Gig Economy Growing in Wisconsin, Despite Early Pushback

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riders, and then sort out any legal matters afterward, misses all of the work that Uber does before setting up shop somewhere new.

“It is essential for us to work with regulators, to work with our counterparts in legislative bodies, to work with these bodies that exist to protect the public,” Chang says. “We really are moving things forward, in [the] shared interests of expanding technology—expanding safe, affordable, and reliable transportation. But we want to do it in a way that’s working collaboratively.”

She points to two cities in Minnesota—Rochester and Duluth—as places where local leaders wanted to make sure they had all of the necessary information about what might result from Uber coming to town. “The Rochester City Council had said, ‘We’re thinking about this. We want to make sure that we do this right,’” she says. “And so we respected that, and we waited.”

In addition to what some detractors view as a play-by-your-own-rules regulatory structure, Uber and Lyft have also been criticized for the fact that they profit from rides provided by drivers who are classified as independent contractors, meaning they’re not entitled to all the same perks and benefits as corporate employees.

One of Wisconsin’s hottest startups, at least as measured by the amount of venture capital it has raised, would have something to say about that. EatStreet, which develops food-ordering technology, has raised more than $40 million from investors since launching in 2010, and has recently joined the contractor-or-employee debate.

EatStreet’s core business model involves providing software that allows hungry users to place orders through the startup’s website or one of its mobile apps. Most of the restaurants that EatStreet works with either have their own employees deliver orders, or outsource delivery to a service such as Austin, TX-based Mr. Delivery. These services typically classify their drivers as independent contractors, says Matt Howard, co-founder and CEO of EatStreet.

However, some of those contractors saw their employment status change earlier this year following EatStreet’s partial acquisition of Zoomer, a Philadelphia-based food delivery startup that is no longer operating. Under the terms of the deal, EatStreet bought out Zoomer’s contracts with about 1,000 drivers. Howard says EatStreet then hired them as “W-2” employees with benefits.

(W-2 refers to the annual tax form organizations issue to their employees. It is often used to distinguish these workers from independent contractors, who are sometimes labeled “1099 employees,” after a different tax form.)

“We have taken the stance of going W-2 as the right path in our mind,” Howard says.

EatStreet, which Howard says had about 150 employees prior to the Zoomer deal, increased its headcount seven-fold as a result of the decision.

Still, Howard says that most of EatStreet’s direct competitors, as well as other well-known companies associated with the gig economy, continue to use independent contractors. Only time will tell whether many of these businesses feel they, too, can strike the right balance of employee happiness and cost control by doing more for the contractors who have played an integral role in getting them to where they are today.

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Jeff Buchanan is the editor of Xconomy Seattle. Email: jbuchanan@xconomy.com Follow @_jeffbuchanan

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