The “Game Changers” – New Business Models Rewriting Worker Classification
It’s no longer news to anyone who follows workforce management that the Ubers of the world – the “gig economy” business models – have initiated a sea of change in worker classification practices. High profile legal challenges to the business models of innovators like Uber and Homejoy wind their way through the legal system. Even log-established companies like FedEx have found themselves in court to defend misclassification lawsuits. Yet, despite these well-publicized cautionary examples, there is still a great deal of confusion over how to properly address worker classification. Perhaps because the nature of “work” is evolving so quickly. So how can you, as a workforce management pro, keep your organization protected from misclassification risk?
The following bit of Q&A comes directly from the IRS website:
Question: How do you determine if a worker is an employee or an independent contractor?
Answer: The determination can be complex and depends on the facts and circumstances of each case. The determination is based on whether the person for whom the services are performed has the right to control how the worker performs the services. It is not based merely on how the worker is paid, how often the worker is paid, or whether the work is part-time or full-time.”
The kind folks at Internal Revenue elaborate a bit more on the subject offering three basic categories of factors relevant to determining a worker’s classification. They define them as:
- whether there’s a right to direct or control how the worker does the work
- whether there’s a right to direct or control the business part of the work
Relationship of the parties
- how the business and worker perceive the relationship
If these seem familiar yet vague, it is because this is ground the industry has already covered. Yet, the “game changing” nature of innovation in business continues to muddy the lines between what were once fairly well-delineated features. Consider the new offering by Amazon – Amazon Prime Now. With this innovation, Amazon is cutting out the parcel carrier portion of the equation and hiring Independent Contractors – Uber style – to deliver Amazon Prime orders, same day. What could possibly go wrong? Just ask Uber.
It seems likely that as new iterations and variations on gig economy jobs continue to come to market, the potential is high for conflicts between the existing rules for worker classification and unique circumstances to challenge the status quo. The best thing an organization can do to mitigate risk in this regard is to partner with an expert provider of workforce management solutions. After all, providers like nextSource, eat, sleep and breathe worker classification. Dealing with so many different business models and strategies, workforce management providers have a far more refined understanding of the nuances in play. They also have up-to-date, hands-on experience and the perspective such experience nurtures.
In uncertain operational environments, having an expert to help guide your actions can be a significant means for mitigating risk. Reach out today to discuss your company’s worker classification practices.