As the Gig Economy Expands, Employers Are Cautioned to be Careful

Liz Carey

Philadelphia, PA (WorkersCompensation.com) – While a federal judge ruled recently that UberBlack drivers cannot be considered employees of the company, one expert has said that underwriters should carefully consider how their clients are classifying their employees.

U.S. District Judge Michael Baylson, Senior United States District Judge for the Eastern District of Pennsylvania, ruled that the San Francisco-based company’s limousine drivers are independent contractors and not employees, according to the federal Fair Labor Standards Act.

The ruling, which could have major implications for the Gig Economy, is the latest in favor of Uber, which has been hit with dozens of lawsuits over the years asserting that their drivers are employees, entitled to minimum wage, overtime, workers’ compensation and other benefits, and not contractors.

In an email interview with WorkersCompensation.com, an Uber spokesperson said the company is pleased with the decision.

Uber’s had mixed results with its lawsuits. In Florida last year, an appeals court ruled that Uber drivers were not employees under Florida laws. But in New York and California, state agencies have ruled that they are employees under those state’s laws.

An employer’s decision to classify a worker as a contractor and not an employee, could have ramifications for insurance underwriters, said Matt Zender, VP and Product Manager for AmTrust .

“If we’re underwriting a risk assessment, and 50 percent of a company’s employees work from home, we have to assume they are working 24/7. And now they are estimating that 43 percent of Americans will work in the Gig Economy in 2020. What happens when those workers turn out to be employees instead of contractors?” he said. “What’s going to happen to those carriers when they’re writing those policies and don’t know that the company has all these contractors until we can get down and do a premium audit?”

Zender said insurers need to be sure what they are covering.

“Agents have increased liabilities to tell a customer what is and isn’t an employee,” he said. “It will be more on the insurance industry to train employers to understand the definition of employee for their state.”

And as the Gig Rconomy grows, Zender said, there will be increased calls for change in the workers’ compensation world.

“There’s no question that if the Gig Economy does grow, then there’s going to be tremendous pressure on the Grand Bargain,” he said. “With an increasing number of Gig Economy employees, the questions become who’s going to train them? Who’s going to make modifications to their work environment in the case of an injury? Who’s going to monitor them to make sure they don’t work 14-15 hours a day and risk injury because of fatigue, stress and exertion?”

As much as he worries about the employers, though, Zender also worries about the employees.

“I do worry about the Grand Bargain, where the Gig Economy continues to increase in size,” he said. “Who’s taking care of those workers? The employer, in my estimation, will be the more informed party in that equation. Entering into that contract relationship, it’s the employees that are the ones I worry about.”