Sharing Economy Companies Sharing the Heat In Contractor Controversy
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compete based on price, he says. They may therefore favor classifying workers as contractors.
Instacart, which has been sued for allegedly misclassifying its grocery store shoppers as contractors, cited reasons similar to Eden’s this week for its decision to offer its shoppers staff jobs.
“This model enables us to train our shoppers to improve the efficiency and quality of order picking, which makes for a better customer experience,” Instacart founder and CEO Apoorva Mehta said in a statement this week.
Meanwhile, Homejoy, a cleaning services on-demand startup that raised $40 million (and also went through Y Combinator), said today it is shutting down at the end of this month. In a blog post, co-founder and CEO Adora Cheung cited “many unresolved challenges in the home services space.” Whether or not it’s part of the reason for the shutdown, the company has been involved in several recent lawsuits over whether its contract workers should be classified as employees.
The distinction between an employee and a contractor was a bone of contention well before tech companies joined the fray. Regulators and labor groups have long tried to prevent companies from classifying workers as contractors to avoid the additional expense of taking on employees. These costs include overtime and vacation pay, reimbursement for staffers’ business-related expenses, and contributions to workers’ compensation insurance and Social Security benefits.
Now that Eden is converting its contractors to employees, the company has to re-think its compensation rates to take the new costs into account, Du Bey says. The Tech Wizards will still be well paid, though their hourly rate may not remain at $30.