Are Gig Economy Startups Misclassifying Their Workers?

Here’s the next chapter in the story of our favorite gig economy startup, Handy:

[Vilma and Greta Zenelaj] filed a class action lawsuit against Handy in October, alleging that the company misclassified them as independent contractors. They are seeking compensation for missed lunch breaks, minimum wage compensation, reimbursement for business expenses, and overtime, in addition to other penalties. According to Handy’s math, this compensation would cost $291,000, not including attorney’s fees. Not only that, if Vilma and Greta prevailed, the lawsuit would also apply to all its current and former workers in California over the last four years.

That’s from Fast Company’s The Gig Economy Won’t Last Because It’s Being Sued to Death, which I recommend you read in full because it’s incredible. Actually, I take that back — it’s completely credible. Handy, for starters, is getting sued because the company is classifying workers as independent contracters while allegedly insisting the contractors follow the same rules that one might give an employee, including “suggestions” about when to wear headphones and how to use the bathroom.

“It is not fair, because there are laws here,” says Vilma. “They are claiming to be just giving us contracts, and they’re not. They’re acting like an employer. But they’re not paying for it.”

I’m already mentally rewriting the Barry Manilow song: Oh Handy, you came and you took without thinking… so let’s sue you away…

Who else is getting sued? Fast Company reports that “Uber and Lyft are also facing charges of misclassifying workers, and a case against an online work platform called Crowdflower that uses independent contractors to complete tasks is in the process of being settled.”

It is a tricky line to straddle, because on the one hand you can easily see that a company like Handy would want its independent contractors to, shall we say, “represent Handy’s values;” on the other hand, the traditional client/contractor relationship, at least as it was originally designed, was based on clients and contractors knowing each other well enough to trust each other and focus on the results of the work, not how the work is performed. Handy and Uber and Lyft are never going to know their contractors — and part of their business model includes collecting as many contractors as possible — which is why they have to issue “suggestions” about how their contractors should behave.

Do those suggestions and rules change the relationship from client/contractor to employer/employee? Fast Company sums it up this way:

When their employer begins to control not only what work they do, but how they do it, that classification gets murky. So Handy, by doing things like giving workers suggestions for how to clean and asking them to wear a shirt with the Handy logo, made itself more vulnerable to a lawsuit.

Take 15 minutes to read the entire Fast Company piece, and then let us know what you think. Are these workers contractors, or employees? What responsibility do gig economy startups have to their contractors? Does it really matter whether someone wears a Handy shirt and keeps their earbuds in, as long as the house gets clean — and if it does, who should pay to ensure that branded behavior? It does, in the end, come down to “branded behavior,” which is why people like the Zenelaj sisters are suing; they’re being asked to represent a brand without, literally, getting the benefits.

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