Uber and Other Gig Companies Maneuver to Shape Labor Rules

Christie Hemm Klok for The New York Times

It was a potentially sweeping proposal from a Texas regulator: Companies that use a “digital network” to dispatch workers the way Uber does could label them contractors rather than employees.

The proposal, made in December, was a turning point in a campaign that has played out in legislatures and courts in numerous states, and even in Washington, as Uber and other gig-economy companies have risen to prominence in recent years.

Lobbyists involved in this state-by-state effort have worked behind the scenes to provide rule makers with a template. Hanging in the balance could be billions of dollars in costs, and even fundamental business models, as more gig companies move toward public stock offerings.

When such companies are able to classify workers as contractors, they don’t have to contribute to unemployment insurance or workers’ compensation, or heed minimum-wage and overtime laws. Industry officials estimate that a work force of employees costs companies 20 to 30 percent more than a work force of contractors — a sum worth many hundreds of millions of dollars per year to Uber.

Worker advocacy groups say the goal is to chip away at classification rules in enough places to create pressure for a broad exemption nationally.

What is notable about the Texas initiative, which would apply only to unemployment insurance, is that it emerged not from a democratically elected body but from an opaque bureaucracy. There were no hearings where outsiders were questioned, no meaningful floor debates — just a few perfunctory statements at public meetings and a 30-day comment period before the agency could issue a final proposal.

“This whole thing caught us by surprise,” said Jose Garza, executive director of the Workers Defense Project, a nonprofit group in Texas that helps workers fight wage theft and misclassification.

For weeks, the impetus for the rule was unclear. A spokeswoman for the agency, the Texas Workforce Commission, publicly denied that it relied on “outside sources” when drafting proposals.

But that narrative abruptly changed in early March when Mr. Garza’s group obtained a set of emails from the commission through a public records request. The documents suggest an ambitious new phase of the campaign by gig-economy companies to solve their worker-classification problem.

Emails involving one commissioner and her staff show extensive communications with lobbyists working with Tusk Ventures, a venture-capital and political-strategy firm. Tusk, in turn, was retained by Handy, a company that dispatches workers, Uber-style, to perform household chores like cleaning and repairs. The strategy firm’s founder, Bradley Tusk, was once a top political consultant for Uber and remains a large shareholder who could cash out millions in equity when Uber goes public this year.

Tusk Ventures appears to have been the primary author of the Texas proposal. Large portions of the draft released by the Workforce Commission mirrored a proposal that the lobbyist forwarded to the agency one year earlier. Lisa Givens, the agency spokeswoman, said she had been unaware of the correspondence when she previously commented.

And Texas is not the only place where Tusk has appealed to regulatory agencies rather than legislatures to cement gig workers’ status as contractors. According to the emails, the firm has pursued similar efforts in other states, like Illinois.

Asked in an interview about the strategy of working through regulators, Mr. Tusk said, “If we believe this is the right policy, our job is to get it through, and that can be the most efficient venue.”

He foreshadowed the plan in a book he published in September. “We’re working multiple angles to get this done federally,” he wrote. “And we’re working on legislation and rules in 13 more states, too.”

What makes a worker a contractor?

Different state and federal laws define employment somewhat differently, but most focus on factors like whether managers exert significant control over workers, and whether the work is central to a company’s business.

Uber, Lyft and Handy argue that their workers should be considered contractors because the workers decide when, where and how long they work. The companies say they are experimenting with ideas, like benefits, to improve…

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Peter Bordes

Exec Chairman & Founder at oneQube
Exec Chairman & Founder of oneQube the leading audience development automation platfrom. Entrepreneur, top 100 most influential angel investors in social media who loves digital innovation, social media marketing. Adventure travel and fishing junkie.
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