
Why Startups Are Making the Expensive Switch to Traditional Employment - shahryc
http://time.com/3984957/independent-contractor-versus-employee-startups/
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littletimmy
> "Under the contractor model, Lee says, the leaders at Luxe hadn’t been able
> to schedule workers for unpopular hours like late nights on Friday and
> Saturday; they could only bribe them to come online with higher rates of
> pay, as Uber does with surge pricing."

Seriously? If someone is working Friday nights or Saturday nights, he SHOULD
have higher pay. What it is with CEOs that they feel they are entitled to
their worker's entire existence?

~~~
bmj
Are you suggesting this to be the norm across industries? Like, the folks
working the registers at Target on Friday night? What about Monday night? Or
Wednesday night? How does that differ?

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baseballmerpeak
Friday nights in excess of a _full-time_ work schedule, yes.

~~~
bmj
So this is just for hourly employees, then? Because in that case, I assume
they'd be getting overtime regardless of the day of the week.

~~~
baseballmerpeak
Non-exempt salaried as well.

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empthought
"Under the contractor model, Lee says, the leaders at Luxe hadn’t been able to
schedule workers for unpopular hours like late nights on Friday and Saturday;
they could only bribe them to come online with higher rates of pay, as Uber
does with surge pricing."

That's not bribery; that's simple supply and demand.

~~~
nickff
You're right, but there is a large group of people who refuse to believe that
employment is a functioning market like any other where a resource is bought
and sold according to factors including scarcity, difficulty, and
pleasantness. For these people, it is easier to describe employment
negotiations in terms of exploitation, 'taking advantage', bribery, and power,
than to acknowledge it is essentially the same as a business to business
negotiation.

~~~
tonyedgecombe
Except it isn't like every other market because most people don't have a
choice not to work, whereas they do have a choice not to buy a TV, phone,
bigger house, etc.

Employers will exploit this fact and take advantage of people desperate to
keep their job.

~~~
AnimalMuppet
No. But they have a choice to work _elsewhere_. Push them hard enough (like
forcing them to take shifts that they hate), and they will take that choice.

~~~
littletimmy
Yes. But they do not have a choice _not to work_. That means that capitalists
can collude to drive wages down to unhealthy levels. Even Adam Smith warned us
against this and advised the state step in to help the worker.

~~~
toomuchtodo
Which is why a proper minimum wage set forth by government is required.

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patio11
The biggest issue seems to be control over the work delivered. All of the Uber
for X want their service to be a pleasant experience for the customer which is
~98% guaranteed to hit 5 stars or the local equivalent. This generally
requires some degree of operational control over the workers. Aside from the
(formidable!) difficulties [+] of actually structuring a business to have
operational control, that tilts the relationship very, very heavily from
"could possibly be an independent contractor" to "presumptively an employee."

Given that one is going to lose a fight with the IRS or local labor department
over classification -- and one will, eventually, if you're doing things like
e.g. giving the employees checklists or training them on the "company
standard" \-- might as well bite the bullet early.

[ + ] Many people employed in startups are young and may, how to put this
gently, not have experience giving them an appreciation that members of the
class which Stanford sources most engineering grads from are not perfectly
representative of all Americans in all ways which matter towards
employer/employee relationships.

~~~
paulsutter
So you are saying, the driver is an employee of the passenger? I definitely
control the work delivered when I'm riding. I dictate where to pick me up, and
the exact destination. Sometimes I even demand a specific route. And to top it
all off, I give the guy a rating.

Uber does none of those things. They don't even tell the driver when to switch
the app on and off. So I guess, your point is, that Uber doesn't have much
risk that drivers be categorized as employees?

EDIT: I WAS KIDDING GUYS! Except my point about Uber. They really don't seem a
bit like an employer to me. Particularly w/regard to control over drivers
work. Bigger question, why does anyone think it would be an advantage to
drivers to become employees and get lower pay?

~~~
patio11
Not a lawyer but I'm obligated to be at least partially conversant with this
by dint of once being a consultant and now being an employer:

The driver is clearly not an employee of the passenger. A driver given the
instruction that they must comply with the passenger's preferences (as opposed
to exercising their judgement as an independent business) may well become an
employee of the entity enforcing that instruction.

It will probably be remarked upon in litigation over Uber that Uber will
terminate their relationship with drivers who fall below a particular cutoff,
specifically tells drivers this, and often specifically instructs them in ways
to ensure this doesn't happen to them. These do not feel like insignificant
facts to me.

I'd ask Grellas to handicap Uber's risk of being reclassified prior to asking
me to do it, since he is an expert on this subject and I am not, but even from
my lay view of the situation it looks like some of the Uber for Xs are at
markedly more risk than others. Uber feels markedly less risky than firms
which e.g. develop in-app checklists for heading off particular ops problems.

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paulsutter
The individual pays the cost. Today Uber drivers get like 80% of the fare. If
Uber needed to pay benefits, give vacation time, etc, the pay rate would be
much lower. That would all come out of the 80%. Just like how contract
programmers bill a higher rate and get no benefits. Calling someone an
employee doesn't suddenly create new money.

I can't imagine uber drivers would prefer a lower rate of pay, but hey, I
guess that's what all these advocates of making them employees want us to
believe.

Or maybe it raises the question, who is driving all this PR anyway? I can't
see it as a grassroots thing from Uber drivers.

~~~
a_c_s
There's no intrinsic reason Uber's take is fixed at 20% - maybe their business
can only viably employ humans (with all of their attendant needs like health
insurance) with a smaller take.

~~~
paulsutter
It would be likely for drivers pay to be cut in half, if Uber had to pay them
as employees (just based on comparable differences between paying contractors
and employees in other fields). Their taxes would also go up since they could
no longer deduct the cost of their car and other expenses from their income.

Even if you pared Uber's take back to 10%, or 0%, it wouldn't cover the costs
of making them employees. And it's the drivers that would take the hit.

Uber provides a tremendous lead-gen service for drivers. Everyone here who's
tried to run a business knows that finding customers is the central challenge
of a business. Uber completely handles that challenge for drivers, for a risk-
free 20%. That's a pretty good deal.

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pnathan
Some precedent here: Microsoft famously lost a lawsuit regarding contractors
vs full-timers in Washington state. You simply can't treat contractors like
employees in the state of Washington - you have to make a very clear
distinction.

Now, 20 days ago, Homejoy closed down, and I said what I am quoting below:

[https://news.ycombinator.com/item?id=9903831](https://news.ycombinator.com/item?id=9903831)

> the balance of power between the tech company and the "1099 contractors"

That hits the nail on the head. A 1099 contractor (a.k.a. freelancer) has to
cut some 30%-40% off their wage to support things like self-insurance, etc (or
add yea much). If you're "working" for a gig provider, you're not a 1099
employee by the inherent nature of the thing. Granted, you're not in a normal
employer-employee relationship, but neither are you a skilled freelancer
contracting your labor out on wages you yourself set and negotiated. While I
fully support the idea of TaskRabbit, Lyft, Uber, Homejoy et al, certain
realities have to be faced squarely: they are not being real about the nature
of their business. They really are something like employers, with something
like employees. Cheung is likely correct that a third legal category needs to
be created (neither 1099 freelancer nor true employee), but in the absence of
that, it seems profoundly more ethical to consider the workers employees.

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odonnellryan
This is kind of interesting. Seems like a lot of trade-offs on both sides that
are both good and bad for the person and the company.

Makes sense for companies to want to be in the position to say certain tasks
must be done while controlling quality. Makes sense for people to want
benefits and steady work/pay.

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mc32
It doesn't bother me one way or the other how workers get hired, as temps,
contractors or permanents. As a worker, I see advantages and disadvantages in
all.

Never the less, here it's stated that companies are taking contractors or
independents internally as employees in order to have more control over
service and presentation. That's something to strive for. As a consumer of
good and services, one tends to prefer the one providing better services.

Yet, Japan, which is very service oriented and super customer focused to the
extreme, has seen its temp workforce take over. So, it does not seem, in Japan
at least that you need permanent employees to get exceptional service.
Something does not jibe.

~~~
michaelt
At least in my country, there can be pretty big differences between being a
temp and being an "independent contractor".

If you work for a temp agency and they send you to a warehouse, you'll have
managers/trainers a few steps away, you'll get paid by the hour, and you won't
have to spend your own money.

On the other hand, if you're an "independent contractor" for a parcel delivery
company you'll be working alone, you'll get paid by the parcel, and you'll be
paying for your own vehicle and fuel and whatnot.

The different environments make a big difference in terms of things like
whether an employee can make a loss/less than minimum wage, how much it's in
their interests to cut corners, and how long it takes for someone to spot if
they're struggling and give them help.

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greggyb
This pops out at me and raises an argument I frequently had with managers when
I worked in restaurants.

>Managers will have to make sure workers are taking breaks.

I almost never wanted to take a break while working for an hourly wage. I
realize I am an exception, and I do not intend to raise issue with the
requirement that breaks be _offered_ , but I do find it odd that it is
someone's job to ensure that I do not do something I want to do, and that my
employer would prefer I do.

When working hourly, breaks tend to entail time spent in an unappealing space,
without much time to do anything worthwhile, and not getting paid to do so.

Particularly with waiting tables, even a 30 minute break in a slow time would
probably lose me 1-3 tables which could translate to anywhere from $3-$30. At
an hourly rate, that's a decent chunk.

If anything I'd prefer to work a shift that is simply a half hour shorter, so
I could actually go home and do things I'd like to do, rather than sit in a
dingy breakroom while losing money.

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ocdtrekkie
I feel like Silicon Valley tends to think they can save money by skipping out
on whatever big businesses have always done, until they find out later that it
was a bad idea, and businesses did things that way for a reason. It's what
happens, I think, when 20-somethings think they know what they're doing over
experienced people with 20-something years of experience in the business
world.

~~~
JoshTriplett
There's something to be said for experimenting. Some experiments turn out to
be a bad idea; other experiments end up making sense.

Always good to figure out which practices have a sensible reason, and which
are just "the way we do things".

~~~
andyidsinga
yes, the experiment is key ...and means a hypothesis and means to test and
measure results is also required.

~~~
JustSomeNobody
Yes. Indeed.

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chaos_monkey
Please, this is just click bait. The startups cited in this article are just
series A companies bleeding money. A very unsubstantiated article. It's the
same thing as when that one Uber driver in California was declared an
Employee, there was a slew of news articles saying it was uber's downfall. But
if you actually read the coverage of the case, you'd see that that court case
applied to that driver and that driver alone and has not really had any
repercussions through now. Then again I guess Time.com isn't the go to place
for tech journalism, but still it's just not good journalism to speculate like
they do in this article.

