The emergence of the gig economy has opened an important debate about having portable health and other benefits for the On-Demand Worker. There has been a number of calls for a new category for those who occupy the gray area between employees and independent contractors. Freelancers often work through a middle man or a marketplace (think Upwork.com or 99Designs) or an intermediary, typically an “app,” that customers use to identify themselves as needing a service—for example, a car ride, landscaping service, etc. This enables the employer to maintain some sort of arms-length distance from the worker. (We all know this is often broken, however). How can you work for someone without them giving you some sort of direction?
It’s increasing, but today it appears that at least about 600,000 or .4% of the US Workforce work with an online intermediator. The Hamilton Project at Brookings (I once interned there while I was a student across the street at Johns Hopkin’s University’s SAIS program across the street), recently hosted a gig economy event where Brookings made a proposal for Modernizing Labor Laws in the Online Gig Economy. The talk focused on health and other benefits, and how to ‘force these new forms of work (from Uber, etc.) into a traditional employment relationship could be an existential threat to the emergence of online-intermediated work, with adverse consequences for workers, consumers, businesses, and the economy. “One of their One of the key benefits they proposed was portable benefits, which is a fascinating idea because (Independent contractors tend to have multiple gigs at one time). Their definition:
As we are defining it, the online gig economy involves the use of an Internet-based app to match customers to workers who perform discrete personal tasks, such as driving a passenger from point A to point B, or delivering a meal to a customer’s house. Note that this definition excludes intermediaries that facilitate the sale of goods and impersonal services to customers, such as TeacherPayTeachers.com, a Web site where teachers sell lesson plans and other non-personal services to other teachers, and Etsy.com, a Web site where individuals sell handmade or vintage goods. It also excludes Airbnb, a Web site where people can rent apartments, houses, and other accommodations.
The authors of the Hamilton Report highlight that ‘because it is conceptually impossible to attribute their (workers’s) work hours to any single intermediary.” Today, these independent workers do not qualify for hours-based benefits, including overtime or minimum wage requirements. These independent contractors rarely, if ever, qualify for unemployment insurance benefits. If intermediaries could pool independent workers, however, for purposes of purchasing and providing insurance and other benefits at lower cost and higher quality without the risk that their relationship will be transformed into an employment relationship, then they might be open to pooling their resources and having portable benefits for the contingent workforce.
The Ubers of the worls could then save on the costs if they have to eventually hire these workers full-time and on legal fees (although Uber has changed their driver terms of service agreement that bars drivers from participating in class action lawsuits against the company and instead requires them to enter into arbitration in the case of disputes).
As Steve King points out in his short analysis of this proposal, this new portable benefits law probably should include gig economy workers who work in the B2B sector, or sell goods, or rent real estate, but they do. But even though they are excluded from their analysis, they would likely be included in any portable benefit laws. Portable benefits seems to be a hot topic. Next week the Aspen Institute is holding a workshop on portable benefits.
Protection of the 1099 is important. I have heard of companies (the employer and the intermediary) using algorithmic scheduling to ensure their works never go beyond 29 hours of work a week, which ensures they don’t have to pay them health benefits or provide the other goodies full-time employees receive. It’s important to figure out how to address this barrier to benefits. Ouch! Talk about Big Data hurting the worker!
Another reason to address this is that Brad Smith, the CEO of Intuit and one of the best leaders I have ever worked for, has indicated that his company’s data data shows that 40% of their self-employed customers also have income from a W2 job. (I know several people who wear these two hats). So this problem of multiple employers with different tax and benefit regimes started way before the Ubers, Lyfts, Instacarts came on the scene.
Portable Benefits basically means a person should be able to use the same benefits when they work for different on-demand companies. The Hamilton proposal is a start – it has accelerated the discussion about a new class of employees or at least the call for examining how workers are currently classified. Their proposal really doesn’t focus on online or offline, but instead stresses that workers should be protected and receive benefits. As the chart below indicates, this will continue to become an increasingly important issue to address in our On-Demand Society.