Sen. Mark Warner (D-Va.) on Thursday became the first lawmaker to propose a significant slate of policies aimed at addressing the questions posed by the rapid growth of the so-called on-demand economy — defined by companies like Uber, Lyft and Airbnb.
In many cases, those companies rely on workers classified as independent contractors who do not receive the benefits afforded to full employees.
“This, I think, represents one of the most significant frayings of the traditional social contract,” Warner said, referring to the abandonment more broadly of the traditional system where employers and employees both contribute to things like retirement accounts and unemployment benefits.
{mosads}“The fact is, for many of these online workers and contingent workers, they are operating without any safety net at all,” Warner said during a speech at the New America Foundation. “They may be doing extraordinarily well — until they’re not — and then there’s nothing to catch them until they end up, candidly, back on the taxpayer’s dime, in terms of benefits that they’re going to have to be provided.”
Warner said it was vital that policymakers deal with the thorny issues that have surfaced, as companies like Uber reach massive valuations and continue to grow their workforces. He even questioned the issue’s absence from the 2016 presidential contest.
“There are 25 people running for president at this point,” he joked. “When we’re thinking about these numbers, isn’t is remarkable that nobody has even mentioned any of these subjects?”
Though he stopped short of announcing legislation on the issue, Warner got into the specific kind of policies he said he thought could create a safety net for workers in the on-demand economy.
He said that there could be a third-party organization, separate from both employers and workers, that acted as an “hour bank” for workers who spent time doing jobs for different sharing economy companies. Such an organization could administer benefits based on the total hours that a person worked, without each employer handling the benefits individually.
Warner also raised the possibility that companies could add a line to customers’ bills to cover things like health insurance and unemployment for workers.
But the senator demured from answering the larger question of whether workers for companies like Uber, which had its fifth anniversary this week and might be valued at $50 billion in the near future, should be classified as employees rather than contractors under current federal law. Instead, he suggested Congress could respond to the issue by creating a new order for how employees are classified.
He noted that labor regulations are essentially based on three different statuses: employment, unemployment and self-employment.
“We’ve got to acknowledge that that description, honestly, does not work in the 21st century,” he said.
Such an approach is likely to be favored by the companies, who could be dealt a financial blow if all of their contractors were suddenly reclassified as employees. At least one judge considering a class action suit brought by ridesharing drivers who say they are actually employees has said the drivers might fall into a legal gray area somewhere between full, traditional employees and independent contractors.
In March, Judge Vince Chhabria said, “the jury in this case will be handed a square peg and asked to choose between two round holes” in a class-action lawsuit involving Lyft drivers. A similar suit is being brought against Uber.
At issue is the degree of control that the companies have over their workers. Advocates who believe the workers are employees say the companies train and screen their workforce and treat them like employees.
As the cases make their way through the courts in California, federal lawmakers and regulators have begun to express concerns that the current system is not capable of regulating the on-demand economy and its workforce.
At a conference last week, Sen. Elizabeth Warren (D-Mass.) said the overuse of the 1099 tax designation, which is given to independent contractors, was “a real problem” without commenting directly on the status of the workers at Uber and Lyft.
The Federal Trade Commission will also take up questions about the sharing economy at a workshop next week, and a Republican member of the National Labor Relations Board said in April that the classification of workers at the companies was something the regulator would need to address in the future.