Some argue these companies might be classifying their workers wrongly. Dan Teran, CEO of Managed by Q, an on-demand office management startup, has long believed that workers can be both flexible and protected.
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The company will pay them workers’ compensation and vehicle expenses, in addition to their unemployment, Social Security, and Medicare taxes, as it does for its satellite drivers and warehouse employees. “We want to provide our couriers with additional supervision, coaching, branded assets and training, which can only be done with employees, so a shift is needed”.
Shyp, a hot new startup that recently raised $50M, is an on-demand shipping company that allows users to call a courier to pick up and drop off packages for a low price each trip (usually $5). The company said that it will switch its couriers from being independent contractors to its employees. One of the main differentiators between employees and contractors is how much control an employer can have over them.
What does an on-demand company do if it wants to control its independent contractors – train them, put them in uniforms, and tell them how to interact with customers?
Some workers question the model’s fairness, suggesting that companies are padding their bottom lines by shifting costs to workers with few protections or guarantees. But businesses that scale up quickly based on the assumption that its workers will remain contractors risk backing themselves into a corner if the model itself ends up alienating workers or falling afoul of employment laws.
Shyp maintains that its decision has little to do with the recent controversy. After launching in San Francisco a year ago, it now has operations in New York City, Miami, and Los Angeles and plans to expand to Chicago soon.
A Shyp spokesman said the company won’t increase its rates as a result of the reclassification. Homejoy, the home-cleaning startup, weighed the pros and cons on two occasions before ultimately deciding to keep its cleaners as contractors. The companies are researching the benefits and drawbacks of hiring their drivers as employees, according to a person with direct knowledge of the matter.
Shyp’s experiment could prove that the fulltime freelancers that Uber and other companies rely on may just be an inefficient strategy, considering the high turnover and mediocre training.
Steven Grady is a current Shyp courier who, like Teran, was happy with Shyp’s decision to change, writing in an email that “most couriers I know will be very excited” about the “huge improvements to their work and personal lives”.
In his blog post, Gibbon said the decision to take that step now was not in response to lawsuits in the industry.
“I think there will be some turnover as certain standards are enforced, and of course as some leave because they prefer the flexibility of being an independent contractor”, he said.
Here at Shyp, we have three different roles that make up the workforce that creates the awesome Shyp experience that we’ve become known for.
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Update 8:57 PM EST 07/01/2015: WIRED has learned that ahead of Shyp’s announcement today, worker misclassification lawsuits had been filed against the on-demand company, and against startups Washio and Postmates, earlier this week in San Francisco.
