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What Can We All Learn From Uber?

The labor laws of the United States may be wholly out of step with the new economy where workers get to decide when and where they may provide services. In fact, the United States Department of Labor is probably heading in the wrong direction rather than grasping the importance of this new world of the workplace. This complaint however is likely shouting into the wind. So in the world as it is, rather than what we would like it to be, what do we learn from Uber?

1. Don’t be a control freak.

First, if the business model is to allow workers to control when and how they provide their services, the company that contracts with those workers has to avoid the urge to take that control away. This can be hard to do because sometimes more control over the worker might add to the bottom line of the company. So this will all be a balancing act. Can the company tolerate a day where all of its workers decide not to work? If not, and the company starts putting rules on to the workers as to when and where they will perform the services, the company may need to examine whether this independent contractor/new economy worker arrangement really works for it.

2. Some worker profits will need to stay worker profits.

Second, control is important, but to what extent can a worker decide how much profit that worker will retain from his or her services? Workers who see a greater opportunity to improve their own profits are more likely to be pleased with their circumstances and provide better services, and that in the end may lead to greater profits for the company. This delicate balance when dividing up profits needs to be considered if there is hope that this type of relationship will work.

3. Providing for contractor risk in the same way as employee risk might get you looked at more closely.

Third, companies like to avoid liability. That is natural. However, taking actions such as buying a worker’s comp insurance policy and applying it to the workers may be seen as wholly inconsistent with the independence of those workers. So, there is a balancing of risk here also. The new economy may involve more risk, but on a daily basis it may allow companies to be more nimble and responsive to customers.

4. Be ready to fight.

Finally, companies who believe in the new economy and in the independent worker need to be prepared to fight for their position. The Department of Labor will take the position that because the workers are providing a service that is central to the purpose of the business, this must mean the workers are employees and not independent. That is wholly inconsistent with the new economy, and one would hope that when given the proper case, the courts will disagree with the Labor Department. There is risk in the new economy, but by applying the lessons learned so far, companies may find success.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.