Workers' Compensation

A Growing Issue in the Gig Economy

Opinions vary on the best way to ensure that gig economy workers have access to workplace injury and illness coverage.
By: | June 29, 2017 • 5 min read

The rapid growth in the gig economy has many companies taking a closer look at their workers’ comp policies.

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Some experts say there is a need for alternative or universal coverage arrangements to protect companies from liabilities and workers from injuries while performing on-demand jobs. Legislators in New York, Washington and other places are considering systems that would require online platforms to pay into workers’ benefit funds.

While such issues will be debated at the state level, there is growing consensus that the growing volume of gig economy workers will necessitate a new model that offers portable and universal workers’ comp.

Blurring Lines

On-demand platforms and companies that use such workers may be at risk for misclassifying their employees as independent contractors.

In October 2016, the Washington State Department of Labor and Industries ordered San Francisco delivery company Postmates to retroactively pay two years of workers’ comp premiums.

And since its inception, regulators in many states have questioned Uber’s classification of drivers as independent contractors.

Gig economy jobs are typically defined as those where workers connect with clientele through a digital platform.

These new work platforms are increasingly blurring the lines, not only for Uber drivers but for the tens of millions of tech and administrative workers who work remotely from their homes.

Most companies that use such models, such as Uber, Upwork and TaskRabbit, serve as an intermediary between the worker and customer.

Jared Staver, attorney, Staver Law Group

Jared Staver, an attorney with Staver Law Group in Chicago, Ill., said the distinction between employee and contractor has become a growing source of debate in the gig economy. Companies that misclassify workers as independent contractors could face fines, be forced to retroactively pay workers’ comp premiums, and have no protection in the event of an injury lawsuit.

“If it’s determined you didn’t carry comp insurance [and were required to], you can then be taken to civil court where there are no caps on the amount of money that someone can recover,” Staver said.

The difference between an employee and a contractor isn’t exactly black and white and can come down to the state, legal opinions and factors such as how the work is done, who provides the tools and equipment, and how work is scheduled.

Staver said these new work platforms are increasingly blurring the lines, not only for Uber drivers but for the tens of millions of tech and administrative workers who work remotely from their homes.

“It ultimately comes down to control over the worker, and that’s a big question in many of these new jobs,” Staver said.

Calls for a “Third Class” of Worker

A 2015 study by the Economic Policy Institute found that up to 20 percent of employers in some industries misclassify workers as independent contractors.

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John Rehm, attorney at the law firm of Rehm, Bennett & Moore in Lincoln, Neb., said while misclassification has been common in fields like driving, cleaning and construction, it “seems to be a part of the business model” for many of these new companies.

Uber’s business model is specifically designed to position drivers as contractors by ensuring they use their own vehicles and by allowing them to work when they want through the app. Yet Rehm said many gig economy models leave workers unprotected and companies exposed to wage and hour litigation.

Many experts say the growing on-demand economy calls for a new classification of worker to meet the needs of both business and worker.

John Rehm, attorney, Rehm, Bennett & Moore

Deborah Berkowitz, Senior Fellow at the National Employment Law Project, said the employment model built 100 years ago provided things like pensions, health benefits, Social Security, workers’ comp and unemployment insurance.

Some states are already trying to address the issue. In New York, the state-run Black Car Fund offers workers’ compensation benefits to participating member’s drivers. Uber is now required to participate in the fund and charges an additional 2.4 percent for each fee.

“Workers’ comp benefits work best when it has universal coverage. We actually think many [gig economy] workers are employees for the purchase of worker’s comp,” Berkowitz said.

Portable and Universal Policies

Rehm said instituting a third class of worker could present challenges, including the fact that it would likely lead to more litigation about how workers are classified.

Any policies to cover gig economy workers would also need to be portable and universal to meet the needs of gig economy workers. As many of these workers perform services for multiple platforms, their sources of income can be scattered through multiple companies and across state lines.

“If you are hurt at a part-time job or a gig job, comp only pays you based on the wages for that job. It doesn’t pay you for wages lost in other jobs because of the work injury in another job,” Rehm said.

Deborah Berkowitz, senior fellow, National Employment Law Project

Berkowitz said the Affordable Care Act has already opened up citizens and businesses to the idea of portable benefits, and that New York’s model could be replicated in other states.

NELP recently collaborated with the Roosevelt Institute to produce a paper on worker benefits and said there is growing political support for making universal many benefits once tied to the workplace.

Legislators in Washington posed a bill earlier in the year that would require such platforms and contracting companies to make contributions to a portable benefit fund equal to 25 percent of a worker’s income, or up to $6 per hour.

And the Portable Benefits for Independent Workers Pilot Program Act introduced in May would allocate funds under the Department of Labor to make grants to state for testing and piloting portable benefit programs.

“We do think there’s a growing need for a third class of worker but there is also a sense that we need to expand the public safety net and think about [other] benefits,” Berkowitz said.

Craig Guillot is a writer and photographer, based in New Orleans. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession

This senior risk manager values his role in helping Varian Medical Systems support research and technologies in the fight against cancer.
By: | September 12, 2017 • 5 min read

R&I: What was your first job?

When I was 15 years old I had a summer job working for the city of Plentywood, mowing grass in the parks and ballfields, emptying garbage cans, hauling waste to the dump, painting crosswalk lines.  A great job for a teenager but I thought getting a college degree and working in an air-conditioned office would be a good plan long term.

R&I: How did you come to work in risk management?

I was enrolled in the University of Montana as a general business student, and I wanted to declare a more specialized major during my sophomore year. I was working for my dad at his insurance agency over the summer, and taking new agent training coursework on property/casualty risks in my spare time, so I had an appreciation for insurance. My dad suggested I research risk management for a career, and I transferred sight unseen to the University of Georgia to enroll in their risk management program. I did an internship as a senior with the risk management department at Sulzer Medica, and they offered me a full time job.

R&I: What could the risk management community be doing a better job of?

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We need to do a better job of saying yes. We tend to want to say no to many risks, but there are upside benefits to some risks. If we initiate a collaborative exercise with the risk owners — people who may have unique knowledge about that particular risk — and include a cross section of people from other corporate functions, you can do an effective job of taking the risk apart to analyze it, figure out a way to manage that exposure, and then reap the upside benefits while reducing the downside exposure. That can be done with new products and new service offerings, when there isn’t coverage available for a risk. It’s asking, is there anything we can do to reduce the risk without transferring it?

R&I: What emerging commercial risk most concerns you?

Cyber liability. There’s so much at stake and the bad guys are getting more resourceful every day. At Varian, our first approach is to try to make our systems and products more resilient, so we’re trying to direct resources to preventing it from happening in the first place. It’s a huge reputation risk if one of our products or systems were compromised, so we want to avoid that at all costs.

We need to do a better job of saying yes. We tend to want to say no to many risks, but there are upside benefits to some risks.

R&I: What insurance carrier do you have the highest opinion of?

I’ve worked with a number of great ones over the years. We’ve enjoyed a great property insurance relationship with Zurich. Their loss control services are very valuable to us. On the umbrella liability side, it’s been great partnering with companies like Swiss Re and Berkley Life Sciences because they’ve put in the time and effort to understand our unique risk exposures.

R&I: How much business do you do direct versus going through a broker?

One hundred percent through a broker. I view our broker as an extension of our risk management team. We benefit from each team member’s respective area of expertise and experience.

R&I: Is the contingent commission controversy overblown?

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I think so. The brokers were kind of villainized by Spitzer. I think it’s fair for brokers and insurers to make a reasonable profit, and if a portion of their profit came from contingent commissions, I’m fine with that. But I do appreciate the transparency and disclosure that came out as a result of the fiasco.

R&I: Are you optimistic about the US economy or pessimistic and why?

David Collins, Senior Manager, Risk Management, Varian Medical Systems Inc.

While we might be doing fine here in the U.S. from an economic perspective, the Middle East is a mess, and we’re living with nuclear threat from North Korea. But hope springs eternal, so I’m cautiously optimistic. I’m hoping saner minds prevail and our leaders throughout the world work together to make things better.

R&I: Who is your mentor and why?

My Dad got me started down the insurance and risk path. I’ve also been fortunate to work for or with a number of University of Georgia alumni who’ve been mentors for me. I’ve worked side by side with Karen Epermanis, Michael Rousseau, and Elisha Finney. And I’ve worked with Daniel Dean in his capacity as a broker.

R&I: What have you accomplished that you are proudest of?

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Raising my kids. I have a 15-year-old and 12-year-old, and they’re making mom and dad proud of the people they’re turning into.

On a professional level, a recent one would be the creation and implementation of our global travel risk program, which was a combined effort between security, travel and risk functions.

We have a huge team of service personnel around the world, traveling to customer sites to do maintenance and repair. We needed a way to track, monitor and communicate with them. We may need to make security arrangements or vet their lodging in some circumstances.

R&I: What do your friends and family think you do?

My 12-year-old son thought my job responsibilities could be summed up as a “professional worrier.” And that’s not too far off.

R&I: What about this work do you find the most fulfilling or rewarding?

Varian’s mission is to focus energy on saving lives. Proper administration of the risk function puts the company in a better position to financially support research that improves products and capabilities, helps to educate health care providers and support cancer care in general. It means more lives saved from a terrible disease. I’m proud to contribute toward that.

When you meet someone whose cancer has been successfully treated with one of our products, it’s a powerful reward.




Katie Siegel is an associate editor at Risk & Insurance®. She can be reached at [email protected]