Are Federal Regulations Needed for Today's Sharing Economy?

U.S. House Committee on Education and the Workforce looks for answers

Kathy Gurchiek By Kathy Gurchiek September 12, 2017
Are Federal Regulations Needed for Todays Sharing Economy?

With an estimated 3.2 million people working in the sharing economy—from providing mobile photo booths to driving for Uber and Lyft to renting their homes through Airbnb—should the federal government institute rules to regulate it?

The U.S. House Committee on Education and the Workforce convened a hearing to gather insights from experts on the new ways of getting work done.

Arun Sundararajan, Ph.D., professor at the Leonard N. Stern School of Business in New York City: 

The author of The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism (MIT Press, 2016) noted that this new economy requires a different regulatory approach

"The ensuing creation of millions of microbusinesses … will require rebalancing regulatory responsibility between governmental and nongovernmental bodies. Many of our current regulatory systems are premised on large corporations dominating the supply of goods and services," he said in written testimony.

Sundararajan stressed the importance of rethinking how benefits are funded "since there will not be a well-defined employer responsible for a majority of tomorrow's workforce."

Creating new government-individual-institution partnerships may be one solution, much like 401(k) programs have evolved away from corporate pension plans. Labor laws based on the assumption of full-time employment also should be rethought, he said.

"For example, minimum-wage laws do not easily port to a platform-based world. Someone who drives for Uber or Lyft can connect and disconnect from the platform at will, can take time off whenever they want, and can drive for multiple platforms." 

Rep. Virginia Foxx, R-N.C., committee chairwoman: 

"As the sharing economy continues to grow, we need to make sure outdated federal policies don't stand in the way. The self-employed individuals who rely on the sharing economy for work don't fit neatly into obsolete job categories defined in another era. So, there are important questions over how we can modernize policies to meet the needs of the future.

She noted that about 79 percent of the millions of people working in the sharing economy do so part-time.

"There are also questions over how sharing economy workers can gain access to affordable health care and prepare for a secure retirement. Not every answer can or should come from Washington."

Rep. Bobby Scott, D-Va., ranking committee member: 

"Too many workers are still struggling to make ends meet. They have not received a raise. Their wages are not keeping pace with productivity. They and their families are not economically secure," he said. The central question before the committee, he noted, "is whether the sharing economy employment model helps reverse this trend or exacerbates the loss of worker protections."

Most sharing economy businesses misclassify workers as independent contractors, he said, and so workers do not have access to statutory protections and benefits such as a minimum wage, unemployment insurance, the right to unionize or compensation when sustaining a work-related injury.

Sharon I. Block, executive director, Labor and Worklife Program, Harvard Law School, Harvard University, Cambridge, Mass.:

The most urgent challenge facing the U.S. economy, she noted in written testimony, is how to raise labor standards. National attention would be better spent, she said, on policies that raise the minimum wage and increase the overtime threshold.

"We have a real problem with wage stagnation," she said. She urged the committee to "create a basic level of protection, a basic social safety net" for workers. Pointing to worker compensation and retirement savings plans, she said, "They're not benefits, they're not luxuries. They're things Congress has said are a fundamental part of making our economy work."

It's also critically important that participants in the sharing economy have a right to collective bargaining, she said.

"Online platform companies can be innovative and flexible while creating good jobs or while destroying good jobs," she said. "We have a danger here of putting online platform [work] in one category and saying that our labor and employment laws don't fit [them]." 

Michael Beckerman, president and CEO, Internet Association (IA), Washington, D.C.:

IA advocates at the local, state and federal level on behalf of its membership, which is made up of more than 40 of the world's most innovative companies. Those include sharing platforms such as Airbnb, HomeAway, Lyft, Thumbtack, Turo and Uber.

He urged the committee to assess whether some of the proposed legislative and regulatory actions would deal with genuine concerns about worker protection and safety, or are the result of those looking to forestall increased competition in their industries.

"There is a growing body of evidence from groups like IA, UCLA, Brookings Institution and others showing those concerns [over worker protection and safety] do not play out in data." 

Jonathan M. Johnson, owner of SnapSeat, Hartford, Conn.: 

Johnson told of how online platform Thumbtack helped him to start and grow his mobile phone booth company that now consists of five part-time employees.

Among his suggestions he submitted to the committee: 

  • Give everyone, including entrepreneurs, the opportunity to pay for and choose a right-sized health insurance policy for themselves and their families. He called it a "viable option for my part-time employees who are at different stages of life." 
  • Make basic registration processes for new businesses easier to navigate and understand. His experience with the Small Business Administration, he said, "left me feeling like assistance to seek financing … was the only help being offered."
  • Give small businesses a two-year tax amnesty period on income. This would put more money in the pockets of startup entrepreneurs, allow more of them to complete the registration process for their businesses to be a part of their income tax filings, and allow them to become more proficient and lucrative taxpayers at later stages in their business cycle. 

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