In some cases (licensing, insurance coverage) Uber established its initial business practices by leveraging what is generously referred to as "regulatory arbitrage.(Links to an external site.)" Other cases, such as the one highlighted by their settlement with the State of New Jersey this week, depend on legal ambiguities in the classification of workers: whether they are employees, working for hire, or some amalgam of the above (subcontractors, though in some cases without a formal series of contracts).

Depending upon how the company views the workers--and how the workers view the company--the "rational" expectation(s) will differ between the parties. For instance, an employee may expect to be able to take at least some number of sick days, while a contractor for hire must opt between working sick or being paid.

For a business, the most rational action is the one that ensures the highest Net Present Value of the company. Similarly, each individual worker wants to have a career that results in their receiving the highest Net Present Value, given their Lifetime leisure/labour preference.

How can you as a manager get the most value out of your workforce, given these constraints?