Determining whether a worker is an “employee” or an “independent contractor” can be an uncertain and consequential task. According to the Department of Labor, “[t]he misclassification of employees as independent contractors presents one of the most serious problems facing affected workers, employers[,] and the entire economy.” Yet, despite its ostensible importance, the definition of “employee” in many employment statutes is essentially useless: an “employee” is merely defined as an “individual employed by an employer.” To apply this circular definition, courts have been forced to craft variable worker classification “tests” that can perplex both businesses and workers attempting to make the distinction.
Recently, the employee–independent contractor obscurity has been compounded by the rise of the modern “sharing economy business model” and the digital platforms that facilitate it. Platforms such as Uber, Lyft, and Postmates purport to be technology companies that facilitate transactions between suppliers and consumers via online, real-time applications. The transactions in the sharing economy generally involve a supplier lending goods or labor—such as a car, bedroom, or delivery service—to a consumer for a limited period of time or for a limited use. Thus, a resource that would be otherwise idle is “shared” between the parties at a low transaction cost, which allows almost anyone to “make money from underused assets” and ultimately “provides new opportunities for enterprise.”
Because these platforms claim to be facilitative technology companies, they classify their network of suppliers as “independent contractors” rather than “employees.” Some suppliers, however, have begun to challenge this classification, urging state and federal courts to declare them “employees” as a means of gaining protection under various employment statutes. As courts struggle to apply “outmoded” worker classification tests that originated in nineteenth-century labor law, the ensuing litigation has proven to be costly, causing at least one sharing economy startup to shut down completely.
This Comment explores the incongruity between the existing worker classification framework and the modern sharing economy business model.
