Copyright 2016. No quotation or citation without attribution.
UCSD - GPS CASE 16 - 10

Exploitation of On-DemandWorkers:
A Corporate Accountability Issue of Amazon

By: Alisha Tomita

School of Global Policy and Strategy, UC at San Diego
Prepared for Professor Peter Gourevitch
Course on Corporate Social Responsibility
Winter 2016

Executive Summary
The National Employment Law Project’s recommendation to end the exploitation of
Amazon Prime Now and Amazon Flex on-demand delivery drivers by misclassification of
independent contractors is to pursue a third worker classification. This strategy of pursuing athird worker classification is much larger than just holding Amazon accountable for its Corporate
Social Responsibility. The National Employment Law Project will create a public campaign togarner the support of Amazon and other firms that rely on on-demand workers, on-demand
workers themselves, and lobbying key politicians (Senator Mark Warren, and Presidential
Candidate Hilary Clinton). Other options explored was to bring all on-demand workers on as
employees, which has the potential to increase employee related expenses by 30 percent. The
second option explored was to unionize the on-demand workers with the coordination of the
AFL-CIO and other trade unions. However, this option would hold the most amount ofapprehension from firms and government organizations.
Introduction
Amazon’s misclassification of Amazon Prime Now drivers as independent contractors, isa pressing concern of corporate accountability. The lawsuit by four former Amazon Prime Now
drivers that claim they were misclassified as Independent Contractors claim: they were not paid
minimum wage, over time, given standard breaks, reimbursed for business expenses, and there
was a breach of employment contract. This case study will attempt to unpack in four sections:
the Background, Analysis, Solutions, and Recommendation for the National Employment Law
Project (NELP) to get Amazon to be a change-agent for Amazon on-demand workers. First, thebackground will detail the lawsuit that the four Amazon Prime Now drivers brought against

Amazon, Sccobeez and ABT Holding. A short background on Amazon and its relationship with
its supplier Scoobeez, who hired the independent contractors as drivers for Amazon Prime Now.
Second, the Analysis will provide an understanding around the violations claimed in the lawsuit
and whether it is state or federal regulation. It will further discuss why misclassification ofworkers as independent contractors is a corporate accountability issue. This section will explore
the incentive mechanisms, who has more influence over the labor decisions Amazon makes(shareholders, stakeholders, and consumers). Third, three solutions will be explored, Employee
Classification, Unionization, and Third Worker Classification. The costs, risks, and benefits foreach solution will be reviewed in detail. Fourth and final section of this study NELP will provide
a recommendation on what strategy to hold Amazon accountable for misclassification of
independent contractors, ensure these violations do not occur in the future, and who to leverage
to apply pressure.
I.

Background
Class Action Lawsuit
The following are statement of facts from the lawsuit filed on October 27, 2015 in

California against Amazon, its supplier Scoobeez, and ABT Holing by four former Amazon
Prime Now drivers for misclassification of independent contractors. 1 The Amazon Prime Now
drivers claim to be misclassified as independent contractors and have nine cause of action
complaints that claim the drivers were not: paid minimum wage, over time, reporting time pay,
reimbursed business expenses, given standard breaks, given wage statements, waiting time1

Class Action Lawsuit section based on facts listed in this document. 2015. "Class Action Complaint Taree Truong,
Khaled Alkojak, Olga Georgieva, and Cynthia Miller v. Amazon.com, INC., Scoobeez, INC., and ABT Holdings,
INC." Los Angeles. Accessed January 30, 2016. https://consumermediallc.files.wordpress.com/2015/10/2015-1027amazon-scoobeez-complaint-final-2.pdf

penalties, breach of employment contract, and violations of the unfair competition law (UCL).
The lawsuit further provides that the four plaintiffs were hired by Scoobeez exclusively for the
Amazon Prime Now delivery service. The drivers were required to wear Amazon Prime Now
uniforms, use the Amazon Prime Now app that facilitated delivery customer, time, and route.
The plaintiffs in this case worked exclusively out of an Amazon warehouse and received
Amazon specific training on Amazon Prime Now delivery service. The smart phone with the
Amazon Prime Now app was provided to each driver. A written contract was required of eachdriver, but the signed copy was not provided to the drivers. Drivers are required to work fixed
shifts during the Amazon Prime Now service hours and can be scheduled up to six days
consecutively in a row. Drivers are assigned packages and cannot reject work assignments orrequest specific geographic locations. Package delivery sequence and route is generated by theapp for the driver. Drivers can be assigned to drive up to 100 miles or more a day and receive no
reimbursement for mileage as an independent contractor. The drivers are paid hourly at rates set
by Amazon & Scoobeez and have no ability to negotiate. The drivers were originally hired for$11 per hour, plus $2.50 a package drop, and tips. But, in September the drivers were required by
Scoobeez to sign a new contract removing the per package delivery bonus and were not provided
copies of the new signed contract. Amazon guarantees its customers that all tips are given to thedriver, however the plaintiffs claim that they are not able to see the tips nor are given a statementof tips by delivery. Drivers are paid for actual hours worked, but are not paid overtime rate forany hours worked over an 8 hour day or 40 hours in a work week. Drivers are required to use
their own vehicles and are not reimbursed for fuel, maintenance, tolls, insurance, and othervehicle expenses.

AmazonIn 1994, Amazon started as an online auction platform that has since evolved into theworld’s largest retailer and one of the largest publicly traded companies. According to theAnnual Report, Amazon seeks to be the Earth’s most customer-centric company.2 Being
customer-centric is a core competency of Amazon that can be seen in all segments of thebusiness (Marketplace, Amazon Prime, AWS). Using this strategy revenue reached $107.01B by
2015 with an operating margin of 2.09% and a market cap of $250.05B (See Figure 1.)3 In 2015
Amazon reported having 230,800 full-time and part-time employees.4 It is assumed that Amazon
relies on a vast diffuse labor network of subcontractors. Amazon does not have to disclose theamount of subcontractors that are employed on behalf of Amazon by suppliers. Amazon hired
Scoobeez to provide the Amazon Now Prime delivery service in select markets for a set contract
price versus wages paid for labor.

2With its “financial focus being on long-term, sustainable growth in free cash flow per share.”2015. 2014 Amazon
Annual Report." Accessed January 31, 2016.
file:///D:/Profile%20Data/Downloads/AMAZON%202014%20Annual%20Report.pdf.
3
2016. Amazon Key Statistics. January 31. http://finance.yahoo.com/q/ks?s=AMZN+Key+Statistics.
4
2016. "Amazon 10K for Fiscal Year Ending December 31, 2015." Accessed January 30, 2016.
file:///D:/Profile%20Data/Downloads/Amazon.pdf.

Figure 1 Key Statistics for Amazon

Source: https://finance.yahoo.com/q/ks?s=AMZN+Key+Statistics

Scoobeez/ ABT Holdings
In 2013, Scoobeez was started as an on-demand door to door messenger service in
Glendale, California by Benjamin Art also known as “Beno Blanko”, CEO of Scoobeez.5 In
August 2015, ABT Holdings acquired Scoobeez for 76 percent equity, total fair value at the time

5

n.d. Scoobeez.com. Accessed February 1, 2016. http://scoobeez.com/index.php/about-scoobeez.

of acquisition was $1,296,000.6 ABT Holdings is a US based holding company founded in
1957.7 ABT Holdings’ mission is to, “Invest, acquire, develop, and grow various businesses thatprovide strategic advantages, and generate attractive returns and positive cash flow.”8 ABT
Holdings is responsible for the day to day operations of Scoobeez, of which is now aggressively
expanding from its hive location in Los Angeles to, San Francisco, Las Vegas, San Diego, andmost recently to Chicago, all in under 6 months of the acquisition.9 Scoobeez relies on
independent contractors for delivery drivers.
II.

Analysis

Exploitation of “On-Demand” Workers
Exploiting “On-Demand” technology (tech) workers has become common practice in the“tech” industry as a result of fissured employment.10 The increasing demand for more affordable
products by consumers and the need for corporations to maximize profits influence corporation’slabor decisions. In tech more job functions are being shed to focus on core competencies in turnincreasing the number of suppliers. This leads to the suppliers bearing more of the liability andpressure to produce at lower costs. Amazon identifies in their 10-K and Annual Report that their
expansion places significant pressure on its Management, Financial and Other Resources.11 We
can assume that this pressure placed on management and resources lead to failures in
6

Common Stock to be issued for $1,200,000 & $96K cash investment. 2015. "ABT Holdings Quarterly Report."
OTC Disclosure & News Service. November 1. Accessed February 1, 2016.
http://www.otcmarkets.com/financialReportViewer?symbol=ABOT&id=146209.
7
n.d. ABT Holdings. Accessed February 1, 2016. http://www.abtholdings.com/about.html.
8Ibid
9
2015. "ABT’s Scoobeez plans to expand its services in San Francisco’s Hyper Efficient Logistics Market."
NASDAQ Globe Newswire. September 28. Accessed January 31, 2016. https://globenewswire.com/newsrelease/2015/09/28/771407/0/en/ABT-s-Scoobeez-plans-to-expand-its-services-in-San-Francisco-s-Hyper-EfficientLogistics-Market.html.
10Weil, David. 2014. The Fissured Workplace: Why Work Became So Bad For So Many and What Can Be Done to
Improve It. Cambridge & London: Harvard University Press.
11
2015. "2014 Amazon Annual Report." Accessed January 31, 2016.
file:///D:/Profile%20Data/Downloads/AMAZON%202014%20Annual%20Report.pdf.

compliance, corporate social responsibility, and possible principal-agent problems. Amazon
hired Scoobeez to provide the Amazon Prime Now delivery service, rolled out as a pilot in selectmarkets with intention to aggressively expand. Amazon as the lead firm places all of liability
onto Scoobeez to provide the workers for the delivery service, but controls every aspect of how
the work is to be performed. Amazon should be held accountable as the lead firm for the workers
being misclassified as independent contractors as Amazon applied the pressure to Scoobeez tokeep costs low leading to worker rights violations under California employment law.
Additionally, Amazon is hiring independent contractors directly for its Amazon Flex Programfor Amazon Prime Now delivery.
Employee vs. Independent Contractor Classification
Worker classification as an “employee” or an “independent contractor is not straightforward and varies from state to state allowing for misclassifications that cost the worker and thegovernment. There are two separate fact and circumstance tests that employers, employees, andcourts use to determine whether a worker is an “employee”, one by the Internal Revenue Service(IRS) and another by the Department of Labor (DOL). Common law has determined more pointsof classification for independent contractors case by case.
The Internal Revenue Code section 3121 (d)(2) defines terms for purposes of Social
Security taxes that apply to wages paid to an employee defines the term “employee” to include
any individual who, under the usual common law rules applicable in determining the employeremployee relationship, has the status of an employee.12 Section 3401 defines terms for purposes

12

Staff of the Joint Committee on Taxation. 2007. Present Law and Background Relating to Worker Classification
for Federal Tax Purposes. IRS Report, Internal Revenue Service. Accessed February 24, 2016.
https://www.irs.gov/pub/irs-utl/x-26-07.pdf.

of an employer’s Federal income tax withholding obligation with respect to wages paid to an
employee, does not define the term “employee.” 13
IRS Common-law Test
The IRS identifies three categories of evidence to determine whether requisite control exists
under the common-law test:14(1) Behavioral - Does the company control or have the right to control what the worker does
and how the worker does his or her job?
(2) Financial - Are the business aspects of the worker’s job controlled by the payer? (These
include things like how worker is paid, whether expenses are reimbursed, who provides
tools/supplies, etc.)(3) Type of Relationship - Are there written contracts or employee type benefits (i.e. pension
plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work
performed a key aspect of the business?

DOL Economic Reality Test
The DOL uses seven factors from judicial precedent:15

13

20 factors from common law case outcomes that can be considered when trying to determine an employee vsindependent contractor (Instructions; Training, Integration; Services Rendered Personally;, Hiring, Supervision, andPaying Assistants; Continuing Relationship, Set Hours of Work; Full Time Required; Doing Work on Employer’s
Premises; Order or Sequence Test; Oral or Written Reports; Payment by the Hour, Week, or Month; Payment of
Business and/or Traveling Expenses; Furnishing Tools and Materials; Significant Investment; Realization of Profit
or Loss; Working for More than one Firm at a Time; Making Service Available to the General Public; Right toDischarge; Right to Terminate. Ibid
14
2015. "Independent Contractor (Self-Employed) or Employee?" IRS. August 5. Accessed February 24, 2016.
https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Self-Employed-orEmployee.

1. The extent to which the services rendered are an integral part of the principal’s business.
2. The permanency of the relationship.
3. The amount of the alleged contractor’s investment in facilities and equipment.
4. The nature and degree of control by the principal.
5. The alleged contractor’s opportunities for profit and loss.
6. The amount of initiative, judgment, or foresight in open market competition with others
required for the success of the claimed independent contractor.
7. The degree of independent business organization and operation“Safe Harbor” Exemptions
Section 530 of the Revenue Act of 1978 allows a taxpayer to treat a worker as not being
an employee for employment tax purposes, but does not exempt the taxpayer from income tax
purposes, regardless of the worker’s determined status under the common-law test.16
Costs of Misclassification
The costs to the on-demand worker misclassified as an independent contractor results in there
not being social insurance protection such as Social Security and Medicare. Independent
contractors have no protections for on the job injuries as well as no workers compensation
insurance. No protections from loss of work as a result of contracts being terminated as theindependent contractor do not pay into unemployment insurance. The on-demand workers
classified as independent contractors do not have certain labor rights such as a minimum wage,
overtime, standard breaks and meal-time.
15

2014. United States Department of Labor. May. Accessed March 13, 2016.
http://www.dol.gov/whd/regs/compliance/whdfs13.htm.
16
Staff of the Joint Committee on Taxation. 2007. Present Law and Background Relating to Worker Classification
for Federal Tax Purposes. IRS Report, Internal Revenue Service. Accessed February 24, 2016.
https://www.irs.gov/pub/irs-utl/x-26-07.pdf.

The cost to Federal and State government is the result of loss income and funding of social
programs from misclassification of independent contractors. Very few studies have been done toshow the complete impact of misclassification in the United States. However, interest is picking
up as more misclassification lawsuits come to light from companies dependent on the on-demand
worker. A recent 2015 Government Accountability Office (GAO) study estimates that 7.4
percent of the labor force is classified as independent contractors.17 A 2010 by the Congressional
Research Service estimated $8.71 billion in income over FY 2012-21 as a result of proposed
modification to the IRS’s “Safe Harbor” rules.18 About 20 states have conducted their own
exploratory studies to see the annual impact of misclassification (See Figure 2).
The companies receive significant benefit in the ability to classify workers as independent
contractors saving up to 30 percent on employee related benefit expenses. In addition, the “safeharbor” rules from the IRS allow for exemption even if the workers should be defined as an“employee”. Without effective regulations/laws, direction, and enforcement companies have an
incentive to continue to classify employees as independent contractors in order to cut costs
without penalty.

17

U.S. Government Accountability Office, Contingent Workforce, GAO-15-168R (April 2015), available at
http://www.gao.gov/assets/670/669766.pdf.
18
2015. "Independent Contractor Misclassification Imposes Huge Costs on Workers and Federal and State
Treasuries." National Employment Law Project. July. Accessed February 29, 2016.
http://www.nelp.org/content/uploads/Independent-Contractor-Costs.pdf.

Figure #2 Annual Losses Due to Independenct Contractor Misclassification

Source: http://www.nelp.org/content/uploads/Independent-Contractor-Costs.pdf
InfluenceConsumers
Amazon wants to be the most customer-centric company on earth. However, in regards tochanging Amazon’s reliance on classifying on-demand workers as independent contractors
targeting consumers to organize boycotts in order to apply market pressure to change Amazon’s
behavior would not be likely. Amazon customers are driving the market demand for the Amazon
Prime business model of more benefits while applying pressure to keep costs low. Amazon has
to differentiate its services to its customers as retail competition is high. There are many
substitutes to choose from to replace using the Amazon marketplace such as Google Express,
Wal-Mart, and Target, etc. This causes rent seeking on the revenue side by reducing labor costs
in order to offer Amazon Prime benefits without increasing costs to the customer.
Shareholders
Similar to consumers Amazon shareholders would have little influence with regards tochanging the behavior of Amazon’s stakeholder’s reliance on classifying on-demand workers as
independent contractors. Shareholders are focused on Amazon’s ability to maximize shareholder
value. This is done through a strategy of being customer-centric and focusing on corecompetencies. The shareholders are more concerned with business strategies that keep costs low
while investing all profits back into the core competencies for aggressive growth.
Stakeholders
Amazon stakeholders have the most influence in being able to change the reliance onclassifying on-demand workers as independent contractors. Stakeholders make the on the grounddecisions to carry out shareholder interests, create and implement strategic plans. It is vital to the
Amazon Prime business model to address this concern early on of misclassification of

independent contractors as it has the potential of threatening the entire Amazon Prime Now
business model cost effectiveness. This holds the most influence with Amazon stakeholders as
the entire Amazon Prime Now model is based around “on-demand” workers. The legal outcomesfrom this lawsuit as well as other similar lawsuits regarding the misclassification of on-demand
workers as independent contractors could have great effect on Amazon Prime Now’s businessmodel.19 Amazon Prime Now is currently offered in 26 markets with future expectations of
aggressive expansion.20 Amazon Flex program is in 18 cities with future aggressive expansion as
well as future intent to deliver regular parcels.21 Net shipping costs have increased annually by
18 percent to $11.5B (See Figure 3). Stakeholders are most concerned with controlling the costsof shipping as it is important to the Amazon Prime model in order to ensure that the membershipcosts are low while still delivering increased benefits such as quicker delivery times. It isessential to the Amazon Prime business model as Prime members outspend non-Primecustomers; 69 percent of Prime spend > $100, compared to 28 percent non-Prime (See Figure

19“Uber, Postmates, Shyp, and Washio were all sued by workers, arguing that they should be classified as
employees and not independent contractors.” Ribeiro, John. 2015. "After Uber ruling, pressure mounts to reclassify
contractors as employees." PCWorld.com. July 2. Accessed March 3, 2016.
http://www.pcworld.com/article/2943792/after-uber-ruling-pressure-mounts-on-companies-to-reclassifycontractors.html.
20
Amazon Prime Now in 26 Markets: Atlanta, Austin, Baltimore, Chicago, Dallas, Houston, Indianapolis, Las
Vegas, Los Angeles & Orange County, Miami, Minneapolis & St. Paul, Nashville, New York City, Phoenix,
Portland, Raleigh, Richmond, Sacramento, San Antonio, San Diego, San Francisco Bay Area, Seattle & Eastside,
and Virginia Beach. 2016. Amazon.Com. Accessed March 6, 2016. http://www.amazon.com/Amazon-comAmazon-Prime-Now/dp/B00R20MPW2/ref=sr_1_1?s=mobile-apps&ie=UTF8&qid=1457415334&sr=11&keywords=Amazon+prime+now.
21
Demmitt, Jacob. 2015. "Amazon has big plans for Uber-like ‘Flex’ package delivery service, job postings reveal."
Geek Wire, December 16. Accessed February 3, 2016. http://www.geekwire.com/2015/amazon-plans-to-expanduber-style-crowdsourced-delivery-network-to-millions-of-drivers/.
Amazon Flex is in 18 Markets: Seattle, Richmond, Nashville, Portland, Raleigh, Virginia Beach, Austin, Dallas,
Baltimore, Miami, Atlanta, Houston, San Antonio, Las Vegas, Phoenix, Minneapolis/St. Paul, and Indianapolis
metro areas. Accessed February 4, 2016. https://flex.amazon.com/

4).22 Stakeholders want to keep customers happy in order to continue to capture their purchasing
power.
Figure 3: Amazon's shipping revenue and outbound shipping costs from 2006 to2015 (in million U.S. dollars)

Source: http://www.statista.com/statistics/236503/amazons-annual-shipping-revenue-and-outbound-shipping-costs/

Figure 4: Amazon Prime Members Spend vs. Non-Prime Customers

Source: https://www.statista.com/chart/2370/amazon-prime-spending/
22

72% Non-Prime spend under $100, compared to 37% of Prime, 69% of Prime spend > $100, compared to 28%
Non-Prime. Richter, Felix. 2014. "Amazon Prime Members Heavily Outspend Non-Prime Customers." Statista.com.
June 18. Accessed March 6, 2016. https://www.statista.com/chart/2370/amazon-prime-spending/.

III.

Solutions
Options

Option 1 – Employee Classification
National Employment Law Project (NELP) could apply pressure to Amazon stakeholders
by campaigning for Amazon to reclassify the independent contractors who are delivery drivers
for Amazon Prime Now through Amazon Flex program as employees. In addition, request
Amazon to require all partners who hire independent contractors for Amazon Prime Now
delivery drivers to be employees. Employee classification would benefit the workers byincreased labor protections, unemployment insurance, workers compensation insurance, social
security contributions, as well as voluntary benefits provided such as 401 (k) retirement
contribution matching, stock options, or employee stock purchase plan, and healthcare theywould otherwise not be eligible for. Amazon stakeholders would benefit by having greater
control over quality, training, work schedules, delivery routes and performance evaluations. The
potential benefits of converting the on-demand workers to employees from independent
contractor would mitigate any future misclassification lawsuit risk. Converting the independent
contractors preemptive to any lawsuit outcome could improve Amazon’s reputation. The risk
associated with this option is the increased employee related expenses to carry the drivers as
employees could increase 30 percent for cost of benefits. Amazon has seen a 50 percent annual
employee growth to 230,800 full-time and part-time employees as of December 31, 2015,
causing higher operating expenses (See Figure 5).23 This option could potentially erode already

23

Growth calculation created by using Amazon 10K employees as of December 31, 2015 and original headcountfrom the 2014 Amazon Annual Report,154,100 Amazon Employees as of December 31, 2014.
"2014 Amazon Annual Report." Accessed January 31, 2016.
file:///D:/Profile%20Data/Downloads/AMAZON%202014%20Annual%20Report.pdf.

slim profit margins overtime. However, the Amazon Flex program is less than a year old and has
not yet amassed a substantial amount of on-demand drivers that would cause significant changes
to margins if converted to employees. The potential liability of future lawsuits by not converting
the independent contractors to employees could end up being more than the conversion which
would in turn erode profit margins causing negative effects to the Amazon Prime businessmodel.
Figure 5: Number of Amazon.com employees from 2007 to 2015

Source: http://www.statista.com/statistics/234488/number-of-amazon-employees/

Option 2- Unionize Amazon Prime Now and Amazon Flex On-demand Workers
A second option to explore would be for NELP to partner with the AFL-CIO tocoordinate the Amazon Prime Now and Amazon Flex on-demand workers in order to unionize.

"Amazon 10K for Fiscal Year Ending December 31, 2015." Accessed January 30, 2016.
file:///D:/Profile%20Data/Downloads/Amazon.pdf.

Last year on-demand drivers of Uber, Lyft, and other on-demand vehicle drivers attempted to getan ordinance in Seattle to unionize on-demand vehicle drivers passed.24 There was a lot ofbacklash to the companies who were perceived as union-busting. Another outcome was thedrivers creating driver associations, networks and a unity campaign by NY taxi drivers. Inaction
by Amazon stakeholders holds high risk of backlash as previously seen with other on-demand
workers at Amazon such as Mechanical Turk where on-demand workers protested alleged inhuman wages by sending letters to Jeff Bezos, CEO directly.25 The Mechanical Turk workers
received support from Stanford and the University of California San Diego in solving collective
action problems of crowd workers by creating Dynamo a collective action platform.26 With aplatform to bring all of the Amazon Prime Now and Amazon Flex drivers together NELP and
AFL-CIO could apply further pressure to Amazon stakeholders by collectively bargaining for
better employment contracts and worker protections. The largest risk to this strategy is if the
Amazon Prime Now and Amazon Flex drivers are not willing to coordinate for various reasons(time, effort, costs, economy, and benefit tradeoff).
Option 3 – Third Worker Classification
A third worker classification to accommodate the on-demand worker segment would
alleviate the current corporate governance issue of classification of the on-demand worker falling
between employee and independent contractor varying by state law.27 The Department of Labor

24

Smith, Rebecca. 2016. "UNION-BUSTING. NOW THERE’S AN APP FOR THAT." NELP. March 7. Accessed
March 13, 2016. http://www.nelp.org/commentary/union-busting-now-theres-an-app-for-that/.
25
Harris, Mark. 2014. "Amazon's." The Guardian. December 3. Accessed March 7, 2016.
http://www.theguardian.com/technology/2014/dec/03/amazon-mechanical-turk-workers-protest-jeffbezos?CMP=share_btn_fb#_=_.
26
Niloufar Salehi, Lilly C. Irani, Michael S. Bernstein, Ali Alkhatib, Eva Ogbe, and Kristy Milland. 2015. "We Are
Dynamo: Overcoming Stalling and Friction in Collective Action for Crowd Workers." Stanford. April 18. Accessed
March 7, 2016. http://hci.stanford.edu/publications/2015/dynamo/DynamoCHI2015.pdf.
27
Chayka, Kyle. 2015. "A Third Way for Temporary Workers." Pacific Standard. August 7. Accessed February 25,
2016. http://www.psmag.com/nature-and-technology/defining-an-employee-in-the-digital-economy.

(DOL) is in the beginning stages of trying to assess the size of “contingent worker” segment witha report expected in 2017.28 A NELP campaign could influence Amazon stakeholders to comply
with its corporate social responsibility to join a coalition with other companies that are dependent
on the on-demand business model to lobby the government for this new worker classificationthat could provide for rights & protections to on-demand workers, while still providing more
flexible work, and allowing for an alternative compensation plan (See Figure 6). A third worker
classification that could allow for unemployment insurance, workers compensation benefits, andsocial security. This option would allow for continued on-demand workers to support the
Amazon Prime Now through Amazon Flex program by controlling shipping costs as delivery
services using on-demand workers is 35 percent of standard shipping costs.29 In addition, theability for Amazon stakeholders to scale delivery services up or down as a result of demand.
Political risks associated with this option is that it is an election year and parties are polarized
meaning that it could be quite difficult to get any new labor laws passed quickly. In order to get
any new policies passed would take a lot of time, effort, and money. In order for the coalition to
gain any ground in a third worker classification they would need to start with a gaining the
support of a politician who is already in support of change such as Senator Mark Warren to
influence a new policy.30 Another risk could be this new classification is complex to figure out
what benefits and protections that the dependent contractor would receive. If Amazon

28

Morran, Chris. 2016. "Government Will Try To Figure Out How Many Americans Are Now Part Of The "OnDemand" Workforce." Consumerist. January 26. Accessed March 5, 2016.
https://consumerist.com/2016/01/26/government-will-try-to-figure-out-how-many-of-americans-are-now-part-ofthe-on-demand-workforce/.
29
Saito, Mari. 2016. "Exclusive: Amazon expanding deliveries by its 'on-demand' drivers." Reuters.com. February
18. Accessed March 4, 2016. http://www.reuters.com/article/us-amazon-com-logistics-flex-idUSKCN0VR00O.
30
Senator Warner is Democrat representing Virginia who is in support of a third job category to support “ondemand” workers. Warner, Mark R. 2015. "Sen. Mark Warner: Asking tough questions about the gig economy(Washington Post)." Mark R. Warner Senator from the Commonwealth of Virginia. June 19. Accessed March 6,
2016. http://www.warner.senate.gov/public/index.cfm/newsclips?ContentRecord_id=9ec95aab-a96c-4dd5-8532b45667013d2e.

stakeholders chooses not to join the coalition and does not react to the current allegations anddoes not change policies, thus waiting for the outcome of legal proceedings before reacting there
could be several risks. The risk potential is new lawsuits in each of the 26 Amazon Prime Now
markets for Amazon Prime Now delivery drivers and potential Amazon Flex drivers. The
increase in on-demand worker lawsuits for misclassification as an independent contractor acrossthe US could indicate the legal climate for such labor practices. Additional risks of letting themarket correct itself and legal regulation to catch up could be a long-term strategy and take many
years to resolve in the mean-time costing Amazon an unknown amount in employee related
expense, back wages, fines, and legal fees.
Figure 6: NELP Report on Major Companies in the On-Demand Economy

Source: http://www.nelp.org/content/uploads/Rights-On-Demand-Report.pdf

IV.

Recommendation

Third Worker Classification
NELP’s recommendation is to pursue a third worker classification to accommodate theon-demand worker. In order to achieve a third worker classification a coalition would need to bebuilt. The support of Amazon stakeholders, Amazon being the largest retailer and one of thelargest companies with a workforce over 200,000, could have greater impact to gain supporters
on board with the coalition. Amazon would benefit as this strategy supports their long-term
growth strategy and the Amazon Prime Now business model that relies on on-demand workers.”
Amazon’s stakeholders would be supportive of such initiative as the potential third worker
classification allows for flexible on-demand workers that would still be cheaper than an
employee and would cost less than lawsuits from misclassified independent contractors. NELP
garnering support from Amazon stakeholders to uphold its corporate social responsibility would
have the potential for other organizations, who rely on on-demand workers such as Uber, Lyft,
Fed-Ex, UPS, Shyp, etc., who would benefit from a third worker classification, to build a
coalition that would lobby for a new classification. As seen previously in figure 6 the companies
that rely on on-demand workers crosses almost every industry and is growing rapidly growing.
This strategy provides for a broader reaching solution to independent contractor exploitation.
Stopping one corporation, Amazon, from abusing independent contractors does not necessarilystop the entire industry from doing so. One of the largest issues of independent contractor
exploitation is the definition of employee vs. independent contractor varies by case and by statelaw. The impact is greater if change can be affected across the nation.
NELP could apply pressure by pointing out to Amazon the risk exposure involvement oftrade unions such as AFL-CIO or Teamsters. Amazon would benefit by being at the forefront ofany new policy development for a third worker classification for the on-demand worker. NELP’s
expertise on policy development would ensure the correct worker classification is adopted
allowing the appropriate protections, benefits, flexible work, and alternative compensation.31
Amazon will have higher risk exposure if the trade unions spearhead the change in policy.
Collectively the weight of a coalition spearheaded by Amazon could start a public campaign fora third worker classification to protect the on-demand worker. Amazon and the coalition could
then lobby an already known supporter, Senator Mark Warren, to submit policy for the third
worker classification. 2016 is a major presidential election year to obtain support from the public
as well as on-demand workers and employers who want to sign onto the campaign. Hilary
Clinton has already made public that she promises to, “Crack down on bosses who exploit
employees by misclassifying them as contractors.”32 Having the support of Hilary Clinton andSen. Mark Warren would provide strong credibility to the campaign. This recommendation is a
win-win for companies, the government, and the on-demand workers as all would benefit. The
state and federal governments would directly benefit from taxation as well as including workers
in the employment category. Estimates of increased income as a result of new classification
previously seen in figure 2 Annual Losses Due to Independent Contractor Misclassification.
Risk Mitigation
The third worker classification strategy has several risks that NELP will need to keepahead of. The first risk is gaining the support of Amazon to want to build a coalition and not just
wait for legal outcomes of its existing lawsuit. It is very important for NELP to gain enough
31“NELP works from the ground up to build systemic change. We collaborate with community partners on
advocacy campaigns, developing and testing innovative policy ideas in cities and states, then scaling them up toeffect change nationally.” n.d. National Employment Law Project. Accessed March 6, 2016.
http://www.nelp.org/campaign/turning-gig-jobs-into-good-jobs/.
32
Sahadi, Jeanne. 2015. "When an Independent Contractor is Really an Employee." Money CNN. July 16. Accessed
March 7, 2016. http://money.cnn.com/2015/07/16/pf/independent-contractors-employees/.

support from the public through campaigns to put pressure on Amazon in order to advocate on
behalf of the on-demand worker. The second is time, there is a very small window of opportunity
to gain political support during the election window as well as race to get campaigns moving topressure courts for favorable outcomes of lawsuits for on-demand workers. It will be pertinent tothe success of the on-demand worker coalition to move quickly using heavy hitters at the top likeAmazon to garner support. The third risk is the costs of lobbying, campaigns, and coalitionbuilding. This strategy is quite expensive and could be a long-term strategy to get effective
changes for a new worker classification. NELP will need to show the costs of unionization of ondemand workers and the cost of employee classification are higher than a third worker
classification which benefits offset its costs. Having the DOL study show the economic andsocial impact of a new classification would gain credibility of a third worker classification.

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