The Damocles sword hanging above the emerging on-demand economy is how to classify workers, and whether the dichotomy between permanent W2 workers and 1099 contractors is even appropriate to the kinds of work that exist today.
For example, Uber has stuck to the contractor model, since drivers provide their own cars, set their own hours and the company doesn't need to do substantial training. The California Labor Commission, however, recently ruled in favor of a driver and argued that she should be an employee. Following that, other companies like Shyp and Instacart have shifted at least some of their workers to permanent status, because they require more training.
A new YC company called BlueCrew thinks it has another answer. They're a temporary staffing agency for service jobs from warehouse work to produce pickers and packers to data entry personnel. The key difference here is that they employ their workers as W2 employees.
"We help companies find the workers for what we call low-complexity jobs," said Michele Casertano, a BlueCrew co-founder. "But a big difference between our business model and others is that all of our workers are W2 employees. This, we believe, gives more security both to the workers and to the customers."
His co-founder Cooper Newby added, "A contractor model is much much cheaper in the short-term, but not in the long-term. A lot of startups aren't familiar with how much liability they're taking on with 1099 contractors. If you have a misclassification problem, you'll have to pay back-taxes and back-benefits. That's a lot of liability."
With a base of "hundreds" of workers, the company says they can quickly fill more than 20 openings a company in less than 40 minutes with a 98 percent show-up rate. The company says it has at least five clients ranging from a furniture-moving business to a tortilla-making factory in the East Bay.
The company takes care of all of the complexities that a 1099-employer would normally pass onto their contractors like tax withholdings, FICA taxes and worker's compensation insurance. BlueCrew employees, in turn, have a recurring work schedule, uniforms and training for each type of business. They make between $12 and $20 an hour. If they work overtime, they get 50 percent more per hour.
BlueCrew's company clients get a pre-screened and curated workforce that is compliant with labor laws and regulations. All of the workers have profiles, pictures, ratings and a list of their previous experiences.
For this, BlueCrew takes a "not super-high" cut on the hourly wages, Casertano said, declining to elaborate on their share. They source workers in a number of different ways from Craigslist and Facebook ads and then through the Veterans Administration and referrals. They also have raised some seed funding, but declined to say how much or from whom.
Casertano used to manage supply chains in Europe, the Middle East and Africa. "I just thought there had to be a better way to a mange and source temporary workers," he said, recalling that many workers would travel for hours and then be refused work.
Some venture capitalists like Greylock's Simon Rothman have called for a third legal kind of worker in addition to the W2 and 1099 classifications.
"It would be a nice if there was a third classification," Casertano said. "But workers comp has to be there. There are people who have things fall on them and their life is ruined. They deserve a settlement, because that's what workers comp is for. It should give flexibility, but it also needs to give worker's comp somehow."