Uber is officially a part of the 2016 presidential race. Last year, the California Labor Commission found that an Uber driver had been misclassified as an independent contractor, instead of as an employee. Weeks later, Democratic presidential candidate Hillary Clinton suggested companies such as Uber were committing “wage theft” by misclassifying employees as independent contractors, and thereby stripping them of employee benefits. Within days, Republican presidential candidate Jeb Bush very publicly hailed a ride in an Uber to travel in San Francisco. The debate was on.

Are Uber and other sharing-economy companies helping consumers and workers by giving them greater flexibility and control over how they buy and sell services? Or are these companies undermining hard-fought labor protections and worsening the divide in our society between the haves and the have-nots?

The answer lies, as is often the case, somewhere in the middle. Yes, the sharing economy offers greater choice to buyers and sellers. And yes, under current laws, many workers in sharing-economy companies miss out on critical protections such as worker safety laws, medical leave and reimbursement of work-related expenses. The real question is not which side is right, but rather: Where do we go from here?

First we must recognize that, like it or not, the sharing economy is not going away. It’s exploding: There are already more than 100,000 sharing-economy companies, with more coming online every day. These companies are upending entire industries. Uber and Lyft provide millions of rides every day, more than long-established taxi services in cities around the world. Airbnb has been around just a few years, yet already offers more rooms each night than Hilton Hotels.

The sharing economy will continue to grow because it captures the ethos of the Millennial generation. While my generation wanted to own the biggest car, the biggest TV and the biggest house, Millennials — soon to be the biggest buying cohort on the planet — want to own less and share more. They prize flexibility, convenience and sustainability. The sharing economy is the Millennial economy.

Second, the key for our government is not to fight this change, but to set smart rules to govern it. The sharing economy has given rise to a new class of workers who are neither employees nor independent contractors. We need forward-looking policymakers to ensure these workers receive basic protections and benefits without stifling the flexible employment options and consumer choice that sharing-economy companies provide. The California Legislature should partner with leading sharing-economy companies to adopt two reforms:

A “dependent contractor” classification for workers who fall somewhere between the definition of “employee” and “independent contractor.” Germany, Spain and Canada have adopted this “dependent contractor” classification in recent years. Under this model, the more an individual works for a certain company, the more protections and benefits that individual receives. Companies are not saddled with paying expensive benefits for someone who works only sporadically to supplement his or her other income. At the same time, if someone works close to full time and receives nearly all of his or her income from one company, that person is entitled to receive some baseline benefits from that company, such as health care and paid medical leave.

A pooling system for workers’ compensation and unemployment benefits for people who do not work full time for one company, but instead work for multiple sharing-economy companies at once. Under this model, proposed last year by Sen. Mark Warner, D-Va., every hardworking person gets basic protections, and no single company bears the entire burden to provide for that person, who may work for two, five or even 10 different companies in a single year.

We do not need to choose between protecting workers and supporting the continued growth of the sharing economy. We do need smart public policy to adapt to this fundamental change in how Millennials buy and sell services. Our companies are leading the creation of the 21st century economy. It’s time for the California Legislature to work with these companies to create 21st century laws to help them continue to grow, while ensuring that all hardworking people receive the benefits and protections they deserve.

Steve Westly is managing partner of the Westly Group, a sustainability venture firm. He previously served as California state controller.

http://www.sfchronicle.com/opinion/article/How-we-distinguish-employees-contractors-and-6841023.php