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The Uber Economy Needs a New Category of Worker
An anonymous reader writes: Uber headlines a new group of companies building out the so-called "sharing economy," in which people can easily hop in and out of employment modes. Somebody can suddenly start hiring out his driving services to others, taking breaks and setting hours as he prefers, and then just as quickly stop participating forever. An article at NY Magazine says we need to define a new class of worker to fit Uber drivers and similar at-will employees. "According to American employment law, though, our driver must be one or the other, a 1099 contractor or a W2 employee. And the gulf between the two in terms of mandated government protections and benefits is as wide as the line between them is blurry. As such, thousands of on-demand-economy employees and scads of lawyers are at war in court to determine what camp our average driver should fall into. ... It might be time for a new standard that splits the difference between the two — a 'dependent contractor,' as some labor experts call it — that would be better for businesses, consumers, and all those workers themselves."
Look, I get that these guys are trying to do something new. And for that I applaud them and their efforts. However until there are new laws supporting the sort of things they're trying to do they need to follow the current laws especially regarding employment.
Just because you came up with a new way to run things doesn't mean that the rest of it like it or agree that's the way the world should work. Especially when it seems like all you're doing is trying to dodge current legal frameworks without any good reason for doing so.
People who do small side jobs (including myself occasionally) often aim for cash payment to avoid government reporting (especially so-called "self-employment" taxes); it's been called "working under the table" forever. Or if you do regular contract work (which I also do), you get an LLC, go the 1099 route and bury as many expenses you can against the LLC to avoid reporting much of a profit (because profit=taxes). Both routes are common and well-accepted.
>> dependent contractor
Please [diety], no. We just got done with this fight. If you define the terms of success and let me pick how it's done within certain standards of quality, I'm a contractor, and I'll take cash. If you ALSO want me to behave like an employee, controlling my hours, sitting through useless HR presentations, and acting like an agent of a corporation, then I'm an employee and I want the full benefit package. It's pretty black-and-white and has never really been an issue in the dozens of contracts I've been involved in.
I agree...why a 3rd category??
They are clearly doing contracting work, plain and simple...and a model of work I prefer!!!
I would, however, encourage them to incorporate themselves, which has a number of benefits.
If incorporated the relationship is clearly corp-to-corp which keeps the govt from fscking up the relationship trying to insist you should be a W2 employee.
Also, if you don't mind a little extra paperwork, make yourself a S-corp. This way, you only have to pay SS and medicare (the employment taxes) on a portion of your billing. For example, if you bill $100K. You pay yourself a W2 salary from your company that is reasonable, say maybe $30K. Now, you only have to pay SS/Medicare (employee and employer parts) on that $30K. the remaining $70K you only have to pay normal federal (and state if you live in a state tax state) after you write off all your expenses.
This savings can really add up.
Also, most of the insurance policies out today after obamacare came out, will qualify for high deductible policies, which will allow you to open a HSA (Health Savings Account) into which you can sock up to about $3K pre-tax for your normal routine medical expenses (co-pays, meds, etc). And, you get to write off a LOT of expenses.
Sure it is a bit more paperwork, and you have to be an adult and learn how to manage money, save for tax payments, etc. But I find it is a MUCH better way to do things than the usual W2 set up...where you have to "earn vacation hours" (God I hated this), you work when you want to and are off when you want to....and if you do things right, you can not only have this independence, but you can also save a bit more of your hard earned money from Uncle Sam.
Light travels faster than sound. This is why some people appear bright until you hear them speak.........
Agreed. A "dependent contractor" is by definition an employee. We have several people that have moonlighted for us over the years. We generally considered them 1099s as they did not generally work in our office, use our supplies, or have responsibilities other than delivering a specific product, which would place them firmly in that category.
Reality is that more people need to be considered W2 employees because that is the easiest way to prevent abuses.
The "gotcha" with Uber is what happens when a driver is simultaneously driving for Lyft, Uber, and the Pizza Company? Has he achieved a nexus where he is independent?
My bias is really over the issue of exempt/non-exempt employees though. Labor laws for non-exempt employees are really hard for small businesses when you get beyond restaurant/retail and into the professional realm. (Would you like a coding session when you are in the zone broken up by a mandatory 15-minute break?)
The analogy is the actor's agent and the actor. "Find me some work, but I reserve the right not to take the part."
Pretending this is my office full of bitter coworkers..
And a lawyer and an accountant and an accounts manager and a salesperson and a...
The reason I'm an employee is so that I can do what I enjoy doing and let some other suit deal with giving people handjobs under the table or swing at each other's balls. Yeah, I know I'm not "in charge of my destiny" or whatever, but I can focus on developing the abilities that actually make me useful for something other than brown-nosing.
In California it was ruled that uber drivers are employees not contractor so their trying to find a way to not pay employee benefits
Because usually these people only have one person that they sell their services to, and that makes them employees, not contractors. Uber doesn't like treating them as employees, so it wants another box to put them in, and deny them the benefits of being an employee.
If you're getting punished for using your contractually guaranteed benefits, then you need to find a better employer and/or a lawyer.
1099 Contractors can't be controlled like a regular employee. You can't train them and you can't direct their behavior (such as work hours, etc) while working. Companies don't like this, as in some of these internet companies are pulling their 1099 employees in as W2 employees so they can control them better. What these finance guys want is a new category where they can control you like a W2 employee but don't have to give you benefits like a 1099. The employer gets the best of both worlds and the employee gets bent over and taken.
I'm sure the people suggesting this would like to see the minimum wage dropped to zero as well so they can make more cash exploiting people.
Incorporate in a state with lower taxes and fees. Delaware comes to mind as a popular location. Or the Cayman Islands.
Have gnu, will travel.
There is no reason why Uber can't have work rules for employee drivers that fit the current Uber business model. They just don't want to pay for benefits and offer employment protection like unemployment compensation and minimum wage. Uber wants to take the profits while transferring all the risk to the driver.
There is no question that the current taxi system is a relic of another time and should be dismantled. But that can be done without dis-empowering the workers. The current trend in the courts is to classify drivers as employees rather than contractors since it is Uber that decides (via their app) when and where the work can be done. A contractor is free to decide when and where the work is done. So Uber does not fit the contractor model.
"He took a duck in the face at 250 knots." -- William Gibson, Pattern Recognition
What do think caused all of the stock market crashes: volatility. When you have people with no stability, like say working for a few days, then trying to find another job, they spend most of their time trying to find a job rather than actually working and doing something productive. Worse yet, with this kind of stability, people can not even begin to image of buying a house, a car, and I doubt working day to day, you can even get an apartment.
This form of volatile, "at-will" employment is just INSANE.
The flip side of that is CONTROL. Employers want CONTROL but not the responsibility that comes with it. As a 1099 I could be flexible and tell companies to take a hike even if they really needed me (There are some contracts not worth the hassle of extending. They can call me when they get serious about the project). AN employee has to do the job regardless. Employers want to force people to do things their way without giving them the flexibility of picking projects and tasks and doing things their own way.
putting the 'B' in LGBTQ+
Ummm, no. Employers started offering health insurance in large numbers during WW II.
https://en.wikipedia.org/wiki/Health_insurance_in_the_United_States#The_rise_of_employer-sponsored_coverage/
Just my $0.02 (Canadian, before taxes)
We all know what this is really about.
Revenue collection.
It's about the IRS and the state governments not liking that there are 162,037 independent contractors they have to go after for taxes, rather than going after a single choke-point for those same taxes. Thus they would prefer that Uber drivers be employees, rather than contractors.
The answer for Uber is obvious: The cheapest S-corp incorporation runs $39. So to get those 162,037 incorporated as contracting agencies with a single employee would cost $6,319,443.
I'm sure Uber would be happy to pay that out of petty cash. Now the IRS has 162,037 contracting agencies to deal with, all under the total number of employees thresholds that would subject them to most of the government regulations that Uber would be subject to, were they Uber employees.
So they are back in the same regulatory boat they started in, without the ambiguity that regulators are trying to exploit to get their hands on the money, and leaving with exactly the same enforcement issues they wanted to avoid.
They could probably also spin off an "Uber Business Services Division" that charges a flat fee for:
Business license
Business name and/or DBA registration
Account for taxes
Sales tax account
Federal and State Tax ID
Business checking credit accounts
Merchant account (to process credit cards) (or used the new "Uber Payment Provider Gateway" instead)
Insurance (business, liability, property, if applicable)
Accounting software (or use the new "Uber Books" online accounting system)
Or they could just create a damn franchising company, and make them all franchisees, with Uber's take coming as franchise fees.
P.S.: I suggested a similar approach to AirB&B to incorporate them all as actual B&B's...
I was with you until your last sentence. Now you just look like an asshole.
Never underestimate the power of stupid people in large groups.
but on the plus side they'll be negotiating a higher salary for you since they get a cut.
Are you sure? Maybe it's more likely that these agencies are going to compete against each other, and will offer lower rates than their competition.
I feel we need either a negative income tax or a basic income.
For a negative income tax...
If Poverty Level > Federal AGI, then (Poverty Level - Federal AGI) / 2 = Credit
For citizens and permanent residences only. For those who are 22+ years old.
The divide by 2 thing is to incentivize working still as it doesn't completely fill the gap to get out of poverty.
For a basic income...
For citizens and permanent residents only.
22-65, $500/person/month and $750/couple/month
21-, $250/person/month
66+, $750/person/month or $1125/person/month or social security, whichever is higher
The 1.5 multiplier assumes less expenses when a married couple lives together. Although, someone can avoid that by simply not getting married I guess.
I figure this would be beneficial towards the homeless, especially if four homeless individuals were to pool their money and live together.
This wouldn't be a replacement for SNAP. If it were, I'd add a flat $200/person/month into those figures above.
This would need to be adjusted annually for inflation.