RISK FOCUS: WORKERS’ COMP
Do You Have Employees or Gig
The number of gig
economy workers is
growing in the U.S.
But their classification
as contractors leaves
many without workers’
protection or other
By Susannah Levine
and Michelle Kerr
Agrowing number of Americans earn their living in the gig economy without employer-provided benefits and protections uch as workers’ compensation. With the proliferation of on-demand services powered by digital platforms, questions surrounding who does and does not actually
work in the gig economy continue to vex stakeholders. Courts and legislators
are being asked to decide what constitutes an employee and what constitutes an
independent contractor, or gig worker.
The issues are how the worker is paid and who controls the work process, said
Bobby Bollinger, a North Carolina attorney specializing in workers’ compensation
law with a client roster in the trucking industry.
The common law test, he said, the same one the IRS uses, considers “whose
tools and whose materials are used. Whether the employer is telling the worker
how to do the job on a minute-to-minute basis. Whether the worker is paid by the
hour or by the job. Whether he’s free to work for someone else.”
Legal challenges have occurred, starting with lawsuits against transportation
network companies (TNCs) like Uber and Lyft. Several court cases in recent years
have come down on the side of allowing such companies to continue classifying
drivers as independent contractors. Those decisions are significant for TNCs,
because the gig model relies on the lower labor cost of independent contractors.
Classification as an employee adds at least 30 percent to labor costs.
However, a March 2018 California Supreme Court ruling in a case involving
delivery drivers for Dynamex went the other way. The Dynamex decision places
heavy emphasis on whether the worker is performing a core function of the
business. Under the Dynamex court’s standard, an electrician called to fix a wiring
problem at an Uber office would be considered a general contractor. But a driver
providing rides to customers would be part of the company’s central mission and
therefore an employee.
Despite the California ruling, a Philadelphia court a month later declined to
follow suit, ruling that Uber’s limousine drivers are independent contractors, not
employees. So a definitive answer remains elusive.
A LEGISLATIVE MOVEMENT
Misclassification of workers as independent contractors introduces risks to both
employers and workers, said Matt Zender, vice president, workers’ compensation
product manager, Am Trust.
“My concern is for individuals who believe they’re covered under workers’
compensation, have an injury, try to file a claim and find they’re not covered.”
The motive for companies seeking the contractor definition is clear: They don’t
have to pay for benefits, said Meneghello. “But from a legal perspective, it’s not so
easy to turn the workforce into contractors.”
It’s about to get easier, however. In 2016, Handy — which is being sued in five
states for misclassification of workers
— drafted a N. Y. bill to establish
a program where gig-economy
companies would pay 2.5 percent of
workers’ income into individual health
savings accounts, yet would classify
them as independent contractors.
Unions and worker advocacy groups
argue the program would rob workers of
rights and protections. So Handy moved
on to eight other states where it would
be more likely to win.
So far, the “Handy” bills have passed
one house of the legislature in Georgia
• Digital platforms are making it
harder than ever to define what
constitutes an employee.
• One company is pushing
legislation that would broadly
define what an independent
• Portable benefits are one possible
solution under consideration.
“My concern is for individuals
who believe they’re covered
under workers’ compensation,
have an injury, try to file a claim
and find they’re not covered in
the eyes of the state.”
— Matt Zender, vice president, workers’
compensation product manager, Am Trust
New legislation could expand the pool of employers who classify their workers as independent contractors.