Startup Shyp to Make Couriers Employees Amid Regulatory Threat

Delivery startup Shyp will reclassify its couriers from independent contractors to employees as regulators take a stronger look at the way companies label workers in the demand economy.

California’s labor commission two weeks ago said a driver for Uber Technologies Inc. must be considered an employee. The decision prompted food delivery service Instacart Inc. to begin reclassifying part of its workforce.

Shyp’s decision gives the San Francisco company greater control over its workforce at the expense of increased legal obligations and costs. On-demand companies such as driving services Uber and Lyft Inc. rely on tens of thousands of independent contractors who chauffeur passengers. The relationship lowers the cost for such things as payroll taxes and wages, but also limits control over schedules, training and worker attire.

Shyp announced Wednesday that all of its 60 workers will become company employees as defined by federal tax law. It didn’t give a timeframe for completing the transition.

Shyp provides packaging and courier services in San Francisco, New York, Miami and Los Angeles and plans to expand into Chicago. It picks up and packs items to be sent, negotiating bulk rates with major carriers.

Shyp’s decision was not motivated by any legal action against other companies, spokesman Johnny Brackett said.

“We are making this move to ensure that each time a customer uses Shyp, they have an incredible experience,” he said. “This requires that we provide our couriers with additional supervision, coaching, branded assets and training, which can only be done with employees.”

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