Gig Workers and Workers Compensation

A gig worker for Uber

In virtually every state in the U.S., workers compensation laws protect employees, providing them with paid medical care if they are injured on the job and replacement wages if they are unable to work. But in today’s growing gig economy, the rights of so-called gig workers, including the right to workers comp, are increasingly unclear. And as the recent protests by Uber and Lyft drivers clearly point out, that’s creating conflicts that are unlikely to be resolved any time soon.

At the heart of the matter is the question of whether gig workers are independent contractors or employees — a distinction that not long ago was fairly easy to make. Employees were workers whose employers had a “right to control” their working conditions, work hours, benefits and pay. Independent contractors, on the other hand, set their own schedules, decided how much to charge, provided their own equipment, and determined how and under what circumstances they worked.

But the gig economy has changed all that — at least for people who work for large corporations like Uber, Lyft, GrubHub and DoorDash. Although classified by the companies as independent contractors, more and more of these workers say they are functioning as employees and are entitled to the benefits and protections that being an employee entails.

The Impact of the Gig Economy

Since the Great Recession of 2008, more and more American workers have been unable to find steady, full-time work. Despite glowing economic reports and an unemployment rate of 3.6 percent, the truth is that millions of gig workers are piecing together a living working multiple part-time jobs. Even the U.S. Bureau of Labor Statistics, which is tasked with monitoring employment trends and guiding U.S. labor policy, has no idea how many gig workers there actually are. Some estimates are as high as 75 million, but the latest survey from the BLS sets the number at one-eighth of that. That survey, however, dates back to 2005.

There’s also a lot of confusion about what a gig worker is. Some surveys rank moms who pick up occasional babysitting jobs on a par with people who work 20 hours a week or more for Uber and Lyft. Clearly, there are distinctions there. But what’s not clear is how much impact those distinctions should have on workers’ rights.

California Sets the Bar

Given its prominent place in the gig economy, it’s not surprising that the debate about gig workers’ status and rights is playing out in the State of California right now. Last April, the State Supreme Court issued a ruling in the case of Dynamex Operations West, Inc. v. Superior Court that required businesses to apply the so-called “ABC test” to determine if a worker is an independent contractor or an employee. Under that broad criteria, a person is an employee if:

  • The company controls what the worker does
  • The worker performs a task that is integral to the company’s business model
  • The worker doesn’t run an independent business doing what it does for the company

The ruling generated shock waves in the business community, putting employers on notice that workers who substantially contribute to their business model (or most everyone who works for the company) may soon be classified as employees in the state with the largest economy in the U.S. And while the ruling applied strictly to wages — affirming that gig workers are entitled to be paid minimum wage and overtime pay — its implications for benefits such as paid time off and workers compensation are clear.

At this point, the California state legislature is hashing out how to codify the court’s ruling into California law. According to Assemblywoman Lorena Gonzalez, a Democrat from San Diego, the ruling is a critical step forward to ensuring that “… workers aren’t left behind in this new gig economy, doing one side hustle after another.” She would like to see the state expand protections to the California’s estimated 2 million gig workers, including benefits such as sick time, employer-sponsored health care, unemployment benefits and workers comp.

Naturally, not everyone agrees. Assemblywoman Melinda Melendez, a Republican representing California’s 67th State Assembly District, has introduced a bill that would limit the impact of the Supreme Court decision, which she says would have “chilling and potentially harmful impacts” to businesses and independent contractors in the state.

About Us

The Carmoon Group, Ltd. is a family owned insurance broker headquartered in Hicksville, New York. Through our large nationwide network of insurance associates, we offer a broad range of risk management products to businesses of all types, including for-profit businesses and nonprofit organizations across the United States. Our experienced professionals are available every weekday to review your current coverage and answer any questions you may have. Just give us a call to set up an appointment, or reach out online and we’ll get back to you at a convenient time.

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