The newest radical innovation to come out of Silicon Valley: calling the people who work for you employees. 

Joining what’s fast becoming a movement in the on-demand services sector, the food delivery startup Sprig is reclassifying its freelance couriers as W-2 workers and making them eligible for an employee stock option plan. Gagan Biyani, Sprig’s CEO, says the change will allow Sprig to better live up to its vision of making healthy food widely accessible. 

“We’re an intensely mission-driven company,” Biyani said in a phone interview Wednesday. “If you’re a server and you’re delivering these beautiful organic meals, we want you to embody our mission and to deeply care about the relationship Sprig has with our customers.”

Caring deeply carries a price tag. By swapping out 1099s for W-2s, Sprig takes on responsibility for things like Social Security taxes, disability insurance and the vehicles couriers drive. Other on-demand CEOs have said their companies are uniquely positioned to make the transition work. Shyp founder Kevin Gibbon told me his company can make the most of a stable, scheduled workforce because demand for package pickup doesn’t have the sharp peaks and troughs of meal delivery or taxi rides. Luxe CEO Curtis Lee said the cost of going W-2 will be bearable only because the only vehicles his company needs to provide its employees with are scooters, which they use to ride to and from the cars they valet park. 

Biyani said he hopes Sprig will recoup some of the expense through increased productivity and improved employee retention, but he didn’t attempt to portray the move as anything but a money-loser, at least in the near term. “We modeled the financial impact but it’s not really the main criteria,” he said. “I expect it to increase our costs -- and, on the flip side, to improve our relationship with customers.” 

What it does confer is the ability to turn couriers into brand ambassadors for Sprig by putting them in uniforms and training them to be able to describe what goes into the meals, from farm to table, just as a waiter at a Michelin-starred restaurant would. Uniforms and training are two of the tests regulators use to determine whether a company is illegally trying pass off employees as contractors. 

Munchery, a Sprig competitor, also uses W-2 employees to carry out its deliveries. 

Published on: Aug 6, 2015