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Why These Startups Aren’t Betting on the Uberization of Work

W2 or independent….. not a one fit model when it comes to people without skills.  Bob L


In July, Kevin Gibbon made an announcement that could turn out to be the best, or worst thing to ever happen to his startup — depending on who you talk to.

Gibbon is the founder and CEO of Shyp, a three-year-old package delivery startup with $62 million in funding. The app-based service, lauded by many as the “Uber for shipping,” allows users to summon a courier to their door and pick up anything that they want to ship across the country. Initially, the 31-year-old founder relied on contractors to do this work “for all the reasons all the big startups do,” he said. Gibbon liked that the employee model would allow him to scale quickly, and Uber’s colossal success proved that a big workforce wanted contract employment. Or so he thought.

But after two years running the San Francisco-based business, Gibbon realized the super-scalable model of employment that Uber is now famous for just wasn’t going to work for Shyp. He needs to train his couriers and tell them where to be at a certain time —  both requirements that contract employment forbids. And while Uber or Lyft can handle any million-dollar lawsuit thrown its way for not hiring its drivers as full time workers, Gibbon says his still fledgling startup can’t afford that risk. So this summer the founder told his couriers that everything about their jobs would soon change. He would be transitioning his entire 245-person staff to W-2 employment. Part-time couriers would receive paid vacation, lunch breaks, workers’ compensation, and more. Full-time couriers would get healthcare benefits as well.

Is this new economy moving us forward or backward?

For some employees, this announcement was cause for celebration. Some even cried tears of relief — finally they had job security, benefits, and perks. One courier, however, quit. To the outside world, the perks of being a W-2 employee sound good. But the biggest on-demand startups — like Uber and Lyft — argue that their workforces are happy as contractors because of the flexibility and independence that comes with that designation. Also known as 1099 employees, contract workers can work for multiple firms, set their own hours, and come and go as they please.

This polarized reaction did not come as a surprise to Gibbon. He is, after all, at the center of the debate over how the on-demand economy is reshaping the future of work. “I do worry about what these jobs mean for the future of employment,” he said. “I’d be curious about how happy the people in the thick of it really are. Is it something they just have to do? Were they pushed out of something else? I just don’t know.”

The decisions these companies make now will have dramatic implications on the future of work. By 2020, the pool of Americans working on-demand jobs is predicted to grow from 3.2 to 7.6 million. Startups like Handy, Postmates, TaskRabbit, DoorDash, and Washio, continue to treat a vast majority of their workforce as contractors; others like Luxe, Alfred, Instacart, and Kitchensurfing are reversing course. And as these venture capital darlings walk the fine line between saving on labor costs and breaking the law, regulators and politicians are watching, and critiquing, their every move. The lines being drawn here raise critical questions: Should workers embrace the freedom the digital world offers? Or should they try to hold onto the rights that their predecessors fought over 100 years to win? Is this new economy moving us forward or backward?

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