IU Tax Policy Colloquium: Ring, “Silos and First Movers In the Sharing Economy Debates”

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Prof. Diane Ring

By: Leandra Lederman

On March 1, the Indiana University Maurer School of Law welcomed Surly’s own Prof. Diane Ring from Boston College Law School as the fourth speaker of the year in our Tax Policy Colloquium. Diane presented a new paper, which I believe is not yet publicly available, titled “Silos and First Movers In the Sharing Economy Debates.” This interesting paper focuses on the classification of workers in the “sharing” or “gig” economy as employees or independent contractors, arguing that “[t]wo interacting forces create the most serious risk for inadequate policy formulation: (1) silos among legal experts, and (2) first-mover effects.” (Page 1 of the draft.) The silo argument is that lawyers operate in subject areas that are isolated from each other, such that tax experts, for example, fail to perceive the effects of tax-related worker-classification rule changes on non-tax (such as employment) law, and vice versa. The first-mover argument is that the first actors on the worker-classification issue can wield outsized influence, shaping the debate in legal contexts other than the one directly affected.

The paper and presentation provide interesting insights into how giants of the service-worker sharing economy—not just Uber and Lyft, but also TaskRabbit—influence the development of the law on worker status. And subject-matter silos are a common complaint among legal academics. That issue has arisen in administrative law, for example, where there may be different rules developed in the context of different agencies. Courts and policymakers may struggle with tax exceptionalism (in the parlance of Kristin Hickman). But I wonder both if the legal silos in the gig economy are as strong as the paper suggests, and whether the effects the paper observes are first-mover effects or something else.

First, to what extent do legal silos persist when major companies such as Uber are faced with legal issues from many fields and have a business incentive to address all of them? The terminology for the legal context—“sharing economy”/“gig economy” and “worker classification” also is not field-specific. However, Diane clarified with me that part of the problem she perceives is that the platforms themselves do not operate in legal silos, while other stakeholders do. Of course, there have been conferences on this part of the economy that try to bridge that gap—such as the one in Amsterdam on “Reshaping: Work in the Platform Economy” that Diane blogged about here—that brought together not only experts from different fields but also actual gig workers! But Diane’s point seems to be that there is more interdisciplinary work to do, which is one of her prescriptions. She also points out that there are different tests for employee status in different fields, although I’m not clear from the paper whether she would advocate for a single “employee vs. independent contractor” test applicable for all purposes.

Second, with respect to first-movers, the paper identifies as first movers the platforms (such as Uber and Lyft) in (1) the space relating to contracts with workers and (2) in the space relating to support for proposed federal legislation in the tax context that, if passed, would provide a safe harbor allowing gig workers to be treated as independent contractors. The paper also identifies a third category of first movers, litigants seeking employee status. Diane made clear that the paper is not using the term “first” strictly, in the sense of choosing only one first actor in the gig-economy worker-classification space. There are multiple contexts in which a stakeholder in the gig economy may try to be the first to make an important move. But looking at the categories the paper identifies, some of them involve a response to the actions of others. Are litigants, who generally are workers responding to their classification by the platforms, first-movers? Are platforms first-movers when reacting to proposed federal legislation?

My impression is that a large part of what Diane’s paper is getting at is identification of the power players. That is, jostling among industry stakeholders may not be so much for first-in-time status but instead for first in influence. Influence over the development of the law could, of course, come from an early move. For example, Uber is known for its “disruptive” business strategy of seeking ex post forgiveness rather than ex ante permission. On the other hand, influence might come from later plays, such as responding strategically after being sued. That may be true whether or not the lawsuit is the first one, although of course litigation can be quite path-dependent where the initial decision has precedential value.

Also, being a later-mover that learns from the mistakes of others can be a business strategy and perhaps could help influence the law. And some influence might not be due to moving first but might instead be from becoming the biggest—the so-called 800-pound gorilla. For example, Uber was not the first ridesharing company, Sidecar was, and Sidecar engaged in early lobbying to permit ridesharing. However, Sidecar could not compete with Uber and Lyft, and shut down in 2015 after moving out of ridesharing and into delivery services. Despite being the first to offer ridesharing, Sidecar likely has not had as much influence on the development of applicable law as its larger, more successful rivals, which operate in many more cities than Sidecar did.

Finally, the interaction of the “silo” and “first-mover” issues is intriguing. The paper contains a major section on the intersection of these issues, arguing in part that the “silo effect . . . . is compounded by strong first-mover actions, especially if some parties fail to appreciate the scope and reach of the result.” If tax lawyers tend to operate in one silo, personal injury lawyers in another, and employment lawyers in yet another, it seems odd that a first mover that obtains a favorable rule on, for example, the tax front, would influence the non-tax front. In other words, if first movers influence the development of the law outside of the field of that first move, that would seem to undercut the silo argument. But the paper’s argument seems to be that early movers in one field of law may be “myopic” in the sense of lacking awareness of likely spillover effects into other areas of law. So, later movers may experience a broader view, rather than staying in their legal silos, but, in effect, they may be burdened with externalities resulting from the myopic actions that earlier actors took.

As this discussion reflects, the power dynamics in the gig economy are very interesting to consider. And the paper’s main point—advocating thoughtful formulation of policy that considers the consequences to multiple fields of law—is well taken. This was a fun paper to discuss in the Colloquium, and is a really interesting follow-up to work Diane has done with fellow Surly blogger Shuyi Oei on the sharing economy, “Can Sharing Be Taxed?” and “The Tax Lives of Uber Drivers: Evidence from Internet Discussion Forums.” Thank you again to Diane for a terrific talk and a stimulating discussion!

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Maurer’s Tax Policy Colloquium series will continue on March 22, with Prof. Emily Satterthwaite from the University of Toronto Faculty of Law presenting “Electing Into a Value Added Tax: Survey Evidence From Ontario Microentrepreneurs.”

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