Employee Classification in the Sharing Economy

Abstract

Workers in the sharing economy are overwhelmingly classified as independent contractors. Under existing rules, at least some of them qualify as employees. However, their employers have limited incentives to reclassify them due to arbitration agreements containing class action waivers, which cut off the threat of aggregate claims. Existing rules can also be somewhat misaligned with the sharing economy. Courts are expected to assess the level of control companies exercise over workers, but their task is complicated when control is exercised through software. Formerly reliable proxies for independent contractor status – such as ownership of equipment, and flexibly scheduling – may no longer be as meaningful as they once were.

As the sharing economy matures and plays a more fixed role within the landscape of employment opportunities, courts and regulators may need to adjust their approach. Such adjustments will be necessary both to ensure that sharing companies do not secure a competitive advantage from their avoidance of employment rules, and to extend a baseline level of protections to affected workers.

Keywords: sharing economy; employment law; misclassification; independent contractors