In our ever-expanding technological landscape, regulators and lawmakers often find themselves in the difficult position of creating new policies to keep up with innovative companies and products. One such area of struggle is the new sharing economy. Companies of the sharing economy offer consumers a platform to share products or services, such as a temporary living space, a cab ride, or a workspace. Since this economic model is still developing, the negative consequences of the sharing economy have not been fully evaluated. However, the companies and employees who are being displaced by the sharing economy are voicing a variety of concerns regarding consumer protection, public safety, taxation, and labor disputes.[1] The question remains as to whether new laws and regulations are necessary to address these growing concerns.
A sharing economy is defined as “an economic model in which individuals are able to borrow or rent assets owned by someone else.”[2] The marketplace for a sharing economy generally involves “three important sets of players – the platform, which provides the marketplace, the buyers (also referred to in varying contexts as consumers, riders, or renters), and sellers (also referred to in varying contexts as suppliers, providers or hosts).”[3]
This discussion will focus on three of the big names in the sharing economy: Uber,[4] Airbnb,[5] and WeWork.[6] Uber allows individuals to sign up as drivers and, using a phone application, quickly finds a match between drivers and riders (consumers) based on geographical proximity.[7] Airbnb provides a platform where renters and owners allow consumers to temporarily live in their homes.[8] WeWork allows like-minded businesses to lease shared office spaces.[9]
In 2015, the Federal Trade Commission (“FTC”) held a workshop to bring together “legal, economic, and business experts as well as stakeholders to examine the competition, consumer protection, and economic issues arising from sharing economic activity.”[10] Commentators of the workshop cited concerns such as consumer protection, public safety, and taxation.[11] An example of a public safety issue came from one hotel industry representative who asserted, “Airbnb hosts are compromising consumer safety” because they may be ignoring “a slew of requirements that hotels and bed-and-breakfasts must meet to ensure that they are safe and sanitary.” [12] There is also a loophole within the IRS Code that allows sharing economy companies to “cheat” on their taxes because “[t]hese businesses have to report a provider’s income to the IRS [“Internal Revenue Service”] only if that person earns more than $20,000 and has more than 200 transactions.”[13] In contrast “freelance workers who don’t use such platforms often face a much stiffer reporting threshold of $600.”[14] This discrepancy means those outside the sharing economy are deprived of revenue and placed at “an unfair competitive disadvantage.”[15]
Public safety and taxes are not the only areas for concern regarding the sharing economy; sharing economy companies also negatively impact their own employees. In the United States, companies are required to pay employees time and a half for any hours worked beyond the standard forty hours per week.[16] There are, however, exceptions, “including one for workers whose primary duty is making independent and substantial decisions about the business.”[17] WeWork uses this exception to avoid paying overtime to front desk associates, associate community managers, and community managers (whose duties include “giving tours, hosting events, [and]answering support tickets”).[18]
Last year, the National Labor Relations Board (“NLRB”) asked an administrative law judge to “order WeWork to change policies that ban its employees from filing class action lawsuits.”[19] This occurred as result of a lawsuit filed by Tara Zoumer, a former associate community manager at WeWork, who alleged that she was fired after refusing to sign a new employment contract that included an “unlawful mandatory arbitration agreement.”[20] Zoumer further alleged that she was asked to sign this new employment contract after complaining to her manager about not being paid for overtime or given meals breaks, which are required under the law of California, where she worked.[21] Later that same year, a second WeWork employee brought “unfair labor charges” against WeWork, citing similar issues alleged by Zoumer.[22]
Uber has also faced harsh criticism over labor issues. According to Christopher Mims of The Wall Street Journal, “Uber sets the prices that its drivers must accept, and has lately been in the habit of unilaterally squeezing drivers in two ways, both by lowering the rates drivers are paid per trip and increasing Uber’s cut of those wages.” [23] Uber is able to conduct their business in this manner since its drivers do no not have the legal protections that come with being independent contractors or employees.[24]
In response to these issues arising in the sharing economy, some scholars have suggested that sharing economy employees should not be classified as independent contractors or employees, but instead as dependent contractors.[25] This new third category would “extend[] some protections to those who take on project-based work but have little leverage or power in their work arrangements.”[26] This classification would involve agencies like the IRS and the Department of Labor giving employers “explicit guidance about which protections would be extended from the patchwork of laws that currently govern employment—from the right to unionize, to minimum-wage and overtime eligibility under the Fair Labor Standards Act, [and]to Occupational Safety and Health Administration rules.”[27]
Another solution can eliminate the need for congressional action altogether by creating a “portable safety net,” where each employer is assigned an ‘individual security account’ into which every business that hires that worker would pay a small ‘safety net fee,’ prorated to the number of hours a worker is employed by that business.”[28] This method would track when employees are paid and how much.[29] However, this solution only addresses labor disputes and tax avoidance, and not issues concerning public safety.
A final suggested solution is to do nothing at all.[30] In the 2015 FTC workshop, some commentators argued that involving regulators would risk the imposition of “unnecessary or misguided regulation [that]could harm customers and competition in this dynamic, innovative sector.”[31] Other commentators have suggested if sharing platforms want to maintain their reputation and branding, they will be forced to engage in “self-regulation,” where they would “assume functions traditionally undertaken by government regulators.”[32] Several commentators countered, arguing that though self-regulation can improve customer service, “they are not a substitute for regulatory oversight,”[33] and that “real enforcement mechanism[s]” are needed, such as “recordkeeping, inspections, and strict fines.”[34]
Thousands of people are affected by the sharing economy – both positively and negatively. The decision of whether to impose regulations, and determining what those regulations should entail, requires balancing the needs and wants of the customers and employees who benefit from the sharing economy against the livelihood and safety of traditional suppliers and the greater public. It remains unclear if companies like Uber, Airbnb, and WeWork are capable of fully regulating themselves. It is even further unclear if Congressional action will actually be able to fix the problems associated with the sharing economy.
[1] See generally, Fed. Trade Comm’n, The “Sharing” Economy” Issues Facing Platforms, Participants & Regulators (2016), https://www.ftc.gov/system/files/documents/reports/sharing-economy-issues-facing-platforms-participants-regulators-federal-trade-commission-staff/p151200_ftc_staff_report_on_the_sharing_economy.pdf.
[2] Investopedia, https://www.investopedia.com/terms/s/sharing-economy.asp.
[3] Fed. Trade Comm’n, supra note 1, at 3.
[4] Id. at 17.
[5] Id.
[6] Susanne McGee, Even in Expensive Cities, the Sharing Economy May Just Have Its Limits, The Guardian: US Economy Money Blog, (Jan. 3, 2016), https://www.theguardian.com/business/blog/2016/jan/03/wework-sharing-economy-uber-airbnb-rent.
[7] Uber, https://www.uber.com/ride/how-uber-works/.
[8] Steven Hill, How the Sharing Economy Screws over American Workers, The Huffington Post, https://www.huffingtonpost.com/steven-hill/sharing-economy-american-workers_b_9018724.html.
[9] McGee, supra note 6.
[10] Fed. Trade Comm’n, supra note 1, at 2.
[11] Id. at 77-87.
[12] Id. at 78.
[13] Laura Sanders, The Blind Spot in a Sharing Economy: Tax Collection, The Wall Street J. (May 19, 2017), https://www.wsj.com/articles/the-blind-spot-in-a-sharing-economy-tax-collection-1495186206.
[14] Id.
[15] Fed. Trade Comm’n, supra note 1, at 84.
[16] Ellen Huet, As WeWork Grew Some Employees Say They Were Mistreated, Bloomberg (May 8, 2017), https://www.bloomberg.com/news/articles/2017-05-08/as-wework-grew-some-employees-say-they-were-mistreated.
[17] Id.
[18] Id.
[19] Nathan McAlone and Avery Hartmans, The Government’s Labor Agency Has Filed A Formal Complaint Against WeWork, Business Insider (July 25, 2016), http://www.businessinsider.com/labor-board-files-complaint-against-wework.
[20] Id.
[21] Id.
[22] Anthony Noto, Another Ex-WeWork Employee Heads to Labor Board over Unpaid Wages, New York Business Journal (July 1, 2016), https://www.bizjournals.com/newyork/news/2016/07/01/another-exwework-employee-heads-to-labor-board.html.
[23] Christopher Mims, How Everyone Gets the Sharing Economy Wrong, The Wall Street J. (May 24, 2015), https://www.wsj.com/articles/how-everyone-gets-the-sharing-economy-wrong-1432495921.
[24] Id.
[25] Lauren Weber, What if There Were a New Type of Worker? Dependent Contractor, The Wall Street J. (updated Jan. 28, 2015), https://www.wsj.com/articles/what-if-there-were-a-new-type-of-worker-dependent-contractor-1422405831.
[26] Id.
[27] Id.
[28] Hill, supra note 8.
[29] Id.
[30] See generally, Fed. Trade Comm’n, supra note 1.
[31] Fed. Trade Comm’n, supra note 1, at 53-60.
[32] Id. at 59-60.
[33] Id. at 61.
[34] Id. at 60.
