I’m not a lover of the so-called 1099 economy, primarily because I think the concept and the unicorns it’s spawned have been successful at gaming the system — so far.

But that’s unlikely to last.

More importantly, a company called Managed by Q is proving it doesn’t need to.

Managed by Q provides on-demand cleaning services for offices using an iPad, which it installs for free, and also offers other services like restocking the fridge or office supplies. With on-demand and subscription services for customers — and now 150 cleaners in New York — its services have become pretty popular: They’re used by other startups like Flatiron Health, Elite Daily, and Uber.

Managed by Q hires its “operators,” as it calls them, as employees, offering full-time and part-time employment with benefits and stock options. The work is flexible, and Managed by Q works with operators’ schedules.

I find it ironic that Uber, poster child of the 1099 model, hires a company that proves you can make money and still do traditional hiring, treat all employees well, draw investment and make money.

I’ve said it before and will continue saying it because it’s true, a company is like a three legged stool with investors, customers and employees being the legs. If one leg is longer or more robust than another the stool will tip over.

Managed by Q is part of the minority of on-demand services that is paying attention not just to its clients, but to the people carrying out its day-to-day work. And that’s what sets it apart.

Sets it apart, gives people a future, isn’t looking at lawsuits and seems to have missed the startup greed train.

All I can say is read the article and three cheers for Q, the anti-1099 heroes.

Image credit: Yelp

As has been pointed out in every media outlet on the planet, Uber is arrogant, pugnacious, obnoxious and plays fast and loose on matters from privacy to government regulations to customer charges to “contractor” relations and compensation.

Uber, in the person of CEO Travis Kalanick, has so enraged various officials that the company has been kicked out of cities, domestic and foreign, and entire countries.

Even Matt Kochman, Uber’s founding general manager in New York, left in disgust.

“Discounting the rules and regulations as a whole, just because you want to launch a product and you have a certain vision for things, that’s just irresponsible.” 

Kalanick pushed, denied problems and claimed that everything that disagreed with Uber’s plans was anti-progressive or nit-picking.

But in January the tone changed.

In January, Mr. Kalanick delivered a speech in Munich filled with talk about compromising with regulators he once sparred with, wanting to “make 2015 the year where we establish partnerships with new European cities.”

A couple of weeks ago I wrote of clouds on the horizon in the form of a class-action lawsuit from 2009 that could affect not only Uber, but every business based on so-called contractors.

Turns out they weren’t clouds, but a full-fledged storm.

A legal storm.

The Boston law firm representing Uber and Lyft drivers, Lichten & Liss-Riordan, won a 2009 decision that Massachusetts exotic dancers were employees because the club could set their shifts, and fire them. Judges in New York and Nevada followed that reasoning last year.

It will be interesting to see what happens in the California courts.

If the drivers win, it will be even more interesting to see how all the startups based on the 1099 business model play when the field is level.

Image credit: 401kcalculator.org

Last fall I asked if the 1099 economy might crash and burn considering the IRS rules governing freelancers and contractors.

I think that companies, like Uber and Instacart, etc., whose success is built on the basis that their workers aren’t actually employees are in for a shock one of these days.

But it’s more than my opinion.

Way back in 2013 a group of strippers brought a class-action lawsuit claiming employee status — and won.

Rick’s, a chain of “upscale adult nightclubs serving primarily businessmen and professionals” based in Texas, argued that its dancers were independent contractors, more akin to stand-up comedians than fry cooks. But Judge Engelmayer was not persuaded. He said the list of rules Rick’s laid down could be described as “micromanagement.”

Rick’s provided “Entertainer Guidelines,” including required heel height and when to strip; the company also set prices.

Uber tells its drivers what to wear, car requirements and sets prices, as do other 1099 employers.

One day soon, a few fed-up drivers are going to file suit and their lawyers will likely cite the judgment against Rick’s.

When that happens, compensation will change, as it did years ago with Microsoft’s contract developers (who were also awarded stock retroactively), and, hopefully, the playing fields will be leveled.

I, for one, am looking forward to it.

Image credit: HeadOvMetal

Uber’s culture is on view in the news and it hasn’t been pretty.

Current news is focused on the privacy scandal, the compensation and pricing rage of a few weeks ago has fallen off the front page as have the overly-aggressive driver recruiting and efforts to sabotage a competitor’s fundraising while Uber’s pushing subprime loans to its drivers seems to be totally eclipsed.

Many users are deleting their accounts

To Imran Malek, an engineer at DataXu in Boston, it signals a winner-takes-all culture that justifies any behavior so long as everyone is getting rich. “If investors choose to value you for billions, you are untouchable.”

VC Mark Suster wrote a spirited defense of Uber, although I don’t consider it as unbiased as he claims.

He claims that most of Uber’s actions fall in the category of ‘business as usual’, with the exception of employees accessing the so-called god view that tracks users’ movements.

I will tell you that if I were Uber this is the one thing I would plug up immediately and enforcing swift punishment for violations. If the public doesn’t trust you with basic confidentiality as a service you’re toast.

All of the articles offer multiple source links for those of you who want an in-depth picture.

A company’s culture provides an insider’s look at it’s values; a quote from Lisa Abeyta, founder of a tech company in Albuquerque, sums it up nicely,

“There is a difference between being competitive and being dirty. It is bad-boy, jerk culture. And I can’t celebrate that.”

Flickr image credit: Robert Payne

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

The so-called 1099 economy, where your workers aren’t actually employees, brings up questions.

1. Is worker welfare a valid consideration in terms of the bottom line?
2. How fair is it to reduce compensation, but maintain publicly that earning power is the same?
3. How ethical is it to encourage workers to take on substantial debt based on those unlikely earnings?

If you answered 1) not really, 2) fine, 3) no problem then you’re in line with Uber management.

…reliably ruthless Uber is in the thick of it. Two “partners” in Uber’s vehicle financing program are under federal investigation, but Uber hasn’t slowed its aggressive marketing campaign to get drivers with bad credit to sign up for loans.

Following in the footprints of the mortgage brokers who sold houses to people who couldn’t afford them, thus creating the subprime housing mess, Uber is aggressively pushing new cars and subprime auto loans to its drivers with bad/no credit.

One comment stood out for its clarity and applicability to Uber and the rest of the 1099 world.

Uber corporate gets venture capital and stock options. Uber drivers get subprime loans. Sound like pretty standard American-style capitalism. –buonragazzo

Sound familiar?

Image credit: HikingArtist

$97 million doesn’t sound like much today, but it was a lot 15 years ago when Microsoft lost a lawsuit and was forced to reclassify it’s contractors as employees.

Back then Microsoft called them “permatemps.”

These days startups of all kinds are relying on freelancers to drive their growth, so many that a new term was coined.

They’re called 1099 contractors and the over-all approach is termed the 1099 economy.

“The most famous examples of 1099 companies are on-demand car providers like Uber and Lyft, but there are dozens of others: Homejoy, Handy, Postmates, Spoonrocket, TaskRabbit, DoorDash, Washio.”

The Feds, in the person of the IRS, are very particular when it comes to classifying employees as independent contractors or freelance.

Behavioral control refers to facts that show whether there is a right to direct or control how the worker does the work. A worker is an employee when the business has the right to direct and control the worker. The business does not have to actually direct or control the way the work is done – as long as the employer has the right to direct and control the work.

The financial control factors fall into the categories of:

• Significant investment
• Unreimbursed expenses
• Opportunity for profit or loss
• Services available to the market
• Method of payment

I’m a long way from being an expert, but after reading through the IRS information at least some of these companies are going to be in trouble.

Uber sets prices, discounts, doesn’t reimburse expenses and terminates drivers who also work for any of the competition.

That’s a lot of control in the light of the IRS rules.

Obviously, any company that can eliminate payroll, taxes and benefits is going to be super profitable—at least until they have to follow the rules like everybody else.

Flickr image credit: 401kcalculator.org