Questions about the on demand, or gig, economy are surfacing in the 2016 presidential race. The differences between employees and independent contractors include things like government regulations, workers’ compensation, and health benefits. Tax Attorney Rob Wood discusses the issues, which are also the subject of his Forbes article, “Hillary Clinton Disses Uber And On-Demand Economy.”
Wood says that the on demand economy involves companies like Uber that see themselves as providing connections between customers and independent contractors. [See Wood’s earlier article about Uber on the Tax Law Channel.] Uber is a text company operating all over the world in about 300 cities. While the company has a core staff of employees, but the drivers who pick up passengers, in response to requests through Uber’s app, are independent contractors. The Uber drivers have a fee splitting arrangement with Uber. All payments are electronic.
That model, Wood notes, is considerably different from the traditional employment relationship. If a customer makes a payment to an employee, the employee is merely a collector for an employer, who compensates the employee. The question raised by many, including the State of California, is whether the people who work with and for Uber and similar ventures are really employees who should be entitled to all the benefits and protections that relationship enjoys.
Battles over independent contractor status have been going on for a long time and show no signs of stopping. Wood points out that these battles have gone on for decades and have moved from industry to industry. Both the IRS and the Department of Labor have battled with companies over this issue. In addition to Uber and Lyft, companies like FedEx have litigated this issue. Wood says that the issue is political, to some extent, although there are legitimate reasons (in the case of Uber) to conclude that Uber drivers are very little different from people who drive for taxi companies.
Wood notes that exotic dancers and taxi companies have had contests over the years with the IRS. Wood opines that there may be no simple way to make the on demand model more acceptable politically. So the on demand economy will probably continue to be a target for governments and for politicians.
For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network. The Legal Broadcast Network is a featured network of the Sequence Media Group.