The rise of the on-demand economy in the last year has fueled the ongoing issue of worker misclassification. Are these on-demand workers, such as drivers for Uber and Lyft and other ridesharing services, employees or independent contractors? And do they have a preference? A new survey from Crowded.com shows the majority of on-demand workers want to be classified as 1099 independent contractors rather than W2 employees.
Crowded.com is an online marketplace that connects on-demand platform businesses and on-demand workers. Spend Matters has covered the company, which was founded just last year. The recent survey showed 80.2% of respondents want the 1099 classification, while just 11.72% prefer the W2 status. Additionally, 8.45% of the on-demand workers in the survey do not understand the difference between 1099 and W2 classifications.
Workers who fall under the 1099 umbrella are independent contractors paid by a company for their services but are not classified as an employee. But, sometimes determining what a worker is — employee or contractor — can be difficult.
"So far, most of the prevailing opinions suggest that there is a wholesale misclassification of workers who are currently working as 1099 independent contractors, but who should instead be classified as employees receiving W2s,” Mark Roth, COO and co-founder of Crowded.com, said in a press release on the survey.
The worker misclassification issue has been in the news in recent months, too. Uber is currently facing a class action worker misclassification lawsuit in California. The Uber drivers who originally brought the lawsuit against the ridesharing company said that while they were classified as independent contractors, Uber treated them more as employees but did not provide overtime, Social Security payments and other benefits.
Seattle also recently passed legislation that would allow Uber, Lyft and other ridesharing services drivers to form worker unions. A member of the Seattle City Council, Nick Licata, said the ordinance was aimed at “advancing the rights of drivers.”
Down in Florida, however, the Department of Economic Opportunity decided in October that an Uber driver was not an employee and should be classified as an independent contractor. Earlier in 2015, the agency had ruled the driver was an “employee,” but after Uber appealed that decision, the agency reversed its decision.
I reached out to Andrew Karpie, Spend Matters analyst and expert on contingent and independent workforce management, to gain some additional insight on this topic.
Kaitlyn McAvoy: What are your thoughts on this worker classification issue? Do you see this becoming a bigger issue in 2016 as the on-demand economy continues to grow?
Andrew Karpie: I really think in 2015 we discovered that with the rapid expansion of on-demand work platforms, we have arrived at a worker classification crisis, so to speak. The crisis is a collision between 20th century labor law and a new range of possible work arrangements technology can now enable. This crisis is not going to be resolved in 2016. How it may eventually be resolved is a very open question. People are discussing different worker classifications and perhaps building legal protections into them. And private services ecosystems are emerging to provide services to independent workers that were previously delivered as benefits by employers. In any case, it’s going to a long, protracted process.
KM: Are you surprised by the Crowded.com survey findings that most on-demand workers want a 1099 classification?
AK: I’m not surprised. However, I think Crowded.com also said that many of those workers who prefer the 1099 status still want some protections. I think the reality is that some workers want to maintain an independent status, and it appears today that that means being a 1099 contractor. However, there are other options that could be available if current labor laws governing the employer-employee relationship could be tweaked so that a worker could easily be a part-time employee with multiple companies, alternatively be W2 payrolled by a hyper-capable and efficient third-party intermediary, something which Crowded.com might eventually be in a position to become.
This is definitely a situation where “time will tell” — probably a rather long time. But I do believe we have crossed the point of no return. There is no going back.