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Transportation network companies (TNCs), which use independent contractors instead of employees, pioneered the so-called gig economy. They draw people looking to set their own hours and “be their own boss.” In the last few years, the smoke has cleared and more people are learning what goes on behind the scenes.
Yet, even in the onslaught of lawsuits and horrific news stories, gig apps such as Uber, Lyft, and Airbnb are more popular than ever. As gig companies fight regulations and technology invites innovation, will the chauffeured transportation industry win out or get left behind?
Survival Of The Fittest
If you ask Scott Solombrino, CEO of Dav El/BostonCoach Chauffeured Transportation Network and longtime National Limousine Association board director, it’s only a matter of time before the law catches up to the way TNCs conduct business.
“There are 200 federal lawsuits and too many class action lawsuits on the labor issue. There’s no way they can prevail in every suit. It’s statistically impossible,” he says. “At some point at the state level, their independent contractors will be dragged back in as W2 employees and the TNCs will kick and scream. They are violating the law. The federal judges haven’t caught up with them yet, but they are about to. These companies have taken the position ‘we are going to do this until somebody tells us we can’t.’”
As well, independent contractors are bad-mouthing their gigs. Nick Kokas, vice president of global operations for Brentwood’s Distinguished Executive Transportation in Macomb, Mich., thinks these contractors are seeing how the gig economy doesn’t really protect them in the labor force.
“Due to the current Presidential election process, I think it’s one of the reasons why candidates like Donald Trump and Bernie Sanders have become so popular,” Kokas says. “Not only is the country facing wage stagnation, but also wage deflation due to the gig economy.”
Raphael Sousa, owner of SF Limo Express in San Francisco, explains how the independent contractor mentality has come back to bite them. “The issue is most people only see what’s directly in front of them. They just see, ‘I got $1,000 doing this by myself without having to deal with anybody else.’ But they’re never taking into account all their other expenses.”
Solombrino notes this reality leads independent contractors back toward regular employment: “These companies can only survive if they have enough drivers to meet the demand. As time goes on, fewer people want to drive for Uber and Lyft because they finally figure out they are getting ripped off and making less than minimum wage.”
Bend, Don’t Break
If you’re thinking, “Why can’t limousine companies just hire independent contractors and compete that way?” think again. According to the Safe Harbor rule in the U.S. tax code, it’s illegal to go from being a W-2 employee incorporation to paying people as independent contractors. But as Kokas puts it, it’s time to use the short falls of the gig economy to our advantage.
“If you are a licensed, legitimate company you should be operating as an employee-based company, not an independent contractor company,” he says.
One of the draws to being an independent contractor is flexibility. But that isn’t a trait exclusive to gig companies. As independent contractors grow tired of the way gig apps treat them, they look for the same kind of work elsewhere.
“TNCs have actually helped us because they have changed the mentality of the gig employee into appreciating the flexibility of being able to either work early in the morning or late at night,” Kokas says. “We now have people coming to us who are more flexible in doing either a nightshift or a morning shift. I actually look at it more as a benefit. They come to us with a different mindset of being open to flexible hours.”
Flexibility is only one trait that draws new employees to a specific company. Vanessa Karamitros, co-owner of Prestige Transportation, LLC in Mission, Kansas, believes in a stronger magnet: Feeling like someone genuinely cares about their well-being.
“If they could go into work every day and have a set schedule but know they are going to be well compensated, cared about, treated well, and somebody actually takes a vested interest in them, that’s so much more important than being able to choose to go to work whenever you want,” Karamitros says. “It makes them feel valued and creates a sense of loyalty and camaraderie.”
Independent contractors thought they could earn a living at a company that doesn’t care what happens to them as long as they make money. Now, reality hits and they’re jumping off.
“We are finding an increased labor pool now because people who went to work for TNCs for the first time have dipped their feet into ground transportation,” Kokas says. “Now they are unhappy with their situation of being unable to take home a good living wage, and are coming to us.” In fact, if it weren’t for gig companies like Uber and Lyft, “[independent contractors] would have never even considered chauffeured car as a way of getting to a more formal labor relationship with a company.”
On the prospect of losing customers to TNCs, Sousa says, “My business is not Uber’s business. Yes, Uber has a black car option. But people who are only going to pay $5, and not $10 or $15, are not going to be the ones who would be using my services anyway.”
Karamitros agrees because she believes a market will always exist for higher-end service models TNCs can never provide. “Uber Black doesn’t really worry me because of the consistency factor. Typically, clients who want a higher-end service model appreciate the relationship aspect of who they choose to do business with. They want more than just on-demand service. They want people who know them, their family, and who take an interest in them. You can call an Uber Black driver and you can get a really nice car with water and mints inside, but are they really going to know you? Do they care about where you work? Do they know you’ve traveled lately? Probably not.”
Operators should take a cue from gig apps in one way. “The old days of picking up the phone to make a reservation are going away,” Solombrino says. “You’re going to need an app with GPS and statistics. The chauffeured car business will never go backwards. It’s not possible. No matter how this ends. The public has already spoken and said ‘we want this usability.’”
As technology alters the way people go about daily tasks, change will accelerate. “It’s up to you to adapt and figure out a way to beat it, not hunch over and die,” Sousa says. In the end, limo services have nothing to fear but fear itself, as long as they show employees, customers, and critics the difference by example.
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