By now, all Canadians have heard of the disrupting effects of the sharing economy on entire sectors of the economy that have failed to keep up with consumers’ changing consumption patterns and rising expectations. Statistics Canada estimates that between November, 2015, and October, 2016, 2.7 million Canadian residents used peer-to-peer ride or accommodation services, resulting in $1.31-billion in spending. One can only assume that these numbers have grown since, as such services expand to more and more cities and provinces.
All over the country, the digital economy is starting to lay waste to antiquated regulations designed to curtail competition at the expense of consumers. This happened very recently in Quebec when the government decided to do away with the taxi-licensing system and put into place a level playing field. Indeed, decision-makers are left to wonder not why new players should be kept out of the marketplace, but rather why these rules still exist. After all, if the government is going to prevent individuals from earning an extra buck – individuals, for instance, seeking to provide transportation to others – it should make sure it has particularly good reasons to do so.
A lot of ink has been spilled regarding the emergence of technology juggernauts such as Uber and Airbnb, but the untold story remains how few of these companies actually do business in this country. Simply looking at the myriad of technology platforms available to consumers elsewhere makes it obvious that the Canadian marketplace is ripe with unfulfilled potential for entrepreneurs to tap into.
One of the major hurdles to the sharing economy taking its rightful place in the economic landscape is our current employment laws. The common law and employment standards legislation distinguishes between independent contractors and employees in terms of the rights and obligations that the parties to the contract owe to each other. Prevalent sharing-economy business models make it too onerous and inflexible for technology companies to have individuals who use their platform to earn income on their formal payroll.
As things currently stand, the fuzzy line between an employee and an independent contractor can be hard to navigate for companies evolving in the sharing economy. One of the perverse effects of this uncertainty is that companies wishing to offer those using their platforms more benefits or incentives risk jeopardizing their business model if they do. And so often, they don’t.
While the courts in Ontario and elsewhere are increasingly adjudicating demands to distinguish between these two types of income-earners, legislators should put this question to rest once and for all. Certainty breeds investor confidence and would encourage companies operating in other jurisdictions to set up shop here, making their services available to Canadians.
There are certain criteria that would help draw a line and put an end to this source of confusion, and so we propose a legal framework to distinguish between sharing-economy workers engaged as independent contractors and other, more traditional working relationships. For starters, independent contractors in the sharing economy must provide goods and services through a third-party application provider. They must do so away from the technology company’s offices, and always have the option of taking on clients from as many platforms as they want. These workers should determine their own availability and be compensated, directly or indirectly, by their clients. And finally, the application provider must not be the recipient of the workers’ goods or services.
For legislators, there is a tightrope to walk between protecting typical workers and enabling innovation. The above criteria do just that. They ensure that only those taking on work through an application are treated definitively as independent contractors – the traditional legal tests would remain available for everyone else.
Beyond that, it should be assumed that these arrangements are made between contracting individuals in good faith. Such a flexible legal framework would also enable technology companies to offer certain benefits without fear of tearing down the business model upon which they’re built.
The potential of the sharing economy is too vast, and what’s at stake is too important to become a political football, or to be punted years down the road. In 2019, we must call on our legislators to take action to make the sharing economy work for workers, for consumers and for the Canadian economy.
Daniel Dufort is Director of External Affairs at the Montreal Economic Institute. The views reflected in this op-ed are his own.