Can the gig economy survive a renewed regulatory onslaught?

The emergence of Uber and Airbnb was a milestone in the creation of the gig economy, creating new ways for the average citizen to make money outside the confines of a traditional job. Two recent examples of legislative action, however, raise questions about the long-term viability of this kind of work.  

In October, Governor Cuomo of New York signed into law restrictive rules for short-term apartment rentals in the state of New York, a move aimed directly at Airbnb. Motivated by claims that building owners were taking apartments off the rental market and opting to list them on Airbnb instead – exacerbating the city’s affordable housing crisis – the new rules make it illegal to advertise vacant apartments in multi-unit buildings for rentals of 30 days or less. Hosts can be fined up to $7,500 if they get caught listing such a property on Airbnb. That said, these rentals are still allowed if the host is present, and is renting out a room or bed.

At the end of October in the UK, an employment court ruled in a landmark case that Uber drivers are not self-employed, should be paid the “national living wage” and are entitled to vacation pay, providing precedent and inspiration for similar legislation in the United States.

Innovation at the Expense of Workers?

From a communications standpoint, these companies have enjoyed something of a free pass. Both companies have been widely regarded, until recently, as innovators who revolutionized the transportation and hospitality industries.

The Uber business model depends on the idea that the company’s drivers are not employees but business owners who simply use the Uber platform to conduct business on their own time and on their own terms. Similarly, Airbnb claims it is just a platform enabling property owners to become business owners, who in turn provide a service to those in need of a short-term place to stay.

But the success of both companies has not come without a price.

By positioning themselves as mere facilitators, they have deftly circumnavigated certain responsibilities that businesses have traditionally accepted – for employee benefits, sick leave or pensions in the case of Uber, and for property damage or transactions gone awry in the case of Airbnb.

In a previous blog, I talked about how regulators were caught off guard by the exponential rise of these kinds of services, and initially outmaneuvered by the costly but effective public policy muscle these brands put into force.

But these two recent cases are the clearest indications yet that regulators are willing to take on the gig economy giants once again.

The implications for both companies are enormous. New York City is the biggest market for Airbnb. While Airbnb has stated its intention to fight the decision, that may be more challenging than they think. And while Uber successfully fought efforts by New York Mayor Bill de Blasio to clamp down on their business, they did so by fighting a costly, aggressive battle, mobilizing the large number of Uber drivers and users in the city to make their collective voice heard.

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As this Vanity Fair rightly points out, Airbnb doesn’t necessarily have the same groundswell of local support. While many New York residents act as Airbnb hosts, most renters tend to be from outside the state, and as such don’t have a direct stake in the regulation. In addition, the hotel lobby is a significant force to be reckoned with.

Meanwhile, Uber has declared it will also fight the decision of the UK court, but it appears that momentum in that market is turning against them. The British government recently announced a six-month review of modern working practices, which will include scrutiny of the trend of the practice of companies deploying a self-employed workforce. This is in addition to another government inquiry which will look specifically at the status and rights of agency and casual workers and the self-employed in the context of tax, benefits and employment law, and will seek ways to protect this new class of worker.

It is arguable that government and media scrutiny of Uber’s practices in the UK is fueled in part by a desire to appease the disgruntled voters who made their voice heard loud and clear in the Brexit referendum.

Similarly, in the US, where income inequality has dominated the political discourse of late, there may be a renewed vigor on the part of regulators to scrutinize the giants of the gig economy and the broader impact of their business model.

Next week, I will look at how companies such as Uber, Airbnb and others built around the concept of the gig economy can and should reposition their narrative – avoiding costly battles with regulators that are damaging to their image and increasingly likely to fail.