Is This The Beginning Of The End For The Sharing Economy?

You’ve likely heard of the “sharing economy”, which accurately describes the business models of companies like AirBnB and Task Rabbit. These companies rely on individuals helping other individuals with their own resources. The outlook for this type of company may be drastically shifting after a ruling was made public yesterday, June 17, 2015, from the California Labor Commission.

The ruling involves Uber, a popular ride-sharing company, and one of its drivers. The driver contended that she was an employee of Uber, not an independent contractor. If you’re asking yourself what the difference between these two distinctions is, check out this article. In this case, it’s an important distinction for what taxes the driver pays, and when, how they pay for their supplies needed to work (in this case, a car and involved expenses), and what benefits they receive.
New businesses are constantly popping up to appeal to workers that want a more flexible work environment or just some extra cash. The sharing economy is also attractive to businesses because independent contractors drastically reduce onboarding, employer taxes, and benefits costs. Many times, these companies are disruptive to the industry the pop up in. AirBnB for example, has been in question in New York because of the hotel and lodging laws and regulations there. Uber has been extremely disruptive to the taxi industry in many cities. What will happen next? Well, if the ruling holds, Uber will have to rethink their business model. Currently, all expenses are the responsibility of the driver – the cost of having a car, insurance, gas, and so on. However, another main distinction between an employee and independent contractor, is that an independent contractor sets their own hours, which Uber drivers have the flexibility to do. Uber has appealed the ruling, and if the case keeps going back-and-forth, it will end up in the California Supreme Court. The final decision, while immediately will only impact the driver that brought the case to the attention of the courts, will impact thousands of workers, dubbed “1099 employees”, that are part of the sharing economy.
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