The Shared Economy: Time For The Regulators To Catch Up

08/09/2016 15:27

Uber, a company that has probably had more column inches dedicated to it in the last couple of years than any other, is locked in a legal battle with 19 of its UK drivers in a case that could make or break the sector. It is a battle being fought for the future of the shared economy and it is being watched with baited breath.

This is not the first case Uber or others within the shared economy have faced; Uber is also currently fighting a case in the US. In April, it was thought that the US action had been settled and the future of Uber's business model (and that of the shared economy) was secured when a settlement was agreed with the claimants with a money value of around $100 million (up to $8,000 per driver). Crucially, that settlement would have meant Uber's drivers would still be contractors, but Uber would be required to stop deactivating drivers 'at will' and would allow its drivers to solicit tips by placing a sign in their cars. What is interesting is that the agreement also ensured that Uber assisted with the formation of a 'drivers' association' similar to a union.

However, in the last few weeks a US District Judge ruled that the settlement was inadequate, and therefore the case goes on. It is fair to say that the shared economy has had its share of teething problems over the last couple of years but what is interesting is that one of the original plaintiffs in the US case stated that "Uber drivers are being sold out and short-changed by billions of dollars while sacrificing the determination of their classification as employees." This is the definitive issue: how are the workers to be classified?

Of course the US and UK employment rules are an ocean apart, but in both countries, workers generally fall into two categories; employed or self-employed. In the UK, the law, which was created to reflect these definitions, has always been under pressure, via the issue of contractors or even agency workers. However, with the rise of the shared economy, which engages workers in a completely different manner, the issue is exploding, namely because if there is a complete shutdown of the contractor model, the shared economy will have to fundamentally change how it operates.

What is clear is that Uber drivers (and many workers in the shared economy) want to dictate their own hours, decide where they work and which jobs to take on. At the same time, many are not truly in control because they work under a particular brand and therefore have to adhere to brand rules, whether on pricing or on behaviour and service.

The argument is that the shared economy is essentially employing workers, but without the worker rights and protections that we have built gradually up as a society over the last few decades. Many find this hard to reconcile, not least the companies because the individuals want complete freedom and control of their day and working life and want a platform which provides them access to the market which they can dip in and out of at their will. It is hard for companies to provide such a platform while at the same time giving their workers high levels of flexibility and control, keeping them on payroll, and ensuring there is always enough work to go around.

I believe that the flexibility of the shared economy should be praised as it gives income to many individuals who might otherwise have been shut out of the traditional job market; students, mothers, carers, and shift workers, for example. The answer is not as simple as forcing the shared economy workers to become employees - the rigidity of employment terms that this would lead to is one of the reasons these individuals may have left mainstream employment in the first place.

What we need is better, more applicable laws. The regulators have been slow to react to changes in how people want to live and work. As a consequence we are stuck with legal definitions that no longer match reality. We need to redefine our working relationships by introducing a third category of worker. This might mean, for example, a lower personal rate of tax for individuals working as part of the shared economy, taking into account their additional costs and risks of their role.

The companies themselves could be required to pay to register as a shared economy business, and also be required to negotiate bulk benefit and insurance rates for the individuals who work with them. They could even be asked to create worker forums as Uber agreed to do. That would still give both sides flexibility, it would not stifle the market and would help the individuals with any shortfall in income, as well as give them the voice and negotiating power many are looking for. Ultimately, it would provide independent workers with a financial safety net currently only in place for salaried workers.

The shared economy is at a cross-roads and the outcomes of the cases involving Uber and others such as Deliveroo will dramatically shape its future. Properly regulated, the shared economy can be a force for good. It is not only the service industry that is benefiting; it's changing even the more traditional sectors such as law. Its growth is testament to the fact that as a society, we are demanding more flexibility and control in our lives. We want to decide when and how we work and technology is increasingly allowing us to do so. The companies in the shared economy are testing new waters. It is time for the regulators to catch-up.