Hillary Clinton’s Uber problem

Democratic presidential frontrunner Hillary Clinton is facing conflicting pressures as she tries to answer questions about how services like Uber affect income inequality without alienating Silicon Valley.

“On-demand economy” companies that harness networks of workers to quickly deliver services — like a ride or food delivery — to users at the tap of a button often consider their workers independent contractors. Their status means that they don’t get the benefits and protections afforded to full employees.

In recent weeks, the battle over the status of the workers has gone from being a wonky labor policy issue to a potential fault line in the 2016 presidential election, with some labor advocates saying that the companies are misclassifying their employees. That has left Clinton standing in a delicate place between supporting symbols of innovation and backing a progressive approach to protecting workers.

So while some on the left have made examining contractors a priority — and the Obama administration issued new guidelines on the topic — Clinton and others have been wary of linking that issue too closely to high-profile tech companies.

{mosads}Instead, Clinton has adopted a cautious approach shared by other national Democrats: She acknowledges that policymakers should look at labor rules to reflect the way the on-demand economy is changing work, but doesn’t tie those firms to her worries about contractor misclassification.

“[M]any Americans are making extra money renting out a spare room, designing websites, selling products they design themselves at home, or even driving their own car,” Clinton said in her first economic policy speech, alluding to Uber and Airbnb. “This ‘on demand’ or so-called ‘gig economy’ is creating exciting opportunities and unleashing innovation but it’s also raising hard questions about workplace protections and what a good job will look like in the future.”

Only later in the speech did she pledge to “crack down on bosses who exploit employees by misclassifying them as contractors or even steal their wages.”

“I certainly don’t have all the answers,” she said in a Facebook comment this week when asked about specific policy proposals related to the on-demand economy.

“But we have to resolve these questions while embracing the promise and potential of these new technologies and without stifling innovation or limiting the ability of working moms and veterans and young people to get ahead,” she cautioned, before endorsing broadly the idea of making benefits more portable.

Her comments stand in contrast to those made by her Republican counterparts, who bristle at the idea of regulating the on-demand economy at all.

But the contrast is a mild one. Her campaign went to great lengths to push back against the idea that her comments represented an attack on Uber, including having the campaign’s chief technology officer write a Medium post praising the companies.

They also reached out to Uber executives in advance of the speech to discuss her language with them, according to a person familiar with the conversation with Uber.

Uber’s political might was underscored this week, when the company marshaled its user base against New York City Mayor Bill de Blasio’s plan to cap the number of cars the service could operate.

Uber argued that it served low-income and non-white communities better than traditional yellow cabs. In an email to customers in the New York area, it said the proposed cap would have a “disastrous impact” on riders and “especially those in communities outside of Manhattan.” David Plouffe, a senior adviser to the company who managed President Obama’s 2008 campaign, met with Rev. Al Sharpton to make the company’s case.

Late on Wednesday, De Blasio blinked. The city will put the cap on hold while it conducts a four-month study of the effects of Uber and other ride services, officials said.

The win for Uber could serve as a warning to Democrats weighing a tough stance against on-demand economy firms. But some on left, including labor groups — a key constituency for any Democratic candidate — are pressing for restrictions requiring that those company workers be treated as full employees.

The Labor Department is looking to crack down on companies that intentionally misclassify low-wage employees as independent contractors so they can pay their workers less and offer them fewer benefits. The agency issued guidance last week to clarify the definition of an employee.

But the agency remains under pressure to zero in on the treatment of workers at tech startups like Uber and Lyft.

“It’s an issue we have to address across the economy,” Sen. Sherrod Brown (D-Ohio) told The Hill. “When you work in this gig economy, you don’t have any kind of a safety net. There’s no protection. We need to figure out something to do.”

Sen. Richard Blumenthal (D-Conn.) said the misclassification of workers is “one of the most prevalent abuses and violations of our labor laws.”

He suggested the Labor Department reevaluate the difference between employees and independent contractors in the on-demand economy, looking at the flexibility drivers have in setting their own schedules and prices.

“I would lean toward a presumption that many of them in practical effect are employees, but it’s still somewhat an open question,” Blumenthal said.

This is putting Clinton in a “tricky spot” of trying to defend workers from income inequality without crossing up-and-coming tech companies, Democratic strategist Brad Bannon acknowledged. But he said that she could reap political benefits from taking a stand against them on labor issues.

“I see it as an opportunity for Hillary to break with someone who might be considered an ally and say, ‘We’re looking for real, full-time jobs with benefits. The Ubers of the world are fine in the short term, but in the long run they don’t solve this major problem of income inequality,’” he said.

National Employment Law Project Deputy Director Rebecca Smith said candidates should first turn to enforcing “existing laws, and the DOL initiative last week put some clarity in how workers in the on demand economy as well as the overall economy ought to be treated.”

But Uber and its ilk are also potent stand-ins for the entrepreneurial spirit that has come to define Silicon Valley. They are also popular with ever-growing user bases, say tech advocates.

“I think that anybody that uses one of these sharing or gig services, they’re beloved,” said Michael Beckerman, the president of the Internet Association, which counts several on-demand economy companies among its members. “It has created such great opportunities for communities.”

“People love these services and platforms,” he said, “and I think this is really going to start to be a voting block.”

Silicon Valley has also created a new class of political mega-donors who Clinton is looking to for campaign cash. In the first fundraising quarter of the 2016 cycle, her campaign secured donations from executives at Apple, Google and Facebook — among other notable firms.

Some measure of Clinton’s cautiousness may come from uncertainty among policymakers in Washington about how to deal with workers in the on-demand economy, Smith said. But the issue is not likely to go away.

Two class action lawsuits brought against Uber and Lyft by drivers who dispute their contractor status are moving through courts in California. There is also movement in Congress to create a benefits safety net that can serve on-demand economy workers.

And the companies at the heart of the debate continue to grow. Uber is the most valuable startup based in the U.S., according to one estimate, with a value of $41.2 billion. Airbnb is the second most valuable, at $25.5 billion. For candidates, the questions about how the companies are changing the ways Americans work are likely to persist.

“It’s a new world,” said Beckerman. “And I think people are going to be looking for candidates that embrace that.”