Some federal lawmakers want to make it easier for on-demand workers to get health insurance, retirement and other portable benefits, mirroring efforts already going on in some states.
The rise of the on-demand economy, popularized by companies such as ride-share giants Uber and Lyft, has lawmakers questioning workplace protections and seeking ways to fill the void of benefits offered to traditional employees.
On-demand or “gig” workers are often treated as independent contractors who usually are not offered benefits and don’t get minimum wage, overtime and workers’ compensation protections. Gig businesses are typically hesitant to offer benefits, at least partly because they fear it would make courts and regulatory agencies more likely to find that contractors should be classified as employees.
That’s why Sen. Mark Warner (D-Va.) is expected to soon introduce legislation that would use a Labor Department grant program to help nonprofits and local governments experiment with portable benefits for gig workers. The measure comes as lawmakers in states like Washington, New York and New Jersey are already starting to think about what those programs would look like.
“These workers like the flexibility of contingent work, but there has been a real erosion of the security people used to have when they had a more traditional job that had unemployment insurance, health-care and other benefits,” Washington state Rep. Jessyn Farrell (D), the sponsor of a portable benefits bill, told Bloomberg BNA May 2. “This bill is an idea to give them the security of those benefits.”
Freelancers Union estimates about 55 million Americans—or 22 percent of the working-age population—are involved in on-demand work. Research by economists Alan Krueger of Princeton University and Larry Katz of Harvard University, using Bureau of Labor Statistics methodology, concludes 16 percent of workers are in gig jobs, while a Federal Reserve survey found the share was more like 36 percent.
Farrell’s proposed legislation, drafted with help from venture capitalist Nick Hanauer and a Service Employees International Union local, would have companies pay into a nonprofit fund to provide benefits for gig economy workers. Companies would be required to allot the lesser of 25 percent per customer transaction with a worker or $6 for every hour on the job to the benefits plan.
A similar bill was recently introduced in New Jersey by Assemblyman Troy Singleton (D).
Online home-cleaning company Handy is among a group of sharing economy businesses that have been talking with New York State lawmakers about possible legislation that would provide workers with portable benefits. The efforts have been met with criticism from another SEIU local—32BJ—which says the draft measure currently making the rounds would erode worker protections by classifying more employees as independent contractors.
“32BJ SEIU and many other unions and community groups were very concerned when they learned companies were pushing legislation in Albany that would deny a large and growing category of workers their rights as employees in exchange for marginal benefits,” union president Hector Figueroa told Bloomberg BNA May 5.
The New York bill comes as Gov. Andrew Cuomo (D) is forming a task force to see how the state can create measures for portable benefits.
Federal Action Expected Soon
Warner’s bill would come amid calls for the federal government to tweak employment tax and worker classification laws.
Both Democrats and Republicans have talked generally about updating federal laws such as the Fair Labor Standards Act, which offers minimum wages and overtime pay protections, to create a third category. Although Warner has led the charge on portable benefits, House Workforce Committee Chairwoman Virginia Foxx (R-N.C.) has also expressed interest.
“Empowering all Americans to save for their retirement and access high-quality, affordable health care is an important priority,” Foxx told Bloomberg BNA May 4. “That’s why we’re taking a close look at our nation’s workforce policies to identify ways to strengthen protections for workers, including those in the sharing economy.”
Any adjustment of federal laws is likely to take time, according to gig economy advocates such as Gene Zaino, president of self-employed business service provider MBO Partners. Zaino said the portable benefits model is a “good idea to experiment and learn from it,” but the larger issue deals with adjusting federal laws.
“The bigger issue is synchronizing with the multitude of federal and state labor laws, tax laws and workers compensation,” Zaino said. “They are all subjective and in many ways it’s hard to draw a line in the sand as to what is an employee versus an independent contractor. It can be a slippery slope with unintended consequences.”
History Crafts Portable Concept
For years, there have been some measures to offer portable benefits for some workers, protections that follow them from job to job.
That includes the multiemployer benefit plans that some unions have negotiated with construction and entertainment businesses. An example includes the building trades unions in the 1950s when carpenters worked for multiple contractors.
Other versions include the Black Car Fund, a nonprofit organization created in 1999 to provide wages and medical benefits for black car and limousine drivers injured on the job in New York. The protection is paid by a fee added to the ride fare.
Warner’s concept could mirror the DOL’s previous use of grants to spur innovation. The agency in July 2016 announced a new $100,000 grant for nonprofits to experiment with portable retirement benefits for workers such as independent contractors.
“We need to prototype at a local level,” said Natalie Foster, a fellow at the Aspen Institute’s Future of Work Initiative. “There we can work out the details of how to provide and pay for benefits and protections that will ultimately inform a federal response.”
Warner is the co-chairman of the Aspen Institute’s Future of Work Initiative.
Experiments to provide a larger scale of portable benefits for the workforce is welcomed by gig employers like Lyft.
“The growing desire for flexibility among many workers has created a need to consider new approaches,” Lyft spokesman Adrian Durbin told Bloomberg BNA May 4. “A pilot program that encompasses all independent workers is a wise way to explore the development of a portable benefits program nationally, a concept Lyft supports.”
States Inch Toward Portable Solutions
Farrell’s proposed legislation for Washington state did not move out of committee this legislative session. The proposal will take more time, she told Bloomberg BNA.
“We are meeting with stakeholders over the summer to work through the various issues to get something done next year,” she said. “The legislative process is not built for quick action.”
The bill was drafted with help from David Rolf, president of SEIU 775NW in Seattle. Rolf told Bloomberg BNA that the union’s involvement is to help provide a “representative role for workers who are not lucky enough to have a union.”
“We think that not only is there a need for economic security for the new workforce, but we also need to create new forms of the worker voice,” Rolf told Bloomberg BNA May 5. “The old unions will not be coming back.”
New York State Bill Expected
Lawmakers in New York are planning in the coming weeks to introduce a bill that would allow gig businesses to contribute to portable benefits programs for independent contractors without facing the legal responsibility that comes with being a full-blown employer under state law, Bradley Tusk, an investor in home cleaning company Handy, told Bloomberg BNA.
The bill would also update the legal line between independent contractors and employees. It’s unclear exactly how the bill would define independent contractors, but some labor groups are concerned that it will greatly expand the group of workers who fall in that category.
The measure, sponsored by New York Assembly Majority Leader Joseph Morelle (D), is being pushed by a coalition of gig employers that includes Handy, Instacart, GrubHub, TaskRabbit, Postmates and StoreDash, according to Tusk.
The bill does not dictate how those plans would be funded, Tusk said.
“I think each company will handle the cost differently,” Tusk said. “Some will pass it on and some will eat it. The bill allows them to make that choice.”
Tusk said gig employers are also pushing similar legislation in California, but any legislation there is a further way off. “If we can pass it in those two states it’s a lot easier to go to other states and say, see this works.”
The 32BJ SEIU says it would support portable measures only if they don’t erase worker protections. Figueroa said workers “should not be forced to give up their rights to get those benefits.”
“Denying current and future gig economy workers employee status would deprive untold millions of New Yorkers of many protections and rights, including the right to organize in a union, the right to collect unemployment and many workplace health and safety protections,” he said.