Shared from the 4/9/2019 Houston Chronicle eEdition

Gig worker proposal spurs outcry

Small businesses, advocacy groups worry shift may lead to exploitation

Picture
Annie Mulligan / Contributor

Adis Diaz works for Maid Brigade, which charges more for its services but also offers its employees better benefits than some app employers.

Picture
Annie Mulligan / Contributor

Maid Brigade, a cleaning service franchise, is run by Robert Moser, who fears tech companies may undercut his prices and business if they can classify their employees as independent contractors.

A proposed rule that would classify gig economy workers as independent contractors and allow the tech companies that hire them to avoid paying unemployment taxes has provoked the outrage of worker advocacy groups that view the measure as opening the door to exploitation. The proposal is also sparking opposition among small businesses that worry the change will make it harder to compete with app-based services.

Robert Moser, for example, employs about 60 at his Maid Brigade cleaning service franchise in Houston. His company provides health insurance, paid vacation and an occupational accident policy, all costs that app-based services can avoid if they classify workers as independent workers. He fears the lower costs would allow the tech companies to undercut his prices and his business.

“If they don’t have any overhead, they can charge a lower hourly rate, by a lot,” Moser said. “If we can get the customer on the phone, we can explain and justify (our prices), but not all customers understand. If it’s two-thirds the cost, they’ll say, ‘I will go with them.’ ”

Challenge to language

The rule, tentatively approved by the Texas Workforce Commission in December, has become particularly controversial because of the intense lobbying by Handy, an app for booking home cleaners and other home services. State lobbying disclosure records show that Handy, headquartered in New York, began lobbying the workforce commission in 2017 to classify workers who get hired for on-demand work through online platforms as independent contractors.

Emails obtained through a public records request and released by a workers advocacy group show that the commission essentially adopted the language proposed by Handy. The three-member commission is scheduled to consider finalizing the rule Tuesday.

The commission denies it was unduly influenced and says the proposed rule is a response to a changing workplace. The rise of the gig economy has created relationships between workers and digital platforms that are wide-ranging and difficult to define, and the proposed rule aims to clarify those relations, according to the commission.

If finalized, it would classify most workers who use a digital platform to perform work on-demand as independent contractors while exempting the companies from paying state unemployment benefits.

“We want to ensure that current rules regarding employment status determination sufficiently address this newer employment model,” workforce commission spokeswoman Lisa Givens said in a statement.

In a statement, a spokesperson for Handy said, “Handy is dedicated to developing policy that both provides protections and benefits for workers and addresses the changing nature of work such that all businesses can successfully grow in the modern economy.”

Level playing field?

If the state changes the classification of on-demand workers from apps such as Handy, Uber and Grubhub, it may hinder the ability of local businesses that provide similar services to compete on a level playing field, business owners said.

Amanda May, the owner and founder of The Purple Fig, aresidential and commercial cleaning service in Austin, said about 10 percent of her monthly revenue goes toward health insurance for her 22 employees. The business also provides them with paid sick leave and matching 401K contributions.

May said that the entrance of gig economy companies into the market has made it tougher to recruit workers. The hourly wage working for a digital platform is often higher than what she pays, which, she conceded, can look attractive to workers. But when you look more closely, she said, on-demand companies don’t provide benefits or reimburse workers for costs they incur for supplies and travel, as her company does.

“I wish I could lay it out — what the true take-home cost is on that — after you take out your gas, supplies and taxes,” May said. The proposed rule, by making it easier for companies such as Handy to do business in the state, “would make it even harder for us to compete in the very limited employee pool with such low unemployment.”

Gig economy companies argue they are not employers, but rather intermediaries between people buying and selling services. Gig work is attractive to people looking for flexible hours and supplemental income. Hosts using the lodging service Airbnb make the most among gig economy participants, according to the Federal Reserve Bank of St. Louis, earning a median of $440 per month in 2017.

Impact to workers

Juliet Barbara, of the Workers Defense Project, said the group is most concerned that the new rule could extend to other workers, such as construction employees who are often misclassified as contractors. The organization said it was concerned that companies could take advantage of the rule by simply calling their workers “marketplace contractors” if they use a digital application.

She said independent contractors normally maintain control over the work they do, negotiating their compensation and conditions with clients and setting their hours. But some gig economy companies, for example, dictate when the workers can take time off, Barbara said.

In the past, Handy workers have come forward to allege the company controls them like employees with harsh penalties for missed jobs and requirements for high ratings to continue earning competitive wages and getting work. The National Labor Relations Board issued a complaint against Handy in 2015 over the classification of its workers as independent contractors. The case is still open.

“These businesses have a lot to gain by classifying workers as independent contractors,” Barbara said of the proposed Texas rule. “This sets a dangerous precedent.”

Conflict of interest

The proposed rule by the TWC lays out nine conditions that must be met by app-based companies for their workers to be considered independent contractors. Seven of those criteria are nearly identical to the language proposed on behalf of Handy.

For example, both the language proposed by Handy and language in the proposed rule define a “marketplace contractor” as any individual entering into an agreement with an online platform.

Handy’s lobbyists and others have pushed for similar rules or legislation across the country. Arizona, Florida, Indiana, Iowa, Kentucky, Tennessee and Utah have approved “marketplace contractor” laws that treat most gig workers as contractors. Four states, Alabama, California, Colorado and Georgia, have rejected such proposals. erin.douglas@chron.com twitter.com/erinmdouglas23

See this article in the e-Edition Here
Edit Privacy