The sharing economy requires a new look at work relationships. Many of the business models in the sharing economy are based on individuals being creative and entrepreneurial as they seek to provide services to others. Drivers for companies such as Uber and Lyft share their cars using a license to access software that connects drivers and riders. Residences are rented out on a short term basis using software that markets to prospective travelers on sites like VRBO and Airbnb. SnapGoods provides a mechanism for lending or borrowing high-end household items. DogVacay provides host homes to animals whose owners are travelling. TaskRabbit allows others to bid to do your tasks and odd jobs. There is a never-ending list of creative sites looking to maximize the sharing economy. But, when is the line crossed from independent contractors providing services to others to employees of the “hosting” company? This is the question that has been the focus of recent administrative rulings and lawsuits involving Uber.
In Florida, a driver for Uber filed for unemployment after his car was damaged in an accident. As reported in the Miami Herald, the state agency agreed he was an employee for the purposes of unemployment benefits. Meanwhile, in California the Labor Commission also found that an Uber driver was an employee not an independent contractor. Both Uber and Lyft are currently facing lawsuits that are wending their way through the Northern California Courts alleging the same thing. So, what does this mean to other sharing economy ventures outside of the transportation industry, such as the short term rental market?
A quick look at the reasoning of the California Labor Commission is the best place to start in the quest for an answer. Under California law, there is an inference of “employment” if personal services are performed as opposed to business services. The factors considered when determining independent contractor status are:
- Whether the person performing services is engaged in an occupation or business distinct from the alleged employer;
- Whether or not the work performed is a part of the regular business of the alleged employer;
- Whether the alleged employer or the worker supplies the tools and the place where the person performs the work;
- The amount invested by the worker in the equipment or materials required by the task and whether or not the worker has employees of their own;
- Whether the service rendered requires a special skill;
- The kind of occupation and whether the work is usually done under the direction of the alleged employer or by a specialist without supervision;
- The alleged employee’s opportunity for profit or loss depending on his or her managerial skills;
- The length of time for which the services are to be performed;
- The degree of permanence of the working relationship;
- The method of payment, whether by time or by job; and
- Whether or not the parties believe an employer-employee relationship is being created.
In the recent California case, the driver claimed she was owed unpaid wages, reimbursement of business expenses, liquidated damages and penalties. Uber disagreed saying she was an independent contractor who had complete control over her schedule, if she even took any riders, and she had to obtain her own license from the state to carry passengers. Uber simply provided the iPhone and the platform for matching riders and drivers. The Labor Commissioner sided with the driver, finding that the type of work performed by the driver was integral to Uber’s business. Specifically, without drivers such as the Plaintiff, Uber’s business would not exist. Uber was involved in every aspect of the operation. They vet the drivers, control the tools the drivers use, set the price for the trip, accept the cancellation fee without necessarily sharing it with the driver, and discourage the acceptance of tips by drivers because doing so would be counterproductive to the Company’s advertising and marketing strategy. The Labor Commission said all of these activities pointed to an excessive amount of control, thus demonstrating an employment relationship – not that of an independent contractor.
So what does this potentially mean to the rest of the sharing economy, in particular, the short term rental market? Likely, not much, but that could vary based on how the service operates. For example, VRBO provides a web platform and marketing, but the property owner needs to do the majority of the work to get her property on the site, manage the property and deal with reservations. One of the big distinctions is that the short term rental companies provide a marketing platform for a business service (renting a piece of property) as opposed to a personal service (renting a driver). The risk for such companies is not so much with the property owners, but with the service personnel who provide housekeeping, or maintenance services or other similar services to support the properties. The short term rental company may insulate itself from a claim that the service personnel are its employees if it limits its involvement in the hiring and supervision of such services, leaving that to each individual property owner. If, however, the short term rental company acts more as a property manager, such as Vacasa, then there may be an argument that the service personnel are employees of the short term rental company. No matter the industry, if there is any question regarding the employment/independent contractor status of your workers, it is always best to involve legal counsel sooner rather than later.
Joy Ellis, member of our Labor and Employment Group and Hospitality, Travel and Tourism practice team, brings us the very latest news about Oregon’s Statewide Paid Sick Leave Bill. Thank you, Joy! – Greg
In a healthy victory for Democrats that left some Republicans feeling ill, Oregon’s legislature voted to enact a statewide paid sick leave law that will take effect January 1, 2016. Governor Brown signed the bill into law on June 22, 2015. The law requires Oregon employers with 10 or more employees to provide up to five paid sick days a year – except in Portland, where employers need only to have six or more employees to be subject to Portland's paid sick leave ordinance, in effect since 2014. Oregon employers with fewer than 10 employees (or six, in Portland) need to provide unpaid sick leave to employees who qualify. The statewide law negates the city of Eugene’s controversial sick leave ordinance that was passed in 2014 but has not yet been implemented.
Under the law, employees will accrue one hour of paid sick time for every 30 hours worked, up to five days (40 hours) a year, the same as the Portland ordinance. Employees may take time off to care for themselves or a family member. It is expected that employers already complying with Portland’s sick leave ordinance will not have to change their practices. Employers with paid time off policies with substantially equivalent benefits will not need to convert their policies. Now is the time to plan ahead and make sure your policies are ready to go on January 1, 2016.
The law also protects employees from retaliation or discrimination for using sick time.
Oregon is now the fourth state to enact statewide paid sick leave, following the lead of Connecticut, California, and Massachusetts.
In the hospitality industry, dress code policies are very important. Diana Shukis, member of our Labor and Employment Group, brings us the latest US Supreme Court ruling regarding image-based policies. Thank you, Diana! – Greg
On June 1, 2015, the US Supreme Court ruled in favor of the US Equal Employment Opportunity Commission (EEOC), concluding that an employer cannot refuse to hire a qualified job applicant in order to avoid accommodating a religious practice – even if the applicant did not request an accommodation. An applicant must only show that her need for a religious accommodation was a motivating factor in the potential employer’s decision not to hire.
In EEOC v. Abercrombie & Fitch, Samantha Elauf, a Muslim who wore a headscarf for religious reasons, interviewed for a sales floor position at Abercrombie. Ms. Elauf wore a headscarf to the interview, but did not discuss her religion or say that she wore the headscarf for religious reasons. The assistant store manager who interviewed Ms. Elauf did not ask about the headscarf, but later testified that she assumed Ms. Elauf was Muslim. The assistant store manager gave Ms. Elauf a rating that qualified her to be hired, but was concerned that Ms. Elauf’s headscarf conflicted with Abercrombie’s dress code, which prohibited headwear of any kind. The assistant store manager checked with the district manager, who directed the assistant store manager not to hire Ms. Elauf because her headscarf would violate Abercrombie’s dress code.
The EEOC sued on Ms. Elauf’s behalf, claiming that Abercrombie’s refusal to hire Ms. Elauf because of her religious practice violated Title VII of the Civil Rights Act of 1964 (Title VII), which prohibits discrimination based on race, color, sex, religion or national origin. Abercrombie argued that it did not violate Title VII because its dress code banned all headwear, whether religious or not, and because Ms. Elauf had not requested an accommodation due to her religion.
The Supreme Court rejected Abercrombie’s argument that Ms. Elauf had to prove Abercrombie knew she needed a religious accommodation, noting that Title VII does not include a knowledge requirement. Title VII outright prohibits certain motives, including making employment decisions based on religion, regardless of an employer’s actual knowledge. The evidence showed that Abercrombie at least suspected Ms. Elauf wore the headscarf because of her religion and it refused to hire her because of it.
- Don’t stick your head in the sand. If you suspect that an applicant may need a religious accommodation if hired, you should engage in an interactive process with her. Typically this would include explaining the relevant policy and asking whether she can comply with it. If not, ask why. If it is because of religion, ask whether she would need an accommodation and what that might be. Then, evaluate whether granting the accommodation would impose an undue hardship. Remember to use caution in asking the follow up questions. Focus on the job requirements and whether the applicant can meet them – not on the applicant’s religious beliefs and practices.
- Train interviewing teams. Be sure that you provide regular training to those who interview in your organization. They need to understand what they can and cannot ask in the interview process and when they need to call in reinforcements to assist with more challenging issues. Also make sure that higher level managers have appropriate training, including on when to contact HR before making a decision. I bet Abercrombie & Fitch wishes its district manager had called HR before giving the “do not hire” instruction as to Ms. Elauf.
- Review your appearance policy. Dress codes and appearance policies are very important in the hospitality industry, but this case is a good reminder of some of the dangers lurking in and around them. The EEOC is very skeptical of image-based policies that seem to exclude people based on how they look and/or what they wear. Be sure your appearance policy is updated and in-line with what is truly important for your business.
Greg Duff founded and chairs Foster Garvey’s national Hospitality, Travel & Tourism group. His practice largely focuses on operations-oriented matters faced by hospitality industry members, including sales and marketing, distribution and e-commerce, procurement and technology. Greg also serves as counsel and legal advisor to many of the hospitality industry’s associations and trade groups, including AH&LA, HFTP and HSMAI.