Rousmaniere: The Real Gig Problem for Work Comp

Peter Rousmaniere

The “gig economy” term, as usually used, refers to disruption to regular employment. There is a big gig problem for workers’ comp. After decades of expanding workers’ comp coverage, businesses and politicians are trimming it, by a lot.

About one out of every serious ten work injuries happens without the worker being covered by workers’ compensation at the time of injury. Some 90,000 lost time compensable injuries may be lost to the system each year. It’s hard to say with much confidence, but it appears the leakage was more like one out of every fifteen, twenty years ago.

The gig economy refers to employment that is outside a permanent job, often through short term engagements, and without labor protections such as unemployment compensation, workers’ compensation, and a plethora of so-called wage and hour provisions such as overtime. Uber and Lyft drivers are an example.

Researchers published an analysis in 2016 of what they referred to as “alternative work arrangements.” That term is more informative than “gig” because it adds more context to what has been going on since about the 1980s in the American workforce. The term covers on-call work, temporary agencies, and independent contractors. For some decades, American employers have been adopting strategies to shed themselves of employees with some permanency obligations and benefit overhead costs.

These researchers reported that between 2005 and 2015, the percentage of women who were employed in any alternative work arrangement almost doubled, 8.9% to 17%, and of men from 12.3% to 14.7%. They reported that in 2015, 6.4% of 16 to 24 year olds were employed in an alternative work arrangement; 14.3% for 25-54 in age, and 23.9% aged 55-74.

These overall averages do not help much to see how workers’ comp comes out. That high estimate of lost time compensable injuries comes from diving into at two worker populations: People who are independent contractors in some explicit sense, and people who are paid in cash and who likely do not show up in any audit.

What do we know about independent contracting? States vary on how they define this employment status, as do federal agencies. The 2016 report (whose authors are Lawrence Katz of Harvard and Alan Krueger of Princeton) drew from RAND surveys in 1995, 2005 and 2015.

I linked their survey results to 2012 workforce and injury rate estimates by occupation. The absolute number of independent contractors in the workforce rose by 50% 1995 if 2012 workforce figures are used. The rise was likely higher, since during that period this work arrangement number probably quadrupled in the fastest growing major workforce, which is healthcare.

I then drilled down to look at the three occupations in which the Washington Labor and Industries said independent contractors appear at high rates: construction (in general), janitorial and truck drivers. These workforces combined account for roughly 10% of the national workforce. For two of them, the rate of undocumented workers is high (construction and janitorial). Half of these vulnerable workers are paid in cash.

In addition, these occupations have high injury rates, three times the average. While they may account for one tenth of the workforce, they generate 30% of work injuries. With both high independent contracting rates and cash compensation, over a quarter of their injuries may occur outside the workers’ comp system. And we have not yet factored in other above average risk occupations such as farming, housekeeping and ground keeping, each with high large numbers of undocumented workers. An estimate of 90,000 “lost” lost time compensable injuries seems reasonable.

Insurers have good reason to be alarmed about this, for these injuries are not completely lost. Insurers fear that many sneak onto their claims rolls by connivance of employers.

State regulation is not as effective as it could be. The National Association of Insurance Commissioners noted in 2009 that “many political, economic and bureaucratic reasons account for disparate treatment by states of independent contractors.” Some rely on “bright line” tests (using a few simply stated criteria), others on more subjective criteria that create more disputes.

Courtney Gilham, a vice president of the National Society of Insurance Premium Auditors, in many years of doing premium audits in most states, never saw an advisory document on home health aides issued by an insurer, rating bureau or state agency. These aides are one of the fastest growing jobs.

To be sure, Microsoft and Federal Express were knocked back for trying to push the envelope on independent contractors. But so-called platform companies, such as Uber and Handy, are spreading. These types of companies use internet platforms to manage their sales and workforces. They vigorously try to influence politicians and the courts to defend their use of independent contractor arrangements. The platform model can be used to hire millions of workers in housekeeping, farming, civilian protective services, delivery services and other major occupations with high injury risk.

Michael Duff, a professor at University of Wyoming Law School, questions the constitutionality of recent laws proposed in eight states that would carve out a potentially immense portion of the workforce independent contractors. According to Duff, a new Tennessee law “leads to the realization that any business providing virtually any service by way of ‘online-enabled application, software, website, or system that enables the provision of services’ is exempted from workers’ compensation regulation.”

One reason that independent contracting will grow is that most workers participating in these companies say they like the freedom of free lancing. They, and their employers, don’t make 401K, social security and Medicare contributions. The foundations for household economic security, including workers’ comp, are removed. What is replacing them besides dreams? That’s the big problem of the gig economy.

And it’s the real workers’ comp out-opt trend to watch.


Peter Rousmaniere is widely known throughout the workers’ compensation industry, both for his writing and consulting experience. Based in the picture perfect New England town of Woodstock, VT, he is a regular on the conference circuit, and is deeply in tune with trends and developments within the industry. His passion is writing and presenting on issues largely related to immigration, and he maintains a blog on the subject at