Sharing economy brings complications for employers

Companies like Uber disrupt labour landscape
By Liz Bernier
|Canadian HR Reporter|Last Updated: 02/05/2016

The rise of the sharing or “gig” economy and non-traditional employment models such as Uber have complicated the labour landscape. And while these changes will undoubtedly spill over into human resources, the question is how? 


“It’s such a difficult question to even ask,” said Chris McNelly, CEO of the Human Resources Institute of Alberta (HRIA) in Calgary.  

“You have individuals working almost as an agent on behalf of these respective organizations. And they themselves become a micro-business themselves.”


The terms of the employment relationship are obviously much more ambiguous, he said. 


“When an employee works within a traditional framework, the terms and condition are much more explicit, the policies of an organization are much more explicit, whereas when you’re in the sharing economy… those terms and conditions may not be as explicit.”


There are numerous questions to be asked — such as, how does HR ensure it adheres to legislation and best practices? How is a contract set up? 


“Even ‘employee’ is a bit of a misnomer because they’re not an employee in the traditional sense,” said McNelly. “It begins to blur the lines of what we consider to be a traditional employee.”


And while recruitment may be easier, it could become somewhat difficult for HR to enforce regulations and policies, he said. 


“You can no longer enforce to the same magnitude those terms and conditions or those policies on those individuals,” said McNelly. 


“It may be easier to recruit but very, very difficult to discipline or actually enforce those policies or difficult to enforce legislation because there isn’t necessarily a central HR department that is there for that personal connection.”


Also, in regards to the employee life-cycle and succession planning, things could change quite dramatically when employees are transient, he said. 


“When you look at the traditional notion of employment, you have a job that somewhat evolves from start to finish, from recruitment to retirement. And that connection, that onboarding connection, may be lost in a sharing economy relationship because you typically don’t have the traditional style of recruitment, the traditional style where you sit down with the manager, you talk about the position description, you talk about the culture, what the expectations are, that sort of things. So that part is somewhat missing.”


At the same time, many of the key pillars of HR will likely remain the same, said Mary-Clare Treglia, division director at Office Team in Toronto. 


“Even though it’s not your traditional corporate structure, the demands and obligations of the HR team will still be largely the same. The HR team still needs to follow the code of ethics — that won’t change. Respect in the workplace, employee relations,” she said. 


And despite having more of a peer-to-peer relationship than an employer-employee one, HR should still put retention initiatives in place, said Treglia. 


“You still want to make sure that your employees are happy and satisfied. An HR professional will be doing employment surveys and engagement, making sure they stay on top of (it) if they have any needs or questions or concerns.” 


Evolving technologies

People tend to think these changes to the employment relationship began in the last few years, but the employment relationship itself has been developing and changing for the last century, said David Ticoll, distinguished research fellow, Innovation Policy Lab, at the Munk School of Global Affairs at the University of Toronto. In fact, the employment relationship is simply a construct of the industrial age. 


“Up until 1900 or so, all economies around the world were agrarian economies… if they weren’t agrarian economies, they were hunter-gatherer economies. So, generally speaking, there was not really an employment relationship,” said Ticoll, speaking at the Sharing Economy Symposium in Toronto in December. 


“Some people were employed but the vast majority of people were not employed — they were typically subsistence farmers so they lived off the land… it was very much a self-managed economy.”


The industrial age is what produced the concept of employment.


“With the rise of industrial manufacturing… we needed all these people in these factories,” he said. “Then we kind of had the golden age of employment after the Second World War, when the idea was that everybody has a job… they were paid well, their income went up and so on and so forth. That all came to an end in the 70s and 80s, coincidentally, with the rise of computer technology.” 


So why does the employer-employee relationship still exist in the same manner it did during the beginning of the industrial age? 


“If we do live in a market economy, why doesn’t everybody who wants to create goods go out and just contract with people on a temporary basis, and actually price the value of labour out on a daily basis?” he said. 


The answer to that is what’s been called the “transaction cost” — that is, the cost of search, of contracting, of quality management and process management involved in each transaction. 


“And, of course, computer technology and the Internet is fundamentally (changing) that transaction cost… (which) is declining,” he said. 


Self-employment, part-time employment and contingent employment are certainly not a new concept, said Ticoll. 


“Uber, Airbnb, they didn’t create this stuff. They may be moving it into new spheres, but it’s not something new,” he said. “We need to really recognize that we are moving into a new era, and it’s not just about, ‘Oh, let’s support innovation.’ There are some fundamental social changes taking place.”


New technologies are making it easier for individuals to work from different locations, said Karl Baldauf, vice-president of policy and government relations at the Ontario Chamber of Commerce in Toronto.


“These new technologies and the rate at which they are appearing is providing new income streams for individuals,” he said. 


“More than just the relationship between the employer and the employee, people more than ever before are able to utilize assets that they have or possessions that they own and take advantage of those to realize new income streams in a way that they never could in the past.”


Questions about the changing relationships between the employer and the employee are not clearcut because they will largely depend on the technology, he said. 


“But I do think that the growth of the sharing economy is going to have a profound impact on the way people work,” he said. 


“What’s important... is that there is a level playing field and traditional operators are not inordinately disadvantaged, and that new players understand their obligations from a tax perspective, and that there is a role for government to play to ensure that that level playing field is there.”


Overall, there’s a real need for HR professionals to be agile and ready to adapt, said McNelly. 


“HR is going to have to be able to be flexible in terms of what the traditional concept of an employment relationship is, and almost redefine what that relationship is. Because now you have this employment relationship or this relationship with an individual that is kind of in between a full consultant versus a full employee — it’s kind of in the middle there,” he said.


Employee or self-employed?

It can be difficult to qualify whether an individual is an employee, self-employed or an independent contractor, said Doug MacLeod, principal at MacLeod Law Firm in Toronto, also speaking at the symposium. 


“If you’re an employee, you have certain protections. Employment standards (legislation) sets out minimum standards that employees are entitled to, such as minimum wage, vacation pay, statutory holiday pay, termination pay, that kind of thing... most employees are entitled to workers’ compensation benefits if they get injured at work.”


There are also protections for employees when it comes to discrimination, health and safety and employment insurance, he said, while independent contractors do not generally have these types of protections. However, there is a test that is applied by the courts when such a situation arises, said MacLeod. 


“The first thing the courts and administrative tribunals look at is, what is the party’s intent? So at the beginning of a contractual relationship, the parties can say, ‘We want to be in an employment relationship’ or ‘We want to be in a self-employment relationship,’” he said. 


“But that’s not the end of it. And there are a number of cases where parties have said, ‘We want to enter into a self-employment relationship’ but a court or administrative tribunal has said, ‘We don’t care what you intended to do.’”


In a case where the individual’s employment classification is unclear, the courts will look at four factors and apply them to the situation.


“The first is control, so does the ‘employer’ tell the individual how to do the work? Does it supervise them? Does it say you have to go through a performance review? You have to apply our way of doing things to get the job done?” said MacLeod. “The more control, the more likely they (will be considered) an employee.”


The second factor is tools — so who provides the capital necessary to get the job done? 


The next issue is chance of profit versus risk of loss, he said. 


“That is, basically, what kind of risk is involved here? If a person is running their own business, they have a chance to change the way they do things to make a profit… an employee is more likely to get the same pay regardless of how well they do the work.”


The last factor is whether the person’s services are integral to the business, said MacLeod.


“If an organization is basically contracting out their core business, is that something we should look at in deciding whether they’re independent or they’re entitled to some legal protection.” 

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