On-demand economy may dodge crackdown

On-demand economy companies like Uber and Lyft appear increasingly likely to avoid an intervention from Washington in the near future targeted at changing the way they treat their workforces.

Many of the companies classify their employees as independent contractors, meaning that they don’t get benefits and protections given to full employees. Concerns over that model led many, including Sen. Mark Warner (D-Va.), to call for the creation of a new social safety net for the workers earlier this year.

But Warner said this week that he supports finding a way for the companies to experiment with giving their workers more benefits and training on their own. That could be followed by additional action in Washington, but would spare the companies from an immediate crackdown over their policies.

“Ten months ago I thought [I’d] get in here, put a bill marker down and get ahead of the curve,” Sen. Mark Warner said said while speaking on a panel this week, before indicating he’d come to the conclusion that lawmakers should tread carefully, saying, “If we legislate too quickly, we’re going to screw it up.”

“I still do believe we need to move quick enough before this gets boxed into a Democrat vs. Republican position,” he said after the event ended. “But I do feel we need to try some of these pilots, we ought to try the same kind of disruptive innovation in the social contract that we’ve seen in some of these industries, and we’ve not been able to have that yet.”

Rep. Eric Swalwell (D-Calif.), who co-chairs the congressional Sharing Economy Caucus, agrees with the approach.

He said he hoped that the Department of Labor would consider a “safe harbor period, or a regulatory sandbox period, where these different companies and platforms could experiment with, try different approaches to classification, and then see what works, what doesn’t work, and then create guidelines for this new economy.”

An aide to Warner said that his office was looking at ways that regulators could give companies a degree of certainty that they would not face an enforcement action for changing their labor practices. The aide offered the example of the Securities and Exchange Commission, which can issue a letter saying it will not pursue a company for trying out new products or practices.

It remains to be seen whether the laws governing the Department of Labor would allow them to offer a similar option for companies in the on-demand economy.

“I’m very involved at this point with lots of folks on how we could get that space to try these pilots, and I’m trying to ascertain how much cooperation that takes from both the federal, state and local [level],” Warner said on Wednesday. “But those are active conversations going on right now.”

The Department of Labor declined to comment on what they thought of the idea of offering a type of regulatory protection to on-demand economy companies that wanted to experiment with offering their employees more benefits or training. A spokesperson did note that the agency provides confidential assistance to companies that have questions about whether they are complying with wage and hour laws.

Secretary of Labor Tom Perez said this week that the on-demand economy “brings old questions about labor standards and protections into sharper focus” but cautioned that the sector remained a small part of the national workforce. He said he would head to Silicon Valley next year for discussions with “high-tech industry leaders and workers.”

Just months ago, it appeared as though the companies could have been headed for a crackdown from Washington as Uber, Lyft and others became political footballs in the presidential race.

In July, former Secretary of State Hillary Clinton (D) tread carefully when speaking about the issue, praising the companies but then saying that they were “raising hard questions about workplace protections and what a good job will look like in the future.” Sen. Bernie Sanders (I-Vt.) later said he had “serious problems” with the “unregulated” Uber.

Republicans, meanwhile, rushed to cast on-demand economy companies as innovators whose growth would only be slowed by regulation. Former Florida Gov. Jeb Bush orchestrated a photo opportunity around an Uber ride and Sen. Marco Rubio (Fla.) said in October that the government shouldn’t get in the way of the companies.

As recently as September, Warner was calling for his colleagues in Washington to move quickly before the issue could be politicized along partisan lines.

But the chatter on the campaign trail has quieted down and, with the shift in Warner’s position, on-demand economy companies may be given a break from intense federal regulatory attention on their labor policies.

“[Warner] has rightly expressed concern that should congress move too quickly they risk screwing up this real bright spot in our economy,” said Noah Theran, Head of Public Affairs for the Internet Association, a trade group.

Warner said that his thinking had shifted in part because of his conversations with the companies. He met with representatives from several major companies in the space earlier this year, including Uber, Lyft, Airbnb and TaskRabbit, as well as academics and other experts examining the on-demand economy, according to an aide.

Policymakers and researchers in Washington are still engaged with the issue. Work in the on-demand economy is a frequent topic of lunches and symposiums held by think tanks, and Warner says he would like to produce something within the next year.

The Federal Trade Commission will also, at some point, release a report about the on-demand economy that could act as guidelines for those in the industry looking to avoid a run-in with the regulator. That product is likely to focus less on worker classification and more on competition and consumer protection, which fall more squarely within the agency’s purview.

But the greatest immediate regulatory challenges to the contractor model in the on-demand economy will likely come from the court system and at the state and local level.

Uber and Lyft are both the subject of class-action lawsuits filed by drivers who claim that they have been misclassified as contractors. The case against Uber is currently scheduled to be argued in June. Labor regulators in some states have also ruled that some ride-hail service drivers should be considered employees — although those rulings generally do not apply to anyone outside of the specific worker in question.