Have you ever rented a room of your home to a traveler on Airbnb? If so, do you consider yourself an Airbnb employee? Probably not, right?
A recent ruling by the California Labor Commission, however, might change that.
Last week, the commission ordered Uber to reimburse one of its drivers over $4,000 in expenses after ruling that she was not an independent contractor, but in fact an employee of the company, loosely citing a state Supreme Court ruling from the 1980s in making its decision.
The implications of this ruling could be ruinous to countless businesses, large and small, whose entire operational models depend on what has become known as the “sharing economy.” In this relatively new method of business, independent contractors buy and sell goods and services, utilizing a company or application only to help facilitate the transaction.
An independent contractor driving for Uber, for example, sets his or her own hours, assumes all costs (tolls, gas, car repairs), but walks away with 75-to-80% of all fares he or she generates. If this was a predatory arrangement, nobody would do it. But the company adds 50,000 drivers each month.
As the Wall Street Journal notes, “Sharing companies have become prosperous in the Obama era precisely because they are nimble. Workers classified as independent contractors aren’t covered by most state and federal labor regulations including the ObamaCare employer mandate and National Labor Relations Act.”
In other words, the regulatory environment has become so suffocating to these fledgling businesses that it helped create the share economy in the first place.
Uber has become one of Silicon Valley’s most promising startups, currently valued at a staggering $50 billion. An axe through the heart of their business model would crush their growth, costing thousands of jobs and calling into question the ability for the share economy to continue in its current form.
Moreover, these businesses were specifically built to steer clear of excessive government headwinds. If the government has the ability to insert itself after the fact, essentially re-writing the rules of the game in the process, who in their right mind would want to start a business today?