The on-demand economy has just had its first employee classification casualty.
On-demand cleaning services company Homejoy will shut its doors for good at the end of this month. And the media were quick to swoop on the fact that a deciding factor was Homejoy’s pending lawsuits over its classification of workers as independent contractors.
The debate about on-demand companies hiring people as independent contractors rather than employees has been simmering for some time – Uber, Lyft, Washio, Postmates, Shyp and many others are currently embroiled in class action lawsuits. It’s a topic that has accelerated to presidential candidate proportions.
While the ‘on-demand economy’ concept is relatively new, it’s no different from companies hiring seasonal workers during peak times. The only difference is in the on-demand world the timing is significantly compressed – peak times that businesses used to plan weeks or months in advance for is now down to minutes or mere seconds.
Technology has caught up with the faster business model, but labor regulations have not. And this has illuminated how easy it is for businesses to be morally bankrupt, ignoring the obligations to its workforce because no legal conduct has been established. A framework already exists to compensate employees adequately, however the on-demand economy is pushing its legal limits, taking advantage of employees and taking a very mechanical approach.
As awareness grows on the issue, and as more companies like Instacart take a stance on how its workforce should be classified, employers and the Department of Labor must establish firm codes of conduct. While classifying workers as employees is more expensive than independent contractors, the benefits in hiring and retaining the best talent will win out every time.