The Sharing Economy is Challenging Labor Laws, Are Lawmakers Paying Attention?

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Ride-sharing apps are revolutionizing how people across the country commute. But with the growth in popularity, companies like Lyft and Uber become easy targets for regulators and lawmakers, mostly because laws already in place protect industries that are already losing their appeal due to competition.

Last month, Lyft settled a class-action lawsuit brought by its California drivers. With the settlement, Lyft upheld the freedom of drivers locally by avoiding to classify them as employees. By allowing participating motorists to remain as contractors, Lyft gave drivers the flexibility to control when, where, and for long they work through the platform.

To many, this was a step in the right direction. But to Christopher Koopman, a research fellow with the Project for the Study of American Capitalism at the Mercatus Center, this victory is not enough.

In an article for The Hill, Koopman says the settlement fails to resolve other issues tied to worker classification laws.

Since sharing economy apps like Uber and Lyft do not easily fit within current state and federal labor laws, Koopman explained, “challenges [to] the status quo of government regulation” will continue to present a legal headache to company executives—and drivers.

In places like New York City, Uber and Lyft stood up to taxi regulations. By doing so, sharing economy apps helped to boost transportation choices for low-income households. At the federal level, Koopman explained, Uber and Lyft are now challenging an 80-year-old law known as Fair Labor Standards Act of 1938, which defines what an employee is. According to Koopman, the Department of Labor’s own interpretations of the 80-year-old law do nothing to clarify the issue, making the lives of individuals relying on Lyft and Uber to pay their bills much more complicated in the long-term.

If this issue is not fixed at both federal and state levels, Koopman says, Uber and Lyft will continue to battle lawsuit after lawsuit. And leaving the decision to the courts, Koopman stated, is “far from ideal.”

As labor laws remain unchallenged by lawmakers, Koopman warns that the sharing economy is not the only one that will suffer.

Using IRS data, Koopman found that the growth in non-employment working arrangements “predates the advent of the sharing economy.” In 2010, the Government Accountability Office estimated, at least 40 percent of workers in America operated under “alternative arrangements.” If their choice had been questioned legally, they would have lost their arrangements, therefore making it hard for folks to make ends meet.

To loosen the restrictions by changing legal definitions could prove beneficial to workers across the country, so why rely on the courts? If that’s the case, Koopman warns, juries, or “ordinary folks simply working with square pegs and round holes” will be tasked with the duty of choosing who should be classified as employees.

Will they choose solutions that boost freedom instead of giving government even more power?