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The call for broader protections for on-demand workers is getting louder. And some companies are listening.
Shyp, a San Francisco-based startup that picks up, packages, and ships items on demand, said today that it's converting its couriers from independent contractors to full-fledged employees. The move, announced in a blog post by CEO Kevin Gibbon, makes Shyp one of the few on-demand companies to boast a workforce made up entirely of employees.
“This move is an investment in a longer-term relationship with our couriers, which we believe will ultimately create the best experience for our customers,” Gibbon writes.
“We want to provide our couriers with additional supervision, coaching, branded assets and training, which can only be done with employees, so a shift is needed.”
According to Gibbon, while its van drivers and warehouse workers have been classified as W-2 employees all along, its couriers—workers who actually interact with the customers, picking up their items meant for shipping—were previously classified as independent contractors. This shift would convert all couriers into employees.
Shyp's workforce of van drivers, warehouse workers, and couriers will consist of a mix of full-time and part-time employees, the company told WIRED. Newly classified W-2 couriers will get workers’ compensation and vehicle reimbursement as well as unemployment, Social Security, and Medicare. Additional benefits such as healthcare will be available to full-time workers.
Shyp’s move comes at a time when the debate around how to properly classify workers for on-demand companies is heating up. As startups like Uber and Instacart go mainstream, so has awareness—and criticism—of the so-called 1099 economy on-demand companies foster. These startups typically employ freelance contractors, a status they pitch as desirable because the work is relatively undemanding and flexible. (Instacart recently began offering its shoppers an option to convert from contractor to part-time; Uber is fighting a class-action lawsuit accusing the company of misclassifying its drivers as contractors.)
Some workers question the model's fairness, suggesting that companies are padding their bottom lines by shifting costs to workers with few protections or guarantees. According to research by the National Employment Law Project, businesses can save up to 30 percent of their payroll tax costs by choosing to classify employees as contractors—savings, some argue, that offer unfair competitive advantage by incentivizing misclassification. But businesses that scale up quickly based on the assumption that its workers will remain contractors risk backing themselves into a corner if the model itself ends up alienating workers or falling afoul of employment laws.
Shyp for its part is growing fast. After launching in San Francisco last year, it now has operations in New York City, Miami, and Los Angeles and plans to expand to Chicago soon. The number of packages shipped by Shyp has grown nearly 500 percent since closing its first round of funding, the company says, and its customer base is growing by more than 20 percent month over month.
That said, the company officially opened its doors just sixteen months ago. That’s still relatively young for a startup, even considering its growth. Shyp declined to share specific numbers on the size of its workforce but says “hundreds of people” work for the company.
This isn't small, but it also means that if Shyp can get ahead of the contractor-versus-employee question early enough, it can ensure that its business scales reasonably. It may cost the company more at the outset, but it would avoid the dilemma so many other on-demand companies—notably Uber, with its million drivers—face. Shyp would avoid getting huge based on a problematic model.
At the same time, Shyp gains more control over all the aspects of its business, including coaching and training its couriers. It could even require them to wear uniforms—all things that aren’t allowed under the independent contractor model.
And though Shyp says its decision isn't motivated by the recent slew of lawsuits1 against other on-demand companies2, the move can’t hurt. If Shyp can scale while retaining granular control over how it operates, and keep a positive image to boot, it would seem like the young startup has nailed down a pretty good plan to grow up on.
1UPDATE 8:57 PM EST 07/01/2015: WIRED has learned that worker misclassification complaints were filed Monday against Shyp, and against on-demand companies Washio, Postmates, and Caviar.
2UPDATE 11:23 PM EST 07/01/2015: Shannon Liss-Riordan, the Boston lawyer who filed the complaints against Shyp and other on-demand companies this week, tells WIRED in an email: "I was very pleased to see the news that Shyp is abandoning the use of independent contractors and acknowledging its workers as employees. We filed the case on Monday, and while they probably didn't see it before they made this announcement (that I learned of today), I do believe the attention this issue has gotten recently is making more companies rethink the business model of saving on labor costs by denying their workers are employees. I hope more companies get this message and follow this trend."
