Tuesday, July 28, 2015

The unintended and unfortunate consequence of wage-and-hour reforms

Wage-and-hour reforms are all the rage. Yet, with reform comes a potential unforeseen price—businesses that simply cannot afford to stay in business.

From Re/Code:

Cleaning services company Homejoy is shutting down on July 31 after struggling to raise a big enough round of funding. The company had already been facing growth and revenue challenges, but CEO Adora Cheung said the “deciding factor” was the four lawsuits it was fighting over whether its workers should be classified as employees or contractors. None of them were class actions yet, but they made fundraising that much harder.

Re-classifying workers as employees instead of independent contractors, raising the salary threshold so that fewer employees qualify as exempt from overtime, and increasing the minimum wage are all popular causes for employee groups to rally behind. Yet, if these reforms leave employees without jobs, was the cause worth fighting? I bet if you ask Homejoy’s soon-to-be-ex-cleaners, each would tell you they’d prefer to be paid as a independent contractor than not paid at all.