Other Shoes Dropping: Silicon Valley Startup and Contract Workers Sue To Be Recognized As Employees

The tension has been building for a long time. How can enterprises ostensibly driven to make the world a better place through technology continue to refuse to share their largesse with those who are helping to create the value?


The Ellen Pao verdict was a symbol, not a cause. Other suits were already being filed about racial and gender discrimination and about the difference between being a full employee rather than a contract worker. And whether being a contractor really meant that the contracting entities were entitled to offer less in pay and benefits.Or even who should reap the rewards from the use of personal data.

The details vary. Some of these challenges may succeed, others may not. What may be more important than the specific details is what unites them: a fundamental disagreement with the way that opportunity is apportioned in the tech industry.

These are not isolated, individual assertions but part of a broader whole. The industry will respond because its public persona is at stake. Consumers may rethink their purchase habits. Governments may re-examine the nature of their support. Of the three essential human components: investors, employees and customers, only investors support the status quo. But without the value being generated by satisfied employees and customers, investors will soon look elsewhere. JL

Cyrus Farivar reports in ars technica:

These companies want to exert a certain amount of control and yet the more they do, the more they look like employers that have to pay benefits and all the things that come with being an employer. "Not paying minimum wage—we decided that back in the Depression."
Earlier this month, two federal judges in San Francisco allowed two significant labor lawsuits filed against Uber and Lyft to move ahead. In those cases, drivers for both services have sued in an attempt to be classified as employees rather than independent contractors. As an employee, workers have certain rights and benefits not traditionally granted to non-employees, such as overtime, minimum wage, worker’s compensation, and more.

"Jury will be handed a square peg and asked to choose between two round holes."

Beyond those cases, court filings show that at least four new similar lawsuits (some of which are proposed class-action cases) were filed in state and federal courts in the San Francisco Bay Area over the past month against so-called "sharing economy" startups. The underlying issue is the same: who exactly is—or should be—an employee?Here in Oakland, one law firm has brought two of the recent cases against Homejoy, a San Francisco company that describes itself as a "movement to make cleaning services available to a broad audience, rather than a luxury for the rich." The lawsuits, filed earlier this month in California Superior Court in San Francisco, are formally known as Zenelaj vs. Homejoy and Ventura vs. Homejoy.
Seated in his downtown 10th floor office overlooking Lake Merritt, Byron Goldstein described a common story among his clients (Vilma Zenelaj and Diana Ventura) who used to work as cleaners for Homejoy.
"They describe the job of going to these houses that they don't know anything about and doing a lot of cleaning and at risk of getting bad reviews and that impacting their pay or being removed," he told Ars, explaining that cleaners don’t know very much about the house where they have been assigned to work, much less what state it is in prior to their arrival.
"A lot of the cleaners do want the opportunity to either be employees or to have more of their control, so they can increase their profit," Goldstein added. "Now they’re just working very hard under specific rules without much opportunity to increase their profit. It's a very very difficult job."
Other similar suits (Levin v. Caviar Inc.) have been filed against companies that include Try Caviar, a food delivery startup that was acquired in August 2014 for $90 million. Another case was brought by Levin’s Boston-based lawyers against Postmates, another delivery service, in Singer and Williams v. Postmates. In February 2015, a fifth civil complaint (Cobarruviaz v. Maplebear) was brought in federal court against Instacart, a San Francisco venture-backed startup that picks up and delivers groceries.
In many cases, workers for these companies sign contracts where they agree to stick to the lower employment status—however, those contracts can be challenged after the fact as part of a lawsuit. Just because someone has signed a document with their employer stating that they are a contractor does not make it ironclad.
None of these companies responded to Ars’ request for comment, except for one. Katie Baynes, a Caviar spokeswoman, declined to comment.

“Cleaners cannot tell Homejoy how much driving they prefer to do”

Goldstein’s co-counsel in this case, David Browne, also told Ars that companies often have their business set up to rely on independent contractors because it saves the company money. But even if a worker signs a contract agreeing to be a de facto freelancer, that doesn’t make it so under the law.
"We think that with the amount of control that the companies have over the cleaners, they can't be classified as independent contractors—we think they need to be classified and paid as employees," Browne said.
In the case of Homejoy, the plaintiffs allege that there is strong evidence that they should be considered as full-fledged employees. Diana Ventura, a woman from Los Angeles County who worked for Homejoy for a total of nine months in 2013 and 2014, alleges Homejoy violated several provisions of California labor law.
Her complaint argues:

Cleaners are unable to provide any additional information before jobs are assigned. For example, a Cleaner cannot tell Homejoy that while she may have picked different zip codes or cities as part of her territory, she only wants to stay within one zip code, or within one small part of a zip code, each day. Instead, if a Cleaner chooses Oakland and San Francisco as part of her territory, Homejoy alone determines whether the cleaner will stay in Oakland on a given day, stay in San Francisco on a given day, or travel in between the two cities multiple times on a given day. Furthermore, Cleaners cannot tell Homejoy whether they want a little or a lot of down time between each job, or each job start time or end time. Cleaners cannot tell Homejoy how much driving they prefer to do, whether the jobs need to be near public transportation, whether the Cleaners prefer to be stuck in rush hour traffic or instead on routes that are reverse commutes, how many jobs the Cleaners want to perform each day, or whether or not they want to return to a previous customer.

Context matters

To be clear, this type of labor dispute isn’t unique to tech companies by any means. Many labor law experts pointed to several years worth of legal disputes between FedEx and its drivers, nearly all of whom are independent contractors. In August 2014, the 9th Circuit Court of Appeals reversed a lower court ruling, finding that drivers in California and Oregon were, in fact, employees. (Since 2011, FedEx has changed its hiring model in this region.)
But FedEx, by its own admission, continues to face dozens of related cases nationwide over this issue. As the company wrote in its annual report in July 2014:

Adverse determinations in matters related to FedEx Ground’s independent contractors, however, could, among other things, entitle certain of our owner-operators and their drivers to the reimbursement of certain expenses and to the benefit of wage-and-hour laws and result in employment and withholding tax and benefit liability for FedEx Ground, and could result in changes to the independent contractor status of FedEx Ground’s owner-operators in certain jurisdictions. We believe that FedEx Ground’s owner-operators are properly classified as independent contractors and that FedEx Ground is not an employer of the drivers of the company’s independent contractors.

On the federal level, the Fair Labor Standards Act (FLSA) of 1938 is the governing body of law that dictates who is and isn’t an employee, and it has some overriding principles. (California has a similar corresponding state law.)
As the United States Department of Labor writes on its website:

A number of "economic realities" factors are helpful guides in resolving whether a worker is truly in business for himself or herself, or like most, is economically dependent on an employer who can require (or allow) employees to work and who can prevent employees from working. The Supreme Court has indicated that there is no single rule or test for determining whether an individual is an employee or independent contractor for purposes of the FLSA. The Court has held that the totality of the working relationship is determinative, meaning that all facts relevant to the relationship between the worker and the employer must be considered.

In the case of Homejoy and the other civil complaints that he has read, one labor law professor thinks that the plaintiffs have a slam-dunk case and that startups will have a hard time defending their practices.
"At the end of the day, [companies] are going to have this common law test of who's an employee, and they're going to be disappointed to learn that courts apply the old-fashioned test of categories," Michael LeRoy of the University of Illinois told Ars.
Similarly, Ruben Garcia, a labor law professor at the University of Nevada Las Vegas, told Ars that someone like a plumber who is employed on a one-off basis by customers is an obvious independent contractor, but someone who is consistently spending long hours working for the same company is more likely to be considered as an employee under the law.
"Are these workers subject to the control of an employer?" he asked. "It doesn't matter if the employer is on site, is in your home, is telling you how to do every part of your job. If they exert sufficient control or the right to control they can be considered as employees. The problem or the issue with these companies is that they want to exert a certain amount of control and yet the more they do, the more they look like employers that have to pay benefits and all the things that come with being an employer."
Miriam Cherry, a labor law professor at Saint Louis University put it more succinctly:
"You don't want to regulate them out of existence, but not paying minimum wage—we decided that back in the Depression."