A debate is raging around whether workers have to choose between the flexibility of gig work or the benefits and protections offered by traditional W2 employment.
On one side are those who believe Uber and Lyft drivers - and most other gig workers - should be classified as traditional W2 employees.
They argue there's nothing in labor law that prevents companies from offering employees as much work flexibility as gig work does.
They say gig companies should hire all their workers as W2 employees and give them the same flexibility they have as independent workers.
Uber, Lyft, and other gig companies disagree.
Uber's essay Can Employees Really Work However They Want? argues that workers can't have both - or at least rideshare drivers can't - because it's not economically feasible. Key quote:
Think about it this way: Starbucks offers one of the most flexible part-time jobs around, but baristas can't just walk in unannounced, decide they will only make lattes while refusing all orders for cappuccinos, leave during the morning rush to go pick up their kid from school (without permission from their boss) and return to work at a Peet's Coffee. That would absolutely be allowed under the law, so why doesn't it happen?
The answer is simple: businesses simply won't survive if they have zero control over what their hourly employees, whether full- or part-time, actually do. Imagine a restaurant that offered their employees the same freedoms that drivers currently have with Uber. On any given night they might have a single waiter trying to serve 100 customers or 100 waiters all serving one customer. In the middle of preparing a dish, the chef could leave to go cook for the food truck across the street. And anytime their employees decided to be on-shift, they would have to be paid, whether they had any work to do or the restaurant was closed.
We've studied the tradeoffs associated with self-employment and gig work - what we call The Yin and Yang of independent Work - for over a decade. We're also gig workers ourselves and have been for a long time. So we think we have a pretty good understanding of this issue.
We agree that labor laws don't, per se, restrict worker flexibility. Companies could offer workers the same level of flexibility that Uber offers their independent drivers.
But we also agree with Uber.
Economic reality means firms offering the same flexibility as independent work wouldn't be operationally efficient enough to be financially viable.
Because of this, if rideshare companies are forced to classify their workers as employees, they will have to make significant labor changes to maintain their financial viability. These would likely include:
- requiring driver schedules, which would greatly reduce worker flexibility
- a reduction in the number of full-time drivers
- a substantial reduction in the number of part-time drivers
Full-time drivers who are offered a job and are fine working to a schedule would clearly benefit from this shift.
The much larger group of part-time drivers (the vast majority of rideshare drivers work part-time) would either lose their job or lose the flexibility they want or require. Also, some full-time drivers would likely lose their jobs and others, because they are unable or unwilling to work to a schedule, would need to find alternative employment.
Riders would also be impacted. Fares and wait times would likely increase and areas with low demand would likely see their service substantially reduced, or even eliminated.
We agree that rideshare drivers and gig workers, in general, should be provided more legal protections, better working conditions, and higher pay. Our concern is requiring gig workers to be classified as employees would hurt many more people than it helps.
Uber has recently proposed a set of legal changes that would provide a third way for drivers. It's their attempt to fix what has been called the "square peg, round hole problem" with labor law.
We don't think Uber's third way proposal goes far enough. But we think it's a good start.
But we also think eliminating low friction, highly flexible work options that millions of Americans financially rely on makes no sense. Because of this, we think California's AB5 is way too restrictive and is hurting many of the people backers claim it is designed to help.
So in our view, neither solution solves the problem. So we'd like to see both sides go back to the drawing board.
As a side note, we've asked those claiming companies can offer as much flexibility as independent work for examples of traditional W2 jobs that do this. So far not a single example has been offered. If you know of any examples, please let us know.
