Tuesday, May 22, 2018
Business

'Sharing economy' lets micro-entrepreneurs share resources, but conflicts with regulatory laws

Phillip Zakhour is a pioneer of the "sharing economy." He makes his living by renting out the in-law unit of his San Francisco house on Airbnb, performing errands and odd jobs as a TaskRabbit, and ferrying people across the city as a driver for Sidecar.

"I do this now because it pays," said the 49-year-old former software engineer, who says he can earn about $4,000 a month before taxes if he works really hard. "I'm a single dad with two kids and a mortgage. I'm not saving any money, but I'm surviving."

But the Web- and application-based startups that have kept Zakhour afloat now face a thicket of regulatory, tax and labor issues in many of the cities where they operate. And that may threaten the livelihood of micro-entrepreneurs like Zakhour and the new wave of companies that pay them.

While the new companies say they are creating jobs by disrupting legacy industries that have fallen behind the technological curve, established industries — from hotels to taxicabs — complain the newcomers are taking unfair competitive advantage and in some cases endangering the public by sidestepping safety, tax and labor rules.

Government agencies, meanwhile, are under mounting pressure both to enforce existing rules and regulations and to update them for new business models that didn't exist five years ago.

"The sharing economy often straddles the line between pure sharing and commerce," said Oakland, Calif., attorney Janelle Orsi, co-founder of the Sustainable Economies Law Center. "Our laws should also make reasonable space for 'nano-enterprise' — all the small things people do to supplement their incomes. Why not allow people to make money giving rides to others?"

State regulators with the California Public Utilities Commission in November came down on the side of traditional cab companies, slapping startups Lyft, SideCar and Uber each with a $20,000 fine after accusing them of operating as passenger carriers without evidence of commercial insurance to cover injuries, property damage and workers' compensation claims.

New York City is cracking down on Airbnb hosts, arguing short-term rentals violate state laws against renting out rooms or apartments for less than 30 days. And the Washington, D.C., City Council recently hammered out a framework for accommodating car services like Uber.

The new companies say regulators don't understand the pace of innovation or the contribution they make toward easing congestion and environmental degradation. Nearly 6,500 people signed a petition on behalf of Lyft and SideCar, urging the CPUC to protect ride-sharing.

"Every politician that we've talked to has been supportive of what we're doing," said Sunil Paul, CEO of San Francisco-based SideCar. "Transportation is generally a mess. … Our overall view is that this is a new medium, and we need new rules to manage it. The regulators' agenda should be the public interest."

But Frank Lindh, the CPUC's general counsel, isn't easily swayed by the arguments about disruptive technology.

"These companies are for-profit companies, and they are putting people's butts into seats," he said.

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