Last week, I introduced you to the “gig economy.” Now that you recognize it, you’ll be surprised how often you see and interact with it.
Just last week I was chided by one my clients for not using Uber to get to his office from the airport. Why rent a car when Uber is so easy and inexpensive?
You’ll hopefully learn to enjoy the benefits of the gig economy, but there are some issues worth concern—especially for the real estate industry.
As Steve Jobs once said, “ large profits attract imitators and innovators.” It could also be said large valuations attract attorneys—especially in environments where class action law suits find fertile ground.
Is the real estate industry becoming fertile ground for such lawsuits? Probably not. However, it could be negatively affected by new laws and changes in regulations resulting from lawsuits underway in other companies.
Following the Money
Uber recently raised $1.2 billion on a company valuation of $40 billion. Airnb is estimated to have a valuation of $13 billion ahead of its stock sale. Instacart recently raised $220 million after being in business for less than 3 years. And the list goes on.
As these large valuations become a reality, it’s attracted the attention of attorneys who know how to follow the money. The other component needed is some victims and the gig economy is producing a bunch of them.
Who are the victims? It’s not the customers (customers are the victims in most class action lawsuits). Instead, it’s the independent contractors who work in the gig economy.
The Anatomy of a Class Action Law Suit
Earlier this week, I referenced an article written by Sarah Kessler in Fast Company magazine. She describes the details of a current lawsuit brought against Handy, a maid service company who uses independent contractors.
[Two sisters filed] a class action lawsuit against Handy in October, alleging that the company misclassified them as independent contractors.
They are seeking compensation for missed lunch breaks, minimum wage compensation, reimbursement for business expenses, and overtime, in addition to other penalties. According to Handy’s math, this compensation would cost $291,000, not including attorney’s fees.
Not only that, if [the sisters] prevailed, the lawsuit would also apply to all its current and former workers in California over the last four years. As of this past fall, that was about 2,000 people. That’s a potential penalty of almost $600 million….
If a few of these lawsuits hit home, it could change the landscape quickly. No doubt, compromises will emerge between gig economy companies and state and local governments in the form of new regulations. There’s a danger that the real estate industry could be required to abide by some of the new regulations.
Action Steps for Real Estate Companies
While there is nothing you can do to change what happens in other industries, you can take responsibility for what takes place in your organization. Here are some ideas of things you can be doing.
Don’t open yourself to complaints. Some of the victims’ stories highlighted by various news organizations in recent months are alarming. Some workers put in hours of effort, but their net pay works out well below minimum wage.
If someone is doing a lot of work and not realizing results (commissions), you may want to part with them sooner, not later. Letting the situation linger on too long could open up your organization to scrutiny.
Rescue workers from the gig economy. The case could be made that the real estate industry is quite different than most gig economy companies (I’m sure some of you have come up w/ differentiators in your heads already).
One way to solidify this idea is to hire people who were part of the gig economy and turn them into success stories. As you know, if people are making money and experiencing success, they’re suddenly not victims anymore.
Communicate your concerns to your realtor associations. The employment laws are different in each state. Make sure your local realtor associations are thinking through these issues, and that they’re developing a plan of attack. You don’t want them to get caught off guard on this important issue.
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