Uber’s rise shows sharing economy needs new rules

Uber is a brand, a verb, a proprietary eponym, a loss-making $50 billion enterprise and a new way of doing business – one that’s upending industries, worrying workers and thrilling consumers around the world.

Uber is one of many new companies eager to act not as suppliers but as platforms – offering smartphone apps that connect drivers with riders, apartments with travelers, handymen with homeowners. Such arrangements are often known as the “sharing economy.” They’re starting to take off, and they pose something of a challenge to policy makers and regulators.

For the platform owners, the logic is powerful: Use next to no physical capital, employ almost no workers, assume few risks and take your cut of each transaction. For customers, it’s just as sweet: Get more of what you want more easily, and pay less for it.

For worker-suppliers, it’s a mixed bag: Profit from greater demand for what you have to sell and from easier access to buyers – but sometimes for less pay, and without the employee benefits and security that go with traditional jobs.

For officialdom, that’s a vexing combination. What’s the right response to a company that causes much unease and disrupts entrenched interests, yet also has immense potential benefits for consumers?

In Uber’s case, two possibilities suggest themselves.

One appealing option is to have no response at all. Have you tried Uber? It’s great. Its innovations – such as surge pricing, which ensures more drivers are available when demand is highest – are exciting.

For many drivers, it’s a boon. Uber’s battles with local governments have become the stuff of legend, but more and more places are welcoming it – some 300 cities so far – and they often find themselves wondering what the fuss was all about.

Another response is to remember that old laws are sometimes ill-suited to new technology. A pending California lawsuit – on behalf of Uber drivers who say the company owes them for expenses and tips – offers a case in point.

Uber says its drivers are independent contractors, which means they aren’t covered by most labor regulations and aren’t owed expense reimbursements, overtime pay and so on. Some drivers (along with the California Labor Commission) assert that they’re actually employees, and as such entitled to those benefits and more.

They’re probably both wrong.

The New-Deal-era classifications that prevail in the U.S. – either contractor or employee – make little sense for Uber and its peers, which let their workers set their own hours and operate with a lot of independence (as contractors would) but also monitor their performance and set their pay rate (as with employees).

A California judge considering a similar case said that state law “provides nothing remotely close to a clear answer” to the conundrum and that the jury would be “handed a square peg and asked to choose between two round holes.”

Expect such confusion to persist until lawmakers, state and federal, start thinking more creatively. That might mean considering new kinds of classifications – for instance, the “dependent contractor” model used in Canada and elsewhere.

It might require rethinking parts of the social safety net that were designed with full-time employment in mind. It will surely mean, in the federalist spirit, that states should experiment with a variety of new arrangements and find what works best for their citizens.

If self-driving cars catch on, labor laws of all kinds may one day be a moot point for Uber. But industry after industry is testing the logic of its approach – hence Uber for tailors, Uber for doctors, Uber for getting wasted. Each will present its own complications.

On the whole, though, this phenomenon should be viewed with optimism – and a willingness to question whether the old ways of doing things still make much sense in the age of on-demand cannabis.