On-demand postal service Shyp announced Wednesday it will reclassify its couriers – all of whom are independent contractors – as employees, pulling itself out of the worker classification gray area in which companies like Uber and Lyft find themselves.
The San Francisco company's chief executive Kevin Gibbon said in a blog post that the decision to reclassify its workers has nothing to do with the current lawsuits companies like Uber and Lyft face over misclassification of workers. Rather, Gibbon said it's about improving the company's quality of service.
"This is an operational decision based on our interest in owning the entire, end-to-end Shyp experience," he said. "We're doing this because we want to make the Shyp experience as good as it can be."
Under California employment law, if a company exerts a certain level of control over its workforce, then those workers need to be classified as employees who are then entitled to certain benefits and reimbursements.
The company's workforce is broken down into three categories: couriers, van drivers and warehouse employees. The latter two categories have always been classified as employees because of the training required to do their jobs. By reclassifying couriers as employees, Gibbon said Shyp can now extend to those couriers "supervision, coaching, branded assets and training," all of which can only be done with employees.
Shyp's newly classified workers will be eligible for workers' compensation, and the company will pay for vehicle expenses, Social Security and Medicare taxes. The reclassification will take place in all Shyp's markets, including San Francisco, Los Angeles, Miami and New York. Chicago will launch later in the summer.
A Shyp spokesman said the company will not increase its rates as a result of the reclassification.
Shyp now joins the likes of Instacart and Munchery – an on-demand grocery shopping and on-demand meal service – in classifying couriers as employees (Instacart's drivers are still independent contractors, though; only its grocery shoppers have the option of becoming employees).
While worker reclassification has been painted as an arduous task that could turn the on-demand economy on its head, Lonnie Giamela, a partner at labor and employment firm Fisher and Phillips, said it is much easier for smaller, newer companies like Shyp and Instacart to transition, and it's best that they transition early on rather than later.
"It's much easier from an operational standpoint to make the decision of whether they're going to classify these individuals as independent contractors to employees, because if they hit it big, it's going to be much more difficult to switch," Giamela said. "That's the challenge Uber is facing right now."
Uber and Lyft face class-action lawsuits from disgruntled drivers who believe the on-demand transportation has been treating them as employees all along, without giving them the benefits employees are entitled to. Both lawsuits are awaiting trial.