State lawmakers increasingly work to accommodate the ‘gig economy’

Washington state lawmakers are considering a bill that would allow companies to extend to workers some of the benefits commonly associated with full-time employment, but without triggering a presumption of “employee” status. It’s an imperfect bill that will require a lot more rejiggering before it becomes law, but it also marks a potentially important step on the path toward the more flexible future of work.

The rising profile of the so-called “gig economy”—in which workers take on contract-based jobs outside the traditional employee-employer relationship—is forcing policymakers to re-evaluate of the fundamentals of how we have classified employees and contractors for decades. The implications could go far beyond Uber and Lyft drivers.

{mosads}Full-time work typically involves an employer having large amount of control over the hours an employee works and the instruments used to execute that work. By contrast, part-time workers generally are assume to have a great degree of flexibility, but with fewer guaranteed benefits protections. The differences between employees and contractors may seem like semantics, but the law and a host regulations regards them as substantively meaningful.

One problem with the status quo is that it construes conferring noncash benefits—like paid leave, retirement savings and unemployment insurance—as evidence that a worker is an employee and not a contractor. This has led employers that might otherwise be willing to offer benefits to retain the best workers to refrain from doing so. This has meant many part-time and contract workers don’t have access to a private safety net that they might otherwise enjoy.

The Washington bill looks to address the problem by disallowing consideration of benefits provided through certain qualified third-party benefit providers when determining a worker’s employment status. It potentially would open up new ways for job providers to compete for workers, in turn expanding those workers’ opportunities.

But should other states—or the federal government—look to follow the Evergreen State’s example, they should keep a handful of principles in mind. The system will only function as attractive option for workers and job providers if they can chart their own course. Workers should be allowed to pick both their benefits and benefit providers for themselves, or be allowed to opt out of the system entirely. They should be protected from punitive actions from job providers because they did work for a competing firm or because they chose or opted not to choose any particular benefits provider. Workers should be able to work when and where they want, for whomever they choose.

Job providers, for their part, should be able to pick their partners without fear of being locked in. They would more willing to engage in arrangements with greater compensation flexibility if the legal presumption for employment status, over contractor status, were reversed. In practice, this would mean that, in exchange for providing noncash benefits, the burden of proof would be on a worker to demonstrate that a job provider was exercising a level of control sufficient to warrant employee status.

Finally, while it makes sense to distinguish between job providers and benefit providers, principally to ensure that workers enjoy genuine autonomy as they choose their benefits, the specific organizational model of a benefit provider should not be limited. The Washington bill imposes such limits by restricting benefit providers to nonprofits. Since this model is new, it’s not at all clear which model makes the most sense. Experimentation will be necessary.

Finding ways to remove barriers to work is a priority for both political parties, not only because of the economic benefits, but also because of the dignity associated with work. What’s more, empowering workers with the flexibility to achieve financial security independent of public safety will serve to preserve those resources over the long term. For both reasons, Washington’s first step toward portable and flexible benefits is worthy of praise, study and ongoing attention. 

Ian Adams is a senior fellow with the R Street Institute.

The views expressed by contributors are their own and are not the views of The Hill.