As reported by Reuters, Democratic New York State Assemblyman Joseph Morelle has proposed introducing legislation that would allow workers at gig-economy companies to opt into a company-funded portable benefits program. Gig-economy companies use independent contractors to provide rides (like Uber and Lyft), deliveries (like UberEats), housecleaning (like Handy), and other services through websites and apps. They claim not to employ their workers but instead hire independent contractors to provide their customers services. However, independent contractors generally do not receive basic employment benefits, including health insurance, and as more workers join the gig economy, more are forced to secure health insurance elsewhere or go without. Assemblyman Morelle said that he plans to introduce the legislation early next year; it would be the first bill of its kind in the United States.
Perhaps anticipating the sting of impending legislation, Handy, a web-based home cleaning services company, has circulated a draft bill that would establish guidelines for a portable benefits plan for New York workers at gig-economy companies. Its draft bill establishes a program whereby participating gig-economy companies would pay the equivalent of 2.5% of workers’ income into individual health savings accounts. Handy’s cleaners in New York earn approximately $20 an hour and work, on average, 10 hours a week. A 2.5% health stipend deposited into an individual account would amount to about $800 a year for a Handy worker earning $33,000—less than one third of the cost of an individual silver plan on the New York State health insurance market, according to the Kaiser Family Foundation. n return, workers who enter into the program accept their classification as nonemployees, which proscribes them from suing for benefits like overtime pay, joining unions to collectively bargain for better benefits, and receiving mandatory employer payroll contributions, like Social Security and Medicare.
The projected health stipends from the plan’s portable benefit funds are significantly less than what workers might receive as actual employees. “The amount of money that’s supposed to be put into these portable benefit funds seems so meager,” said Larry Engelstein, executive vice president of 32BJ Service Employees International Union, which represents thousands of janitors. According to Mr. Engelstein, employers contribute an annual average of $18,000 per employee for healthcare costs under contracts the union negotiates. “The actual benefit a worker is getting hardly warrants what the worker is giving up.” Deputy director of the National Employment Law Project Rebecca Smith told Salon, “The problem with this proposal is if these workers are not considered employees, the employees come out ahead, even with a very tiny contribution from companies like Handy, but if you assume they are employees who are being illegally treated as nonemployees, it’s a terrible deal.” The National Employment Law Project estimates that the typical employer saves 10 to 15 percent in labor costs by classifying workers as freelancers, as payroll is typically a company’s biggest expense.
The question of what benefits, if any, workers in the gig economy should receive will become more pressing as more workers move from traditional to non-traditional employment. If you believe that you are improperly classified as an independent contractor or that your employer has withheld benefits, contact The Harman Firm, LLP.