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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

The risk manager for Boyd Gaming Corp. says curiosity keeps him engaged, and continual education will be the key to managing emerging risks.
By: | May 1, 2018 • 4 min read

R&I: What was your first job?

I was trained as an accountant, worked in public accounting and became a CPA. Being comfortable with numbers is helpful in my current role, and obviously, the language of business is financial statements, so it helps.

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

Working in finance in the corporate environment included the review of budgets and the analysis of business expenses. I quickly found the area of benefits and insurance — and how “accepting risk” impacted those expenses — to be fascinating. I asked a lot of questions. Be careful what you ask for — I soon found myself responsible for those insurance areas and haven’t looked back!

R&I: What is the risk management community doing right?

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I have found the risk management community to be a close-knit group, whether that’s industry professionals, risk managers with other companies or support organizations like RIMS and other regional groups. The expertise of the carriers and specialty vendors to develop new products and programs, along with the appropriate education, will continue to be of key importance to companies going forward.

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

As I’m sure many in the insurance field would agree, Hurricanes Katrina and Rita in 2005 changed our world and our industry. It was a particularly intense time and certainly a baptism by fire for people like me who were relatively new to the industry. This event clearly accelerated the switch to the acceptance of more risk, which impacted mitigation strategies and programs.

Bob Berglund, vice president, benefits and insurance, Boyd Gaming Corp.

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

The fast-paced threat that cyber security represents today. Our company, like so many companies, is reliant upon computers, software and IT expertise in our everyday existence. This new risk has forged an even stronger relationship between risk management and our IT department as we work together to address this growing threat.

Additionally, the shooting event in Las Vegas in 2017 will have an enduring impact on firms that host large gatherings and arena-style events all over the world, and our company is no exception.

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

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With the various types of insurance programs we employ, I have been fortunate to work with most of the large national and international carriers — all of whom employ talented people with a vast array of resources.

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

We use brokers for many of our professional coverages, such as property, casualty, D&O and cyber. We are self-insured under our health plans, with close to 25,000 members. We tend to manage those programs internally and utilize direct relationships with carriers and specialty vendors to tailor a plan that works best for team members.

R&I: Who is your mentor and why?

I have been fortunate to have worked alongside some smart and insightful people during my career. A key piece of advice, said in many different ways, has served me well. Simply stated: “Seek to understand before being understood.”

What this has meant to me is try everything you can to learn about something, new or old. After you have gained this knowledge, you can begin to access and maybe suggest changes or adjustments. Being curious has always been a personal enjoyment for me in business, and I have found people are more than willing to lend a hand, offer information and advice — you just need to ask. Building those alliances and foundations of knowledge on a subject matter makes tackling the future more exciting and fruitful.

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

Our benefit health plan is much more than handing out an insurance card at the beginning of the year. We encourage our team members and their families to learn about their personal health, get engaged in a variety of health and wellness programs and try to live life in the healthiest possible way. The result of that is literally hundreds of testimonials from our members every year on how they have lost weight, changed their lifestyle and gotten off medications. It is extremely rewarding and is a testament to [our] close-knit corporate culture.

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

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Some will remember the volcano eruption in Iceland in spring of 2010. I was just finishing a week of meetings in London with Lloyd’s syndicates related to our property insurance placement when the airspace in England and most of northern Europe was shut down — no airplanes in or out! Flights were ultimately canceled for the following five days. Therefore, with a few other stranded visitors like myself, we experimented and tried out new restaurants every day until we could leave. It was a very interesting time!

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

I am originally from Canada, and I played ice hockey from the time I was four years old up until quite recently. Too many surgeries sadly forced my recent retirement.

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

That’s a funny one … I am a CPA working in the casino industry, doing insurance and risk management, so neighbors and acquaintances think I either do tax returns or they think I’m a blackjack dealer at the casino!




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