New York Bill Would Let Gig Economy Companies Provide Benefits to Contractors

New York Bill Would Let Gig Economy Companies Provide Benefits to Contractors

One of the key questions raised by the advent of the ‘gig economy’ is how participants in that economy will obtain critical benefits like health care, unemployment insurance, and retirement savings outside of a traditional employer-employee relationship. Ridesharing platforms Uber and Lyft maintain that their drivers are independent contractors and have fought to keep them from being reclassified as employees, which these companies fear would wreak havoc on their business models by requiring them to provide unemployment benefits, paid vacations, regular work hours, and so forth. Gig economy platforms argue that the people who use them for work enjoy a level of freedom and flexibility that they could not maintain as employees, so everybody wins from the independent contractor model. Since gig economy workers look a lot like employees, but not exactly, some economists have proposed that a new type of classification is needed to account for this type of work.

In the meantime, some gig economy platforms have experimented with ways to provide their user-contractor-employees with benefits without breaking their business models: Last August, Uber piloted a retirement savings program for drivers, and is trying out a peer-to-peer platform that allows customers who hire caregivers through the platform to contribute to their caregiver’s benefits, much like a traditional employer would. Other companies say they would like to provide benefits to their contractors but don’t, because doing so would risk having them reclassified as employees.

New York State has been trying to develop a legislative solution to this quandary since last year, working from a draft bill circulated by the online home-cleaning company Handy that would establish a model for gig economy workers to receive portable benefits while remaining independent contractors under state law. At the New York Employment Attorneys Blog last month, Harman Firm attorney Edgar M. Rivera explained how the bill would work:

[Handy’s] draft bill establishes a program whereby participating gig-economy companies would pay the equivalent of 2.5% of workers’ income into individual health savings accounts. Handy’s cleaners in New York earn approximately $20 an hour and work, on average, 10 hours a week. A 2.5% health stipend deposited into an individual account would amount to about $800 a year for a Handy worker earning $33,000—less than one third of the cost of an individual silver plan on the New York State health insurance market, according to the Kaiser Family Foundation. In return, workers who enter into the program accept their classification as nonemployees, which proscribes them from suing for benefits like overtime pay, joining unions to collectively bargain for better benefits, and receiving mandatory employer payroll contributions, like Social Security and Medicare.

The projected health stipends from the plan’s portable benefit funds are significantly less than what workers might receive as actual employees.

The proposal is unsurprisingly controversial within the organized labor community, but the state senator backing the legislation is herself a former union official, and labor leaders recognize that something has to be done to account for the unique circumstances of these workers, Josh Eidelson reports at Bloomberg Businessweek:

State Senator Diane Savino, a former union official who plans to introduce the legislation this month with the assembly’s majority leader, says both labor and management stand to gain. … To help it make the case in Albany, where organized labor is still influential, Handy has engaged Bradley Tusk, an informal Uber adviser who managed Michael Bloomberg’s 2009 mayoral campaign, and Andy Stern, the former president of the Service Employees International Union who now advises companies including Airbnb.

Tusk says unions should make a deal with the tech industry in New York to avoid less favorable changes likely to come from a Republican-controlled Washington. Stern says they should look at the bill as a way to start finding new roles, such as administering the kind of benefit funds it outlines, or working with businesses to create groups that represent contractors without collective bargaining rights, like the Uber-funded guild the company formed last year with the International Association of Machinists and Aerospace Workers. “There’s an existential threat,” says Stern. “If that doesn’t motivate them to find new ways of representing workers, then you can invite me to the funeral.”

Of course, not everyone is convinced that this legislation is the right way to solve the problem. Writing at the Village Voice, Cole Stangler hears from some labor leaders who see the bill as a loss for workers:

“This bill is pure capitulation,” says Bhairavi Desai, founder and executive director of the Taxi Workers Alliance. “Companies, whether it’s Uber or Handy, they’re not looking to make concessions. They’re looking to have labor capitulate and have politicians lay down that framework for capitulation.”

Desai says the bill offers companies valuable ammo to defend themselves against costly misclassification lawsuits. As she points out, the question of whether people who work for apps are employees is far from settled. Former workers have filed dozens of lawsuits against app-based companies to that effect, asking for millions in unpaid wages.