You know how seemingly every regulation being adhered to by most companies seems to turn tech entrepreneurs and investors into petulant teenagers?
"What do you mean, you want me to license the delivery vehicles used in my Uber for Kombucha startup?!?! Ugh, I hate you so much Mom!" [Bedroom door slam] SCENE
Well, we can add the nettlesome matter of employment regulation to the Silicon Teenager's pile of complaints. It's a real pain in the ass to techies operating in the "Uber Economy" of on-demand services, but they've come up with a solution that is both wildly self-serving and kind of brilliant.
There's a war brewing over what to call the Uber and Lyft drivers in this world, and "employee" might not be the answer.
"I think it's not 1099 versus W-2. I think the right answer is a third class of worker," said Simon Rothman, a partner at Greylock and an investor in Sprig, which uses 1099 employees. "People are now becoming one-person companies, and they're not even working for one entity."
That's some cute thinking. See, under current IRS regulations 1099 employees - also known as "independent contractors" - receive no health care or unemployment insurance benefits. While that categorization makes "1099ers" more affordable to startups, it also legally forbids startups from exerting a long list of controls over those workers.
Basically the law says that if you want the right to tell how to work, where to work, or what to wear while they're working, you better be paying their dental.
But gray area created in the interpretation of the law when it comes to Uber-esque startups has turned into a shag carpet of vagaries that is now host to an orgy of employment lawsuits against startups like Uber, Lyft and Handy.
These lawsuits are a pain in the ass to even the most over-funded startups because, among other things, they expose the pink underbelly of potential IPO weaknesses. In a worst case scenario, the lawsuits might actually cause a disruption to the disruptors and make them rethink their underlying business model..
Which is why the VC that talked to BI is so intent on his idea.
If you unbundle benefits from companies or substitute them on a pro-rata basis, that's when you can create a new flexible labor class that matches how the delivery drivers or house cleaners of the on-demand economy see their jobs, Rothman said. He would love to see companies start personalized healthcare that travels with you and not dependent on your employer.
"I think this new class of worker has to reflect this new type of work that's being done," Rothman said. "If you decouple the benefits, if you decouple the pension so it's not tied with you, think about the control you can have, going out of the networks as you wish, controlling the what and when of your job."
So, the new captains of the new economy want to combat organized labor by creating a private version of universal healthcare that comes with a pension system. It's Silicon Retirement Village.
Is there precedent you might ask?
Germany is already rocking a third class of "dependent contractor," but they're not burdened with the Internal Revenue Service.
The argument could be made that giving the IRS another class of worker to regulate would be like throwing a third juggling pin at a man with no arms, but that's also not a great reason to stop thinking about it.