The concurrent rise of the Sharing Economy with the 1099 Economy, aka Freelance Economy, has begun to experience some speed bumps. Whether there's a true disruption in the works remains to be seen, but friction is starting to be felt on several fronts at once. The legal battleground was set several years back when FedEx drivers hired as independent contractors began filing class action lawsuits in several states, seeking to be reclassified as employees. The rulings have had mixed outcomes so far, but the publicity surrounding these cases in recent years has sparked a lot of conversations among organizations representing freelancers in other industries, where some have begun to question why they're not being hired as employees with the traditional benefits. Things aren't going so well for FedEx these days either. Last month, the company agreed to pay $227 million to settle litigation following a ruling by a federal appeals court in Oakland last year that the company short-changed 2,300 drivers in California on pay and benefits by improperly classifying them as independent contractors.

In another widely followed ruling last month, the California Labor Commission ruled in favor of an Uber driver seeking back pay and then went even further by finding that she was also a misclassified employee who was entitled to the same compensation scale and benefits as regular employees. Shortly thereafter, a San Francisco attorney filed class action lawsuits against Uber and Lyft, seeking to force them to reclassify their drivers as full-time employees. Now, she has filed similar complaints against Shyp, Washio and Postmates. Shyp CEO Kevin Gibbon sat for an interview recently with TechCrunch to explain why the package wrapping and pickup service is converting its 1099 workers to W2, in a bold move no doubt inspired at least in part by the pending lawsuit, and by the ongoing troubles experienced by their older, more traditional rival FedEx.

It won't hurt the company's profits much. In April they closed on $50 million in Series B funding led by Kleiner Perkins — a round that brings its total capitalization to $62.2 million. Their shipment volumes have increased nearly 500 percent over the same period last year. In response to the fact it costs about 30% more to pay an employee vs an independent contractor, Gibbon says "It’s still a positive for us. There’s an economics aspect to it. Demand for our service is pretty flat throughout the day, so we know how many people we need [to be working at any one time]; now we avoid the difficulty of being able to schedule people to cover that demand. We also think it will [enhance] our customers’ experience."

‍Note: The company's warehouse and shipping clerks have always been W2 employees; they've now brought their last major worker category - drivers - into the fold.Other Sharing Economy businesses relying on the 1099 Economy model of hiring have made similar moves recently. Instacart announced that henceforth all store-based employees who fill and pack grocery orders all day inside the store will become regular W2 employees, though the drivers will remain independent contractors.Does all this add up to a re-disruption of an economy that was already disrupting an older model? Many experts have been talking about the need for a "Third Category" of worker classification to address the new way that people work. We'll discuss that in a future post, so stay tuned.