‘Age of Uber’ Wrestles With Problems of Fair Pay

(AP file photo/Manu Fernandez)

GREENVILLE, S.C. (CN) — The shift to a gig economy makes wage regulation a “damn difficult task,” says a Chicago law lecturer ahead of the Tullock lecture series at Clemson University.

Legal scholar Richard Epstein is the inaugural Laurence A. Tisch Professor of Law at the NYU Law School and senior lecturer at the University of Chicago School of Law. He will discuss the clash between labor regulations and the rapidly developing gig economy Wednesday, in “Regulating Hours and Wages in the Age of Uber,” at Clemson University.

Though rapid advancements in technology allow innovative business models to form, labor regulations and pay scales are not adapting in step with the technologies, Epstein said.

“Regulations on minimum wages and overtime pay look similar, but when you get down into the trenches, it is important to define what an hour is,” Epstein said in an interview.

In some cases, he said, wages should be set by the job, not by the hour, but added: “Regulating wages by the job can be a damn difficult task.”

Uber is a prime example. Because Uber drivers receive payment directly from customers, they are considered independent contractors, not employees. Minimum wage laws do not apply to such workers. Drivers can choose when to work, take personal time during the day, and the distances they drive may not correlate with the time spent on it. Paying a driver by the hour would not be an effective method of compensation for the driver or for the company, Epstein said.

Uber uses a formula that combines mileage and time to determine fares, and Uber drivers receive 75 percent of each fare.

The Fair Labor Standards Act, based on hours in a work week, regulates minimum wage and overtime pay to protect covered employees. This model maintains equity in settings in which employees perform monitored, equal labor.

Narrowly defined exceptions exist within the act, but, Epstein said the law “stretches” the scope of who qualifies as an employee. Once a worker is considered an employee, the law binds both the employer and the worker to the concept of an hour. This is problematic in cases in which an hour does little to gauge productivity or appropriate compensation, he said.

Epstein said courts need to provide clear distinctions between those who are covered and those who are not. He said federal and state “one-size-fits-all” rules that set minimum wage and maximum hour requirements can be broadly construed in court, resulting in inconsistent findings and confusion about who is covered.

Student researchers, interns and contract workers are among those who work in uncertain territory under the Fair Labor Standards Act, Epstein said.

In his paper on the topic, Epstein suggests reducing the scope of coverage, so that it is easier for employers and employees to “escape its impact in any number of ways.”

The Tullock lecture series is co-sponsored by Clemson University’s Information Economy Project and the Hayek Center for the Business of Prosperity.

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