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

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In the Fast-Paced World of Retail, This Risk Manager Strives to Mitigate Risks Proactively and Keep Senior Leaders Informed

Janine Kral works to identify and mitigate risks, building strong partnerships with leaders and ensuring they see her as support rather than a blocker. 
By: | October 29, 2018 • 4 min read

R&I: What was your first job?

My very first paid job was working on my uncle’s ranch in British Columbia in the summers. He had cattle, horses and grapes — an unusual combo. But my first real job out of college was as a multi-line claims adjuster at Liberty Mutual.

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

Right out of college I applied for a job that turned out to be a claims adjuster at Liberty Mutual. I accepted because they were offering six weeks of training in Southern California, and at the time that sounded really fun. I spent about three years at Liberty Mutual and then I spent a short period of time at a smaller regional insurance company that hired me to start a workers’ compensation claims administration program.

I was hired at Nordstrom as the Washington Region Risk Manager, which was my first job in risk management. When I started at Nordstrom, the risk management department had about five people, and over the years it has grown to about 75. I’ve been vice president for 11 years.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

I would say that technology has probably been the biggest change. When I started many years ago, it was all paper and no RMIS.

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R&I: What risks does the retail industry face that are unique?

We deal with a lot of people — employees and customers. With physical brick and mortar settings, there are the unique exposures with people moving in and out in a public environment. And of course, with ecommerce, we have a lot of customer and employee data, which creates cyber risk — which is not necessarily a unique risk in today’s environment.

R&I: Can you describe your approach to working with senior leaders and front-line staff alike to further risk management initiatives?

It starts with keeping the pulse of what’s happening with the business. Retail moves really fast. In order to identify and mitigate risks proactively, we identify top risk areas and topics, and then we ensure that we have strong partnerships with the leaders responsible for those areas. Trust is critical, ensuring that leaders see us as a support rather than a blocker.

R&I: What role does technology play in your company’s approach to risk management?

Janine Kral, claims adjuster, Nordstrom

We have an internal risk management information system that all of our locations report events into — every type of incident is reported, whether insured or uninsured. Most of these events are managed internally by risk management, and our guidelines require that prevention be analyzed on each one. Having all event data in one system allows us to use the data for trending and also helps us better predict what may happen in the future, and who we need to work with to mitigate risks.

R&I: What advice might you give to students or other aspiring risk managers?

My son is a sophomore in college, and I tell him and his friends all the time not to rule out insurance as a career opportunity. My advice is to cast a wide net and do your homework. Research all the different types of opportunities. Read a lot — articles, industry magazines, LinkedIn. Be proactive and reach out to people you find interesting and ask them about their careers. Don’t be shy and wait for people and opportunities to come to you. Ask questions. Build networks. Be curious and keep an open mind.

R&I: What are your goals for the next five to 10 years of your career?

I have always been passionate about continuous improvement. I want to continue to find ways to add value to my company and to this industry.

R&I: What is your favorite book or movie?

My favorite book is Shantaram by Gregory David Roberts. It’s a true story about a man who was in prison in Australia after being convicted of armed robbery, and he escaped to India. While in India, he passed himself off as a doctor in a slum. It’s a really interesting story, because this is a convicted criminal who ends up helping others. I am not always successful in getting others to read the book because it’s 1,000 pages and definitely a commitment.

R&I: What’s the best restaurant you’ve ever eaten at?

Fiorella’s in Newton, Massachusetts. Great Italian food and a great overall experience.

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R&I: What is your favorite drink?

“Sister Carol.” I have no idea what is in it, and I can only get it at a local bar in Seattle. It’s green but it’s delicious.

R&I: What is the riskiest activity you ever engaged in?

Skydiving. Not tandem and without any sort of communication from the ground. Scary standing on a wing of a plane, but very peaceful once the chute opened, slowly floating down by myself.

R&I: If the world has a modern hero, who is it and why?

I can’t think of one individual person. For me, the real heroes are people who have a positive attitude in the face of adversity. People who are resilient no matter what life brings them.

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

It’s rewarding to help solve problems and help people. I am proud of the support that my team provides others. &




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