San Francisco, CA (WorkersCompensation.com) – Congressional hearings on one side of the country, and lawsuits on the other, may help to reshape the very nature of the gig economy, experts say.
A new study by the Guardian Insurance Co., found that many of those workers may be financially vulnerable, however, due to a lack of traditional employee benefits. The report, "Part-Time Nation," found:
“While many Americans desire the advantages of a part-time work schedule, the financial disadvantages can be a deal-breaker,” the report said. “At best, part-timers typically receive reduced employee benefits packages compared to full-timers. Many are ineligible to receive any benefits at all and, therefore, lack valuable medical coverage, retirement savings plans, life insurance, unemployment insurance, and workers’ compensation. Given the important role these benefits play in protecting the financial security of working Americans and their families, it may be time to sound the alarm for America’s growing Part-Time Nation.”
And Congress is listening to the alarm.
Earlier this year, Sen. Mark Warner (D-Virginia) introduced the “Portable Benefits for Independent Workers Pilot Program Act” that would establish a fund to help governments and non-profits experiment with portable benefits for independent workers.
In recent weeks, the House Education and Workforce Committee held hearings to consider the need for new laws to protect the rights of gig economy workers. According to Bureau of Labor Statistics, an estimated 40 million Americans — nearly a quarter of the total workforce — consider themselves to be part of the gig economy, including part-time workers.
At issue is whether or not companies like Uber, Lyft, GrubHub and others, which hire people as independent contractors, should be further regulated to protect workers.
Michael Beckerman, president and CEO of the Internet Association, a group that describes itself as “the unified voice of the internet economy,” testified at the hearing that the solution was not in government policies and over-regulation. Doing so, he said, would hinder non-traditional companies from offering independent contractor jobs.
Rep. Virginia Foxx, (R- NC), agreed. She said gig economy workers may not have access to traditional employee benefits, but that they do so by choice.
“People can go to work in a factory if they are looking for security or a regular paycheck and the things that come from different jobs,” Foxx said, according to the National Law Journal. “(The) (sic) sharing economy gives ultimate freedom to people in this country. We attempt to regulate it at our peril. It’s not the government’s role to create a level playing field.”
Arun Sundararagan, a New You University School of Business professor, testified that gig economy workers are more entrepreneurs than employees and that the government should create a system where contributions from businesses and contractors would provide benefits for workers.
“Going back to a model where someone called the employer is providing all the funding is no longer viable, with so many entrepreneurs,” he said.
But on the other side of the country, a San Francisco court may make decisions that change the face of the gig economy altogether.
Former delivery driver Raef Lawson has sued GrubHub, for whom he previously worked, saying that he should have been classified as an employee instead of an independent contractor. Experts say a win for Lawson could set the stage for other independent contractors to sue other job sharing companies.
Lawson testified that he felt compelled to take every order given to him by GrubHub so that he would get better payments and would not be “de-activated” from the service. In early 2016, he was terminated from GrubHub for not providing services per the contract agreement.
In 2016, he filed suit against the company in federal court. During testimony, Lawson admitted to filing suit against other job sharing companies that he had worked for.
“I think they’re taking advantage of people like me,” Lawson said, according to court transcripts. “We need to work, need to pay rent, and they give us a little flexibility. Then they deny we’re employees so they can get around wage laws, like paying overtime and reimbursing expenses… I don’t think that’s right.”
Lawson’s attorney, Shannon Liss-Riordan, worked throughout the trial to show that Lawson’s work met the conditions of the Borello test which looks at circumstances like whether or not the work is part of the company’s regular business.
Liss-Riordan said GrubHub’s policies force drivers to take as many orders as are given to them, so that they may qualify for an hourly rate of $15 per hour, or weekly bonuses of $2 per hour, up to 40 hours a week.
In response, GrubHub’s lawyer Theodore Boutrous, Jr. asked GrubHub COO Stan Chia whether or not GrubHub considered itself a “food delivery company.”
Chia, according to Tech Crunch, responded, “No, we do not.”
According to Chia, GrubHub is a marketing and discovery tool for restaurants, enabling diners to discover dining establishments they may not have known about.
“It is still to be the premiere marketplace connecting diners with restaurants,” Chia said.
GrubHub began delivery service officially in 2015. Prior to that, in 2013, GrubHub merged with delivery service Seamless in 2013. The food delivery service was added as a service to restaurants, Chia said.
At stake is the bottom-line for companies and employees. If GrubHub’s delivery drivers aren’t part of GrubHub’s core business, the drivers will continue to miss out on government protections like workers’ compensation and minimum wage guarantees. If the court finds that the drivers are part of GrubHub’s business, companies with independent contractor workforces may face payroll taxes, benefit upgrades and back payment of wages, experts said.
An analysis by Recode in 2015 estimated it would cost Uber $209 million to reclassify its 45,000 in California alone. Notably, Tech Crunch reports that lawyers for Uber are also attending court and taking notes. Uber has faced numerous lawsuits over whether or not their drivers are employees or independent contractors.
The case is expected to wrap up within the week.
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