On Monday afternoon, presidential candidate Hillary Clinton gave a speech laying out her economic vision. In it, she states that "many Americans are making extra money renting out a small room, designing websites, selling products they design themselves at home or even driving their own car." And even though she praises this so-called gig economy for "unleashing innovation," she's also concerned about the lack of work-place protections that these jobs entail. She didn't mention Uber by name, but it certainly fits the description of exactly the kind of companies she's calling out.
The "gig economy" here refers to a situation where people are working as independent contractors (workers who'd get a 1099 form when it's tax time) instead of holding down jobs as full-time staff (who would receive a W2 instead). As independent contractors, 1099 workers don't get the same sort of benefits as regular employees -- no health benefits, no overtime, no sick leave pay -- whereas W2 employees do.
"Many Americans are making extra money renting out a small room, designing websites, selling products they design themselves at home or even driving their own car. This on-demand, or so-called gig economy is creating exciting economies and unleashing innovation. But it is also raising hard questions about work-place protections and what a good job will look like in the future." -- Hillary Clinton
Of course, independent contractors have been around for much longer than Airbnb and Uber, but the uptick in this particular style of business is a relatively recent phenomenon that impacts an unusually large number of Silicon Valley startups. Postmates, for example, relies on independent contractors for its delivery personnel. Washio is a service that relies on contractors to pick up, wash and deliver its customers' laundry. TaskRabbit connects you to a variety of paid services ranging from handymen to people willing to wait in line for you. Homejoy is a cleaning service where the maids are, you guessed it, independent contractors. And this is just a small sampling of Silicon Valley businesses that rely on 1099 workers for their bread and butter.
It's easy to see why: 1099 workers cost a lot less to hire, which lets cash-strapped startups funnel funds into things like app and site development rather than employee benefits. And being an independent contractor can offer up certain perks -- you can work part-time while holding down other jobs, or simply to get extra spending money if you're a student or a stay-at-home mom. For some, it offers the flexibility to set your own hours and work remotely.
Still, this "gig economy" doesn't sit well with everyone. If you're a full-time 1099 worker, that leaves you without a safety net that all W2 employees have. This is especially a problem if a full-time employee is misclassified as a contractor and is thus stripped of important benefits that include overtime, unemployment insurance, worker's compensation, retirement funds, maternity leave and more perks that many of us take for granted. Recently, a few workers have filed lawsuits against some of the aforementioned startups (Uber, Washio and Postmates are among them), alleging that they should be classified as employees rather than contractors.
Shannon Liss-Riordan, the Boston attorney who's the lead on several of these cases, told the San Francisco Chronicle: "These companies thought that if they call themselves technology companies because they provide services by using a smartphone app, that somehow makes them different. [...] They think they can get away with transferring the costs of doing business to their workers and depriving employees of the benefits they're entitled to." Which is exactly what Clinton was referring to in her speech when she said: "I will crack down on bosses who exploit employees by mis-classifying them as contractors."
On the other side of the coin, Uber would prefer to characterize independent contractors less as employees, and more like small-business owners. When asked to back up the claims that hiring contractors is a good way of doing business, Uber offered a few interesting stats. According to an internal survey, 73 percent of its drivers "would rather have a job where you choose your own schedule and are your own boss" and 63 percent say they "use Uber to have more flexibility so they can balance work and family." About 52 percent of its drivers are part-timers -- either students or those with other jobs -- and a vast majority of its drivers don't use Uber as a primary source of income.
In a statement during one of the contractor lawsuits brought against the company (O'Connor et al. v. Uber Technologies, Inc et al), an Uber spokesperson said: "Eighty seven percent of drivers say the main reason to use Uber is because they love being their own boss." Uber also offered a series of quotes from drivers. Jon Shehab, an UberX driver from San Diego said that "Uber is not my employer. ... I don't have a supervisor; I don't have a manager; and I don't even have a telephone number for Uber," and he likes that he's free to work for other on-demand ridesharing competitors like Lyft if he wants to. Christopher Martinez, an UberX and UberPlus driver from Los Angeles, said, "I wouldn't even want to be an Uber employee. I would quit if they tried to make me an employee, because I value my freedom as an independent contractor too much."
Not all Silicon Valley startups follow the contractor model. Shyp, a company that picks up, packs and delivers packages for you, has recently reclassified its couriers from 1099 contractors to W2 employees. The move, according to Shyp's CEO Kevin Gibbon, is "an investment in a longer-term relationship with our couriers, which we believe will ultimately create the best experience for our customers." Shyp is now able to offer "additional supervision, coaching, branded assets and training," which can only be done with employees. It shows the company is invested in its workers, because it knows that offering them benefits and training will help everyone in the long run.
Yet, Shyp is an anomaly in a sea of startups that depend on independent contractors as its primary way of doing business. Clinton might have been the one to bring the issue to light, but she likely won't be the only presidential candidate to address it. Rivals like Jeb Bush and Rand Paul have already come out in favor of Uber and its ilk (with Bush even pledging to ride an Uber or two while he's out in San Francisco this week) to paint themselves as supporters of the new sharing economy. While Carly Fiorina hasn't said much about it yet, it seems likely she'll do the same given her Silicon Valley background. Like it or not, the "gig economy" -- and by extension, Silicon Valley -- is now an issue in the election of our next president.
[Images credit: The Associated Press, Getty Images]