people desperate for work?
          Of course, there is desperate and there is desperate, but that is pretty much why it is called work, not fun, and its not easy to be paid to have fun.

          Of course the translation of what you are saying is actually:
          'I am set up enough to have a solid job with prospects, and I see no reason why people who are not should have a job, because they cannot earn enough to make it worthwhile in my view'
          And that is pretty god damn bad.

          • I am just wondering what business model that employs any significant number of people you think is NOT based on exploiting people desperate for work?

            One where you pay employees well, treat them well beyond pay, offer opportunities for advancement, etc.?

            For example, In-N-Out.

          • by sjames ( 1099 )

            Is it really that hard to imagine someone who WANTS to work in order to have more, but by virtue of already having their basic needs met is not *DESPERATE* for work?

          • 'I am set up enough to have a solid job with prospects, and I see no reason why people who are not should have a job, because they cannot earn enough to make it worthwhile in my view'

            There are a couple of issues. The first is the difference in negotiating power. In a high-skill or high-demand occupation, there is a vaguely level playing field between employer and employee. If the employer doesn't treat the employee well, then the employee can leave and continue employment elsewhere (and the departure is likely to financially hurt the employer). In a low-skill occupation, there is a huge imbalance. The employee is replaceable, but probably needs the job to be able to afford to live.

        • Re: (Score:2, Insightful)

          by Anonymous Coward

          this is actually cheaper and better for Uber,
          - first they can forbid you to work for Lyft (anti-competitive clause) even in your off-time (you can still work for McDonalds in off-time i guess)
          - second they can give you minimum wage and not a cent more (now some drivers get less but some much more)
          - third they can employ you for maximum of 30 hours per week so you don't have any benefits like big grocery stores already do, in other words additional benefits costs are significantly red

        • Touché.... I should know better.. My bad..

          Homonyms, Eye due knot no witch two right off ten.

          • Since this is the pedants thread, I think you mean homophones. As in 'I'm not a homophone, some of my best friends sound the same!'
      • Re: (Score:3, Informative)

        by taustin ( 171655 )

        When someone working 40 hours a week at the federal minimum wage has a gross income (not take-home) that is less than the rent on the average studio apartment in LA, it's not a living wage.

        On the other hand, California has its own minimum wage, which is quite bit higher (and still nowhere near a living wage), so your whining is fairly stupid anyway.

        • by AmiMoJo ( 196126 )

          Mandating a location based living wage would have the additional benefit of encouraging companies to set up in cheaper areas, instead of all clustering in expensive ones.

          • Would it, though? Businesses go where the markets are. Uber might want to move where labor is cheaper, but the vast majority of their customers are - and by extension, their drivers need to be - in expensive urban areas.

            Companies also need to have employees with sufficient skill to do the job. For many (if not most) companies, those people don't exist in sufficient numbers in cheaper places, and their existing employees have no interest in moving.
      • Well, it isn't. What would be a fair "livable" minimum wage nationwide - something that would cover San Francisco, CA, and McAllen, TX? SF is 3.4 times more expensive [bestplaces.net] than McAllen... Rather than have a Federal minimum wage, it should be a local - or at highest, State - kind of thing.
        • I'm all for states rights... We shouldn't have a federal minimum wage if the states can have their own. In fact, a LOT of federal rules and regulations are unnecessary for the same reason. The states should be left to make their own rules about most things anyway.

          (Shush though, you might sound like Trump if you keep this perspective up very long.)

          • We are in 100% agreement - on all points. if a law or regulation doesn't make sense at a Federal level - then it shouldn't exist at a Federal level.
    • "right to work" is just talking point brainwashing. It's all about a right to negotiate collectively.

      • There's nothing stopping you from collectively negotiating in "right to work" states. You just can't force those who wish to negotiate on their own to participate in your group.

    • Care to give ANY reason for that?

      When I worked my way through university, I worked two jobs. Neither of which paid me a 'living wage', and without which I would have left carrying one hell of a lot more debt.

      Is it your position that it is better to live of the state (which of course means other people who can be bothered working) than work?
      Is it your position that people who dont have enough skills to get 'a living wage' dont deserve a job?

      Of course the Gig economy is also a festering pile of crap, however

      • Enforced? Get a state to do something that isn't bought and paid for by lobbyists and campaign contributions?

        C'mon.

        Organize a union? With Right To Work legislation? Nope. Sever employees that try to organize? Ask the NLRB how many complaints are on file.

        This is about: Need To Eat. This is about not subsidizing businesses. This is about not having businesses pay so low that people have to use subsidies to live-- eat, get housing, medical care, and transportation to just, yes, live.

        Some of them don't have you

      • by sjames ( 1099 )

        Is it your contention that employers would rather fire everyone and rage quit than raise their prices a bit and pay a living wage? Or do you believe that labor is so cheap that employers are in the habit of hiring more people than they actually need to run their business?

        Because otherwise, if the minimum wage increases, employers will pay it so they can continue to make money. Since their competition will also have to pay it, they won't be disadvantaged. Then, we the taxpayers won't have to subsidize their

    • Re: (Score:3, Insightful)

      by Jodka ( 520060 )

      It's better to not have a job than one that doesn't pay a living wage.

      That is your opinion. In the opinion of some who seek a supplementary income, a job with is lesser rate of pay is acceptable.

      A student who lives at home, a retiree with a pension, a housewife with free time while her kids are in the school each want to earn some additional cash in their free time. You demand that they be denied the right to some jobs which they would voluntarily accept.

      This is why conservatives and libertarians regard leftism as inherently fascist; Leftists such as yourself seek the power

      • One could easily twist all that logic right back atcha, bro.

        One could say, you are forcing everyone into this kind of job market where no one pays a living wage, not even for full time employment. We are in fact, required, by your thinking, to hold several 'little jobs', juggle their schedules within the confines of our own lives, so your wife can take up part-time babysitting at a wage no one could survive on?

        You see what's happening, your personal freedom claim is affecting everyone around you. When you

        • One could say, you are forcing everyone into this kind of job market where no one pays a living wage

          Freedom is force, got it. Is war also peace?

      • by houghi ( 78078 )

        A student living at home? Well, perhaps if his education was affordable, his parents could give him an allowance.
        And there is a LOT of difference between making a few bucks for a few hours and working full time to just be able to buy ramen to be able not to starve.

    • for a bad job. It's better to not have a job than one that doesn't pay a living wage.

      My teenage son strongly disagrees and so do the two in college.

    • They brought this on themselves by using investor money to lowball prices while allowing airports and other entities to take a 40% cut of the fares. I know in LA that drivers make almost no money unless they get a 1-2 hour trip from LAX. They lose money if they have to take someone downtown from the air port. I question why people are agreeing to work for that rate. They literally get $2-3 for waiting in line to drive someone downtown from LAX. I tipped my last driver $150 for driving me from Pasadena. O

  • What they should do (Score:5, Informative)

    by gurps_npc ( 621217 ) on Tuesday May 01, 2018 @06:53PM (#56538610) Homepage

    Here is what they should do:

    You are an employee if ANY of the following are true:
    * They have any control over your clothing, besides requiring safety equipment
    * They control your hours, rather than give deadlines.
    * They can require you to do things using their method, rather than accepting any method.
    * They make any attempt to find out if you are working for other people, let alone prevent you from doing this.
    * They decide which sub-contractor does the work, rather than the head contractor.

    • You missed the most important one (and the one this case hinges on) - is what you do core to the business that's hiring you.

      • by aaarrrgggh ( 9205 ) on Tuesday May 01, 2018 @08:32PM (#56538998)

        This is one that I think is actually a challenge. Granted, the ruling only applies to CA DOL wage orders (effectively minimum wage plus a few associated items), but for my business we hire two very experienced mostly-retired engineers (72 and 77 years old). One of them goes away for a month or so at a time, and the other (older) one is easing into retirement. Both want flexibility, and it does provide each with a tax benefit. Neither wants any of our benefits, nor the pay penalty associated with them.

        So, should they be part-time employees? The primary business part of the equation means yes if they work for us, but no if they work directly for one of our clients. This seems arbitrary.

        A third person we work with just "retired," and does work for 5-6 other companies and likely well over 50 hours per week. Should he pay social security tax based on the base salary at each employer, or in aggregate as his own business?

        It doesn't really impact me as an employer-- it is barely $200k of pay per year, and paying an extra $15k in payroll taxes isn't a big deal, but the contractor arrangement is what makes their expertise available in the first place.

        • A third person we work with just "retired," and does work for 5-6 other companies and likely well over 50 hours per week. Should he pay social security tax based on the base salary at each employer, or in aggregate as his own business?

          Umm.. aggregate. It's always aggregate. If he works for 6 jobs for two months each, and makes 200k at each of them, he only pays the limit for social security once. 6 jobs instead of contractor status would mean you'd have to get cash back instead of pay the money upfront.

          b

          • You are right; it is just the employers that end up paying additional payroll tax that would otherwise be exempted.

        • by AmiMoJo ( 196126 )

          It's yet another situation where trying to enumerate all the things that identify something is doomed to failure and will always be full of loopholes.

          The only way to do it is to set out the general principals and let courts decide the rest, making adjustments to the principals as required when the decisions are not as intended.

          • Please, no! Compliance is cheaper than litigating the vague crap. Even things that are "clearly" spelled out in wage orders still have a lot of vague areas that are subject to interpretation by people who are programmed with "Employer Bad, Employee Honest and Abused."

            We now have to have a fscking time clock for engineers without their EIT (non-exempt), which is completely stupid but needed for compliance. But at least the requirement is clear...

      • when I hire somebody to fix my fence that's a contractor. When I hire somebody to fix fences for my fence repair business that's an employee.
    • they force you to rent / buy there tools! as well. and when you are an employee there are very limited things with that.

    • by Tom ( 822 )

      basically, "independent" should mean exactly that and nothing else.

      That is basically what law makers have been trying to do for decades, except that they are also trying to not step on anyones feet, not upset business, consider the next elections, keep in mind their campaign contributors stakes in the whole thing, manage public relations and avoid tricky interview questions, negotiate with their fellow lawmakers over compromises and not forget about the impact on the small business of their wife or best fri

  • by EndlessNameless ( 673105 ) on Tuesday May 01, 2018 @07:00PM (#56538640)

    Half of the gig economy is companies trying to cheap out on traditional worker benefits. Uber is one of them, and they can suck it up.

    A worker-centric gig economy isn't managed by the platform: the workers should decide whether/how they deliver the goods or services, have some meaningful control over prices/profits, and be able to accrue a meaningful reputation.

    If the gig platform forces its workers to behave 90% like employees, then yeah, round that number up and call them employees.

    • Half of the gig economy is companies trying to cheap out on traditional worker benefits

      Half? I was going to object that it seems like that's 100%, but then I remembered the other half is avoiding taxi/hotel/[whatever industry] regulations. It's not like Hyatt couldn't have (technically) converted apartments to rentals, it's that they have to obey the law (well, not flout it that blatantly.)

      • or having proper commercial drivers insurance. Modern and very safe cars mean We've yet to see a real test of what happens when there's a multi-million dollar accident caused by an Uber driver. But it's only a matter of time.
    • Uber sets all prices. e.g. it decides how much the employees get paid. Also, Uber will fire you if you don't show up to work. e.g. Uber often has unprofitable rides. Uber won't tell you what the ride is until you pick the person up and if you try to guess and turn down too many rides (or if you turn rides away after you find out they're not profitable) they'll fire you (e.g. ban you from the app). They control what you earn and when you earn it.
    • Re: (Score:3, Insightful)

      by jwymanm ( 627857 )
      Screw your company benefits. They are what corporations use to keep pay down and explain "ohh but your benefits." You know what is a better benefit than 401k or cheaper dental? Being able to ACTUALLY FUCKING WORK. And only work when you work. And keeping costs down. There is room for both kinds of enterprises, just ask Fedex and UPS. Go screw yourselves with trying to regulate people out of work. I personally still want to be able to use Uber and pay lower rates while providing a method for random people to
    • this one gig economy place wanted an cut of parts cost + laber costs and they put the parts cost down as income on your 1099

    • by mjwx ( 966435 )

      Half of the gig economy is companies trying to cheap out on traditional worker benefits. Uber is one of them, and they can suck it up.

      A worker-centric gig economy isn't managed by the platform: the workers should decide whether/how they deliver the goods or services, have some meaningful control over prices/profits, and be able to accrue a meaningful reputation.

      If the gig platform forces its workers to behave 90% like employees, then yeah, round that number up and call them employees.

      Half?

      I think that is a very conservative estimate. The entire "gig" economy is about moving costs from the employer onto the employee, traditionally with contracting you were paid a huge premium over the full time equivalent salary for giving up your rights (paid holidays, pensions and what not) and job security (a contractor can be shown the door at any time, for any reason). The "gig" economy is trying to make everyone a contractor without giving them the benefits of a contractor.

      But the "gig" econo

  • by pgn674 ( 995941 ) on Tuesday May 01, 2018 @07:26PM (#56538746) Homepage
    Will this change also affect contractors that were independent contractors long before this new gig economy trend? For example, if a family owned rug store offers to tell rug installing contractors about sales done that day (with the approval of the customer), are those contractors now under threat of becoming employees? What if the store offers to arrange the timing of the appointment for installation?
    • by Actually, I do RTFA ( 1058596 ) on Tuesday May 01, 2018 @08:06PM (#56538858)

      Will this change also affect contractors that were independent contractors long before this new gig economy trend?

      Maybe!

      if a family owned rug store ... are those contractors now under threat of becoming employees

      Nope! The reason Uber's drivers are now considered employees is because they are performing the "usual course of business" of Uber. The Rug Store sells rugs. Now, if they sold specialty rugs that had to be installed and where the vast majority of customers would buy the rug if and only if the rugs were installed by the Rug Store or their contractors, such that "buying a rug" was synonymous with "buying an installed rug" then they might have to W2 the installers. If it wasn't expected that the rug purchase and the rug installation were supplied by the same company, then no.

      What if the store offers to arrange the timing of the appointment for installation?

      That's the same "control over contractor's actions/methods" test that existed in both standards. So, while there is clearly some line of control, it should remain the same.

    • Re: (Score:2, Insightful)

      by Anonymous Coward

      If the only jobs they ever get are from the rug store, and all payment is processed by the rug store, then I would argue that indeed, the installers are employed by the rug store.

      I think the real issue is that all of these companies started out with some decent ideas, stuff like "I'm driving from my town into the city 40 miles away, anyone else going that way need a ride?" and "I'm going out of town for a few weeks, why not rent out my place?" to people turning into taxi drivers and buying property only to

  • It's as if Silicon Valley created a time machine that takes workers back to the (lack of) labour laws in the USA in the mid 19th century. At least that's what I understand from the ideas espoused as "the gig economy."
    • It's as if Silicon Valley created a time machine that takes workers back to the (lack of) labour laws in the USA in the mid 19th century. At least that's what I understand from the ideas espoused as "the gig economy."

      Some of it actually is going back to when you could have a decent chance of surviving as an independent worker.

      I'd set one of the basic tests as this: If the standard deal is I can list on their app that "I will frob your widgets for $20" and they deal with getting me paid for a cut of whatever my fee for frobbing widgets is, I'm a contractor. If they pay me $10 an hour for frobbing widgets on demand, I'm an employee even if I get to pick my hours.

  • by duke_cheetah2003 ( 862933 ) on Tuesday May 01, 2018 @10:03PM (#56539370) Homepage

    The basic crux of the problem here is part-time employment. It's been abused and misused to an extreme that is just unimaginable.

    What used to be a rare sight, a fluke, a unicorn in the overall job market, the part-time job. The paper-boy route for the aspiring teenager. Or the babysitting gig for the stay-at-home mom.

    Someone took this and ran into hell with in it and dragged us all along for a painful experience that we're currently living through. Part-time was never supposed to be a career choice. It was never supposed to be the only thing you could find. It was a stop-gap, a place for the teenager or young adult. Now it's become THE JOB MARKET. Fulltime employment is hard to come by now.

    Why? Well, because part-time employees are cheaper. You don't have to pay benefits, or retirement plans for part-time employees. It's supposed to be a temporary job after all, not your career. But now, it is. The part-time job has metamorphosed into the mechanism by which the employer is abusing the employee. When they realized the gold-mine of cheap labor they had with the part-time employee, they did any good business person would do. They got rid of the expensive full-time employees and just hired a few more part-timers to fill the gaps.

    Now employers are taking it a step further. Our employees, they're not employees at all. At least on paper. We pay them as contractors and as such, we're not subject to ANY employer/employee rules at all. Even cheaper. Nice. Another win for the top. Yay?

    The race to the bottom is making no winners except for those at the very top. And you jerkoffs who come in here and scream personal rights about part-time or 'gig employment', you can just go take a flying leap. Your kind landed us in this awful situation, and I don't think you have any right to say anything anymore. The part-time job needs to be restored to a temporary thing, not the new normal. An awful lot of people died, spent time in jails, or detention camps, to win the rights we have as employees and I think it's pretty fucking selfish for some of our population to sell that out for their own selfish reasons.

  • This is terrible (Score:4, Informative)

    by FeelGood314 ( 2516288 ) on Tuesday May 01, 2018 @10:10PM (#56539406)
    I do contract work for many companies and my work is core to what they do. I set my own hours, use almost all my own equipment, work in my own office, subcontract out some QA and repairs, I even bill in 15 minute intervals - I don't see how I'm different from an Uber driver. The existing test of control made perfect sense.

    Question - will I now have to be an employee of the American companies I'm currently doing contract work for? or just companies in California?
    • Not the same. Your statement "I do contract work for many companies..." is the *primary* difference between a contractor and employee. A contractor typically has multiple clients, either back-to-back or at the same time. A contractor is running his own business, and doing so requires a steady stream of customers. A contractor who works for one client for an extended period of time is in danger of being classified as an employee. You're different than an Uber driver because an Uber driver works for only one

    • by havana9 ( 101033 )
      You are a clear case of a self-employed worker. In EU you'll have a VAT registration number.
      In Italy here is the problem of the fake VAT registrations, when one self-employed worker has only one customer, and when tax inspector find it both the worker and the customer are fined for tax evasion. In Italy there are some exception of the rules. Taxi drivers and limousine service drivers have VAT registrations despite normally having only one dispatcher service. Baby sitters, cleaners, and caregivers are consi
  • "business model" (Score:4, Insightful)

    by Tom ( 822 ) on Wednesday May 02, 2018 @02:26AM (#56540094) Homepage Journal

    potentially upending their business models

    Their "business model", if you want to call it that, was precisely to circumvent those regulations. It's a bit like basing a business on not paying taxes and then crying when the IRS comes knocking.

    Really? Your business doesn't function anymore when you have to run it like a proper business? Maybe there's a problem with your business model in such case?

  • by ooloorie ( 4394035 ) on Wednesday May 02, 2018 @03:49AM (#56540256)

    The choice California gives you is either to be an indentured servant to both corporations and the state, or to become a government-dependent welfare recipient. They control you either way.

    They hate independent contractors and the gig economy because it allows people to get away from their stifling regulations and taxation.

  • by RogueWarrior65 ( 678876 ) on Wednesday May 02, 2018 @11:11AM (#56541634)

    It's the DPRC (Democrat People's Republic of California) bitching that they can no longer control everyone's money and dole it out as they see fit.

  • This isn't just about Uber, etc. This pretty much puts a bullet in contract engineering/programming in CA. Creating soft/hardware is part of a tech company's regular business, so this judgement says that anybody who participates in that would automatically be an employee even if it's a brief or specialized gig.

    This just makes 3rd parties richer, namely the gov't and the "consulting companies" that more & more companies are using as intermediaries. "Consulting companies" is in quotes because there are co

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