As the sharing economy has grown, it has attracted significant attention into its operations, and especially into the ethics of the industry, whether that’s the disruption caused to incumbents or the working conditions of those using the platforms.
Uber have been a particular target for this focus, with a number of court cases brought arguing that Uber drivers should in fact be classed as employees, with all of the legal protection that provides for them, rather than the freelancers that they are currently classified as.
With similar cases currently pending against a number of sharing economy companies, it not only raises questions about the employment relationship of the platforms, but also the viability of the business model.
It is in this context that a new paper has been published by Harvard academic Andrei Hagiu with Julian Wright from the National University of Singapore. The paper explores the trade off between enabling and control in employer relations.
Enabling versus control
Uber, for instance, want to have a strong level of control over things such as price, but much less control over the things such as the kind of cars drivers use. The authors contend that this line between the two will be central to the court cases currently under way.
“This places [Uber] somewhere in between pure platforms and pure employers. While everyone agrees that the key defining characteristic is the extent of that control, there is no clear sense from the courts of exactly where the dividing line between platforms and employers might be,” they explain.
Of course, companies have operated at various points along this line for an awfully long time. The authors use the example of hair salons, for instance, with some exerting control over the way the hairdresser interacts with the customer, whereas others simply rent out a chair and allow the barber to operate as they see fit.
Despite the longevity of this issue, there is a shift towards a more marketplace based approach, with less control exerted over participants. The paper provides some valuable insights into when platforms should look to exert some control and when to step back.
Two types of decision
The decision rests, the authors suggest, on whether the decision is transferable or not. A nontransferable decision is something that will always be controlled by the professional, or always controlled by the company.
A transferable decision is one that can be made by either party. This could include, for instance the type of car allowed on the Uber platform. It is this kind of decision that is key, because if the firm controls these decisions, it is behaving more like a regular company, whereas if the individual does, then it’s more like a platform.
A legal system that is behind the times
The problem is, that whilst most sharing economies operate in a fuzzy gray area, that law is straight forward and black/white that doesn’t really apply particularly well to these new models.
“The way the law is today, it forces you to make a binary decision: You are either a platform enabling independent contractors or an employer that has to pay full employment costs,” the authors say. “It is very inadequate for these marketplaces. Oftentimes, the optimal model for a company might be somewhere in the middle—controlling some aspects of contractor performance but not others, a situation that current regulations do not yet account for.”
So in reality, Uber and their ilk require a slightly more nuanced response than the current legislation is capable of providing. People using sharing economy platforms are neither employees or contractors, but something in between, and the authors conclude that until this is unique status is reflected, the confusion over how best to treat such people will remain.