Shyp, the startup that sends a courier to your house to pick up your packages and ship them for you, is reclassifying its laborers as employees.
As you may recall, the California Labour Commission ruled last month that an Uber driver, who filed a suit against the company for misclassifying her as an independent contractor, was actually an employee.
So it’s interesting now to see another on-demand company proactively decided to make its workforce employees.
A memo from Shyp CEO Kevin Gibbon says the move is meant to invest “in a longer-term relationship with our couriers,” and is an operational decision that will let the company have better quality control over the Shyp experience. He says the decision to reclassify his company’s couriers is not in response to recent lawsuits.
Not unlike other startups including Uber, Lyft, and Postmates, Shyp relies on human labour to carry out its services for customers. Like these other companies, Shyp hired its couriers as 1099 employees, or independent contractors.
The difference between contractors and W-2 employees is, according to the IRS, for common-law employees, employers “must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid” to full-time employees.
The same is not necessarily true for an independent contractor. Benefits are another aspect often extended to employees but not independent contractors. Employers also retain the right to control how their employees behave — how to dress, for example, or specific customer-interaction protocol — but that same level of control doesn’t apply to independant contractors.
Shyp is not the first company to voluntarily reclassify its laborers as employees, but it is the first of the on-demand companies to have a workforce made up entirely of employees. In June, just after the California Labour Commission ruled on the Uber driver case, grocery delivery startup Instacart announced plans to reclassify some of its workforce as employees.
Shyp raised $US50 million in a Series B round of funding earlier this year, with investors including SherpaVentures and Kleiner Perkins Caufield & Byers. In the past year, the company has increased its number of shipments by nearly 500% and continues to grow. The company sends a courier — which used to be an independent contractor — to pick up your packages and ships them for a $US5 flat fee plus shipping.