Noelle is a labor attorney. Two decades of helping corporations skirt labor laws—lawfully skirt, she assured me—had taken its toll. “Got to the point where I couldn’t take it anymore,” she confided. “I wasn’t making the world any better; I certainly wasn’t helping my fellow man. My job was to enrich companies, even if that meant pulling the rug out from under hardworking families.” She did not want to disclose what rugs precisely she pulled. She is an attorney, let’s not forget—a population that knows better than most how not to self-incriminate. Whatever happened had led her down a road to starting her own practice. Her days are now devoted to, in her own words, “helping people share.”
One unexpected thing to come out of my journey in understanding the sharing economy was to learn about the legal impediments to collaboration resulting from existing labor laws. It is ironic in some ways. The very laws designed to reduce the blunt force trauma created by the ownership economy are keeping us from truly enacting something new and different. This might sound harsh, but the current system does a pretty good job of incentivizing exploitation. When you make more money by treating people poorly—by paying them less, skirting labor laws, refusing to provide adequate health care, and so forth—is that not the definition of incentivizing bad behavior? So we should have strong labor laws: rules to ensure that employers pay their employees, and pay them at least a minimum wage, like what we have under the Fair Labor Standards Act.1 Unfortunately, the laws we have in place, while well intentioned, are ill advised, especially if we hope to kick off a collaborative revolution.
Noelle’s office was next to an elementary school, and our conversation was punctuated by the occasional prepubescent scream. This, coupled with her relaxed, forthright demeanor, gave the interview a laid-back feel. I remember wondering if a nonsharing attorney would be as giving of his or her time and expertise.
We talked first about how current laws are too rigid. As most are currently written or interpreted, all individuals laboring for the material benefit of others, even when it is shared, can be lumped into the “employee” category.2 Whether the act is motivated by love, reciprocal commitments, kinship ties, or altruism is irrelevant.3 Noelle reminded me that the rationale is perfectly admirable, especially when applied to the ownership economy, namely, to ensure that no one slips through the cracks. As she put it, “I would never want a system in place where employers have the ability to cajole prospective employees into signing away their rights. So we’ve historically sought labor laws with those worst-case scenarios in mind.”
Bells outside started ringing. Like air being let out of a balloon, kids began to stream out of a large double door and onto the playground, creating a crescendo as more left the building for recess. After closing the window, Noelle noted that assuming the worst of employers “doesn’t accurately depict relationships in a more collaborative-type economy.” In the dog-eat-dog world to which existing labor laws are directed, employer and employee are by definition not the same person. Not so under more collaborative business arrangements.
My meeting with Noelle was pivotal on a few levels. I walked into her office thinking the biggest legal challenges faced by the sharing economy revolved around property law, including intellectual property law. Naïvely, I did not have labor law on my radar, but I walked out with a newfound appreciation for questions about labor. Not only that, my meeting with Noelle brought with it a renewed faith in labor attorneys—strike that: sharing economy labor attorneys.
I also have Noelle to thank for connecting me with a variety of individuals who had wanted to grow the sharing economy only to discover they legally could not—people like Marcus, a bear of a man with a laugh befitting a person of his stature.
“The story was a major wake-up call for the industry,” he told me shortly after our introductory pleasantries. Marcus is the owner of a small winery near Walla Walla, Washington. The story Marcus was referring to came out of Castro Valley, California. Westover Winery had been fined $115,000 by the State of California after it was discovered that the owners were using volunteers for crushing and bottling—not an unusual practice for smaller wineries, I have learned. One volunteer slipped and fell, breaking her arm. The winery did not have workers’ compensation insurance, or sufficient business insurance, to cover her injury. The fine was for (1) not paying minimum wage, (2) not providing wage statements, and (3) not paying into workers’ compensation insurance.
Marcus confirmed the widespread use of volunteer work in his community. “It’s what we do. It’s what we’ve always done, going back a hundred years if you look at how labor was organized in orchards and farms throughout the state.” It is no secret how farmers a century ago pooled their labor during harvest. If they had been fined for this practice, it would have killed the agricultural sector and everyone connected to it. I confess to not initially believing Marcus’s claim that the practice remains widespread among smaller-scale wineries. Then I took a very nonscientific survey of Facebook pages of wineries in Washington State, Oregon, and California: more than a dozen shared posts requesting volunteers during crush season.
Washington State leaves small businesses with a little more wiggle room on these matters than California does. The Washington State Department of Labor and Industries provides narrow exemptions under which volunteers can be used. A business needs to have documentation that both parties were aware of the volunteer status prior to work being done. No material compensation can be offered to the volunteer beyond maintenance and reimbursement expenses. This means food can be provided during the event. A bottle of wine is also probably okay, as an expression of gratitude. Finally, the business needs to show that the volunteer work is equally advantageous to both parties. Is the work fun? Does it help build community?
“This isn’t about cutting corners. And the thought that we’re exploiting our volunteers is outrageous. You talk to any of those who help and they’ll make it clear, they want to be here,” Marcus told me. With that, he got up from behind his desk and walked toward the door. I confess to being seized by fear at that point. Had I offended him by talking about this? Is the interview over? Nope. He stopped at the wall behind me, next to the door, and plucked off a picture. “Look,” he instructed, while handing me a framed photo. At the top were the words “Pre Crush Party, 2014.” “We need their help to survive.” Back behind his desk, he added, “But it’s bigger than that. From an economic standpoint, I reinvest a bigger proportion of our revenue into the local community than do the E. and J. Gallos of the world,” referring to the Ernest & Julio Gallo Winery, the largest exporter of California wines.
Marcus slapped his knees with both hands, the noise like a dull clap of thunder, and let out one of those larger-than-life laughs. “We’re a kinky group. These volunteer parties are important because they physically”— he interlocked his hands as though praying—“bring people together.”
Common and civil law are suspicious of volunteer labor because it represents, in the words of the U.S. Supreme Court, an “unfair method of competition.”4 Being allowed to use volunteer labor, the argument goes, gives operations an unfair advantage over those that are required to pay their workers and provide benefits, such as workers’ compensation insurance. A one-size-fits-all application of employment laws is thus about creating a level playing field. And so: no volunteers, period.
If only that logic were applied evenly. The courts cannot possibly think the system they are protecting is fair. Can they?
To take one particularly egregious example: agricultural subsidies. Between 1995 and 2014, the U.S. government paid out $322.7 billion in farm payments. Of this, 75 percent—or $242 billion—went to 10 percent of farms. The average annual payment per recipient among this top 10 percent: $498,442. The tippy-top recipient: Riceland Foods, located in Stuttgart, Arkansas. Between 1995 and 2014, this company—the world’s largest miller and marketer of rice, according to its website—received more than half a billion dollars.5 This single company received more taxpayer monies than did all the farmers in Alaska, Connecticut, Hawaii, Maine, Massachusetts, Nevada, New Hampshire, New Jersey, and Rhode Island combined. Is that a fair playing field?
The line between an unfair competitive advantage and an incentive is thin, arbitrary even. To tweak Upton Sinclair’s well-worn line about vested interests, it is an “incentive” when your salary depends on it being so. When Walmart enters a community and is given millions in tax incentives, it is called “stimulating the economy.” When a small business looks to enter the same marketplace using the free labor of those taxpayers, it is an unfair competitive advantage.
“What we’re doing isn’t exploitive; it’s generative.” Now in his bottling facility, Marcus was showing me his mechanical corker and six-bottle-capacity filler—this really was a small-scale operation. “We can’t survive if the game is won or lost according to economies of scale, where bigger is better,” he told me while demonstrating the corker, adding, “Our survival rests in building connections, community.”
Growing a generative, dynamic marketplace: should not that be the goal of economies? Which model would you suppose generates more value: a market dominated by exploitive market concentration or one enriched by collaborative markets? Those I talked with while researching for this book had strong opinions about this. Not surprisingly, all leaned unequivocally toward the latter option.
What look to be highly dynamic and generative business models and what is allowed under the law are misaligned. Marcus again: “I’d love to be able to open my winery up and make it truly community supported, where members could be co-owners and work in exchange for wine and the comradery.” Knowing that farm wages where labor intensive crops are grown make up anywhere between 40 and 80 percent of all costs (the higher figure supposes a farm providing livable wages), I can understand Marcus’s attraction to this vision, from both community building and strictly financial standpoints.
This is not to deny the fact that people need to make money. We are many miles—heck, a better unit of distance would be astronomical units—away from envisioning a system in which money does not matter. Marcus was not suggesting we replace one one-size-fits-all economy (individual ownership) with another (sharing). In fact, his position is just the opposite. He was looking for the option to scale out instead of only up, where getting together is just as acceptable as getting big.
What is wrong with that?
The following legal artifacts—one, a ruling; the other, a statute—were referenced more than once in my conversations with members of a consumer co-op in New York City:
Why did co-op members in New York care about laws from a state almost five thousand miles away? Three words: “member worker programs.”
Joy and I met in a coffee shop that had plush oversized booths, brownish walls, and glittery beaded curtains. She was clearly a regular, greeting others in the shop by name. An urban gardener, practicing attorney, and self-described community activist, Joy had been recommended to me by two people associated with the New York City cooperative. When I asked her about the legality of member worker programs, it took her a while to get to an answer. As an interviewee, she was a bit like a pitcher with no one on base. There was no avoiding the windup.
“Co-ops around the country are founded on this tradition, either where members can choose to work for a larger discount or where all are required to work. It’s about access, community solidarity, and economic survival.” Joy had been with the cooperative since it was founded, in the 1970s. While explaining what she meant by “access” and “economic survival,” she made the claim that her co-op had “the least expensive food in town.” As I teach my students when encountering unexpected claims made during field research, trust, but verify. So I did. Price-checking a sample basket of grocery items from a nearby Fairway Market confirmed Joy’s assertion. The co-op basket: $74.91. Fairway’s identical basket: $99.88—a 25 percent costlier shopping trip.
The member worker program, by keeping labor costs low and member commitment high, has demonstrable benefits for the co-op and its members. Yet some want to do away with it.
Certain members, according to Joy, were worried that the co-op might be violating minimum wage laws and worker compensation requirements. The more I learned about the debate, which played out in meetings and in the members-only portion of the co-op’s website, the more tangled it became. Civil law, specifically the Fair Labor Standards Act, is pretty expansive in its understanding of who is an employee. Whether or not a worker is an employee, in the eyes of the FLSA, hinges on this bit of legalese: an employee is “any individual employed by an employer.”8
Yet a scan of common law—law established through court precedent—will reveal numerous rulings giving the member worker program cover, such as the Hawaiian court case mentioned earlier. Joy was also the first to tell me about the aforementioned law legalizing volunteer work for up to twenty-five hours per month, explaining how it needs to be enacted at the federal level. “As an attorney, you get used to working in the art of interpreting law. But this area, especially around member worker programs, is particularly gray, which is why we need something like that from Congress”—the “that” referred to being Haw. Rev. Stat. Ann. § 421C-33.
I later learned from another individual with the cooperative that members in the 1980s asked the state’s department of labor for advice on the subject and were told that member workers were entitled to a minimum wage. That ought to have put an end to the practice, according to some. Upon hearing that piece of information, I initially leaned in that direction, too. Then I talked to Lyle.
Lyle was recently retired from the New York State Department of Labor, which might account for his candor. Talking about member worker programs, Lyle admitted that the department had been asked by cooperatives over the years to give legal advice. He was refreshingly frank about how regulatory agencies, in his opinion, approach these queries. “Generally, we have a practice of wanting to err on the side of caution. The last thing we want is to say a practice is legal, have it challenged in the courts, and have our opinions proven wrong.”
The entire incentive structure seems to be working against sharing, from laws that criminalize “employers” who enlist volunteers, even when volunteers are employers and vice versa (e.g., in cooperatives), to policing authorities who explicitly “err on the side of caution” for fear of being proven wrong by the courts. Lyle spoke of a disconnect between “the world envisioned by proponents of sharing economies and today’s laws, which were designed primarily to protect us from markets premised more on hostility than reciprocity.” His comment echoes a point made earlier: conventional labor laws assume the worst of businesses, making it hard for those who want to do something socially positive.
We wrapped up our conversation by talking about the future of the sharing economy and the barriers that still stand in its way. For Lyle, change must happen at the top: “Until Congress recognizes sharing, labor laws as they apply to things like volunteering will forever remain subject to political winds.”
All the more reason for building bridges rather than fences: the answer to how this political pressure is going to grow. While I agree with Lyle that change has to take place at the top, it is not going to start there. We have to force the hands of our elected officials on this one. Only by working together can we hope to design laws that encourage sharing while still protecting workers.
The same rules for everyone. Sounds reasonable—right?
I had been reading for some time about the plight of small-scale Southeast Asian family farmers—predominantly Hmong, Iu Mien, and Lao refugees—in California’s Central Valley. The stories have similarities. There is always an extended family with a compelling immigration tale of leaving poverty and oppression behind for a slice of the American dream. Eventually, the dream turns into a nightmare. The boogeyman is often a government official, an inspector, typically. In a case of the pen being scarier than the sword, the household finds itself facing onerous fines for any number of infractions. Those violations include anything from using the labor of minors (their own children, grandchildren, nieces, and nephews, mind you) to not paying minimum wage, not carrying workers’ compensation insurance, failing to provide gender segregated toilets, not having a Cal/OSHA approved Injury and Illness Prevention Program (Cal/OSHA is the state’s Division of Occupational Safety and Health), failing to put a Not Potable Water sign at the designated handwashing station, not having all the right posters (yes, posters) carrying various regulatory messages, and not providing single-use water cups. After years of reading others’ accounts, I decided it was time to go to the source.
When Dawb greeted me at the door, I noticed immediately the center stone in her necklace. A large black onyx gemstone: beautifully cut and polished, it seemed to draw all the light in the entryway toward it. She fiddled nervously with it as she invited me out to her garden.
Stepping off the porch, she told me a bit about her family’s history. Dawb’s mother and father had moved to California when she was just a child, from the mountainous region of China just north of the Vietnam border. She also made a brief reference to “political persecution,” reaching for that gemstone again, this time with both hands. I got the sense that she did not want to dredge up the past. That was not why I was there anyway, so I stuck to questions about her farm.
Dawb’s family farmed a little over five acres. About half of the produce went to feeding the household; the surplus was sold at a roadside stand and to a few restaurants. That’s how they got themselves into trouble. That last bit, without requisite practices in place, was a no-no in the eyes of the law.
Let’s be clear: we are not talking about sales that generated a lot of money. In fact, they added up to below minimum wage for the adults involved.
Two weeks prior, not far from the very bench on which we were sitting, an official from the state’s Division of Labor Standards Enforcement had cited Dawb. Her offenses, among other things, included not having workers’ compensation insurance and not paying her non-nuclear family members a wage. The total penalty exceeded $10,000, close to an entire year’s profits for the household. She admitted that she didn’t know what her family would do in future seasons. And as that future is now upon us, I’m afraid to ask, for fear of self-incrimination.
After she told me this story, we just sat there. I remember staring at a patch of lemongrass as I wondered what to ask next. Dawb’s voice broke through the awkward silence as she told me about her experience of looking into workers’ compensation insurance. It was an excellent example of laws written without enterprises like hers in mind.
Dawb had discovered not only that insurance policies are pricey but also that their term length makes them cost prohibitive. Trying to stifle the pain in her voice, she said, “We can’t get a policy for less than three months.” She turned her head in my direction but looked through me, adding, “Those policies don’t work when you’re dealing with planting and harvest seasons that run only a week or two in the spring and again in the fall.”
Dawb’s case is an important reminder that evenly applied laws alone do not a robust and just collaborative economy make. Take translation services, or lack thereof. Among these Hmong, Iu Mien, and Lao households, most adults speak limited English, while they might be inspected by people who speak only English. People are being fined without even understanding why.
This is all to say that worker regulations can hurt as well as protect people, and we need to learn the difference.
Marcie had lived in the Bay Area her entire life, all sixty-five years of it. Forty-five of those were spent in the restaurant industry in and around San Francisco, as a short-order cook, baker, head chef, sommelier, and, just prior to retiring, general manager. She left that world to take care of her ailing husband. Not long after doing that, she saw an ad for Josephine, an online platform promising to help home cooks coordinate their small-scale takeout business. “Wanted: Outgoing people who love to cook and who are good at it. The shy and those who hate to cook need not apply!” The business model is fairly straightforward. (In February 2018, executives of this Oakland-based start-up announced the imminent closure of the business after almost four years, following a series of legal ups and downs.)9 Those who sign up make meals in their home and then post them online. After placing an order, the buyer picks the food up at a prearranged time. The chef gets 90 percent of the revenue; Josephine gets the rest.
“I knew I needed to be at home, but I couldn’t give up food,” Marcie explained. “Josephine gave me something to do that was for me.” I learned about Marcie’s business from a friend and frequent customer of her crawfish and shrimp gumbo. This friend was born and raised in southern Louisiana, so to hear her describe the dish as “out of this world” says something about Marcie’s culinary skills.
I first talked to Marcie about two weeks before taking a trip to California. My plan was to meet her in person and hear more about her thriving business. I was also looking forward to talking to whoever happened to drop by her house to pick up food. The day prior to my flight, I received the following cryptic e-mail message from her: “Got shut down. Cease and desist order. Come out if you want. Still happy to talk but can’t promise dry eyes.” Twelve hundred miles later, I was sitting at Marcie’s kitchen table. She handed me the order. “I was told I was committing a misdemeanor, punishable by jail if I didn’t stop. Just for cooking food in my own kitchen!” Marcie was clearly pained, her eyes glistening as she pounded her chest with two clenched fists in tempo with the words “my own kitchen.”
Not long after my trip to California, District Judge Vince Girdhari Chhabria of the U.S. District Court for the Northern District of California likened the sharing economy to a square peg and existing laws to round holes.10 Later in the same decision, he opined about how twentieth-century law “isn’t very helpful in addressing this”—“this” being the growing number of legal questions surrounding the sharing economy—a “21st Century problem.”11
The health department officials who stopped Marcie from continuing her trade chose one such hole, treating her business like any other commercial enterprise. That particular hole leads to very clear lines of questioning: had Marcie’s kitchen been inspected and certified, and did it have all the necessities as dictated by law? Triple sink: wash, rinse, and sanitize?—no comingling! Grease trap? Dedicated washroom for employees? Commercial refrigeration? HACCP (Hazard Analysis Critical Control Points) food safety management systems? Crack-free floors? Lighting fixtures with nonbreakable lenses?
That hole, if the city really wanted to play hardball, could have also resulted in Marcie being cited for noncompliance with the Americans with Disabilities Act (ADA). To pick up their food, neighbors were required to hurdle two separate sets of stairs. One regular customer had, in Marcie’s words, “mobility issues.” Marcie simply walked his order out to his car, as he could park directly in front of her house—problem solved, from the standpoint of all parties concerned. The government, however, might not have seen it that way, if it had bothered to look.
Another round hole casts Marcie’s cooking simply as the activities of a private individual.12 This is how Marcie saw things, and how the majority of those engaged in the sharing economy view these practices, as perfectly legal and even worthy of tax-exempt status. They’re private transactions, after all, or so folks like Marcie say. (The Internal Revenue Service, not surprisingly, holds a different opinion.)13 According to this line of thought, people around the country prepare food for others all the time and avoid the scrutiny of overzealous food police. Sure, Marcie sold food she prepared. But is that qualitatively different from selling your baked goods at a local church’s bake sale? What about those quid pro quo food exchanges between neighbors, in which those with gardens give friends buckets of fresh fruits and vegetables, receiving in return any number of items or services?
Let us not forget that when sociologist Marcel Mauss set out to study socially enabled exchanges nearly a century ago, he found gift relations to be even more indebting than money based exchanges in some ways.14 This is not to suggest that altruism does not exist, just that we can feel indebted in many ways and that monetary indebtedness and social indebtedness are more similar than we might wish to admit.
I recall telling Marcie jokingly—jokingly, for any health department officials out there—that she should restart her business, this time giving customers a quick palm reading when they pick up their food and charging for that instead of for the food. Some chefs actually do things like this to exploit loopholes and to give their square peg the appearance of being round. I recently visited a pop-up restaurant that operated this way; attendees were instructed to pay for the live music while receiving “complimentary” food.
You will not hear me arguing on behalf of this hole—or any hole: remember, we’re dealing with square pegs. Just as I want laws that enable sharing, I do not want to make it easier for unscrupulous people to act unscrupulously. In other words, sharing should not be a Trojan horse for deregulation. Why this reluctance to embrace the private citizen hole? One big reason: private individuals can legally discriminate. You can choose, for instance, whom you invite into your home for your son’s parties, dinner, a barbecue, you name it. And if you wish to have over only whites, or Christians, Muslims, Native Americans, Chicago Cubs fans, close talkers, or vegans—whomever—you are well within your rights to do so. After all, it’s your home.