Last week, on-demand cleaning company Homejoy shut down citing four pending employee misclassification lawsuits as the “deciding factor.” Presidential candidates, regulators, and labor movement leaders, have also recently weighed in on the status of workers in the on-demand economy. With a major debate raging on the value of work in the on-demand, a critical question has emerged: how do we preserve these income opportunities while protecting the worker?
Regulations that eliminate income opportunities in the “on-demand economy” hurt workers who rely on the earnings. That said, all workers, regardless of employment classification, need a safety net that supports them when they’re injured, sick, or when it’s time to retire. We need to modernize our employment structures and policies for today’s independent workers.
Current employee classification options, independent contractor or employee, give us a false choice between stability and flexibility. As an employee, you receive basic protections, including workers compensation and unemployment insurance, and potentially, benefits like health insurance, sick days, and vacation days. However, employee status isn’t the panacea it’s made out to be. Employers have greater control over when you work, how much you can work, and how you do your work. Increasingly employers are limiting workers to less than 30 hours of work per week in order to avoid additional employee obligations, like contributing to health insurance.
On the other hand, being an independent contractor offers outstanding flexibility, autonomy, and, for some, greater earning potential. Want to work 20 hours one week, 60 the next, and none the week after? No problem, you’re in charge. However, independent contractors don’t have the same protections and benefits as employees.
Today, it’s impossible to embrace the flexibility that’s underpinned the on-demand economy’s success--both for platforms and workers--while providing a safety net that protects workers and ultimately contributes to our economy’s overall resilience. In fact, some on-demand platforms want to offer benefits, but paradoxically this act of support is discouraged by current regulation as it increases the chance that workers would then be considered employees. This needs to change.
Eliminating the choice between flexibility and stability could be accomplished by an independent benefits platform with three key components: independent access, innovative benefits, and multi-payer options.
Workers should be empowered to select the benefits they desire independent of their employer, and those benefits should be portable across jobs, and should not change depending on the app they have open.
Innovative benefits will need to be tailored to independent workers to create protections relevant to today’s context. For example, in the on-demand economy, a new form of “workers compensation” would needed to replace income from multiple sources, instead of the solely the income from the job where the worker was injured.
Finally, payment for the benefits must be flexible, allowing contributions from multiple payers, including the worker and several employers, fairly distributing costs.
Ultimately, we believe that on-demand platforms will want to contribute to their worker’s benefits, in order to improve employee recruiting, retention and productivity, as well as because it’s the right thing to do. However, regulatory reform, overhauling an outdated employee classification system or potentially introducing a new worker classification some have termed the “dependent contractor,” will be required to give companies a safe harbor to make contributions to the cost of benefits.
Fortunately, solutions are on the horizon. A growing alliance of on-demand platforms, government, labor, and industry is working to resuscitate our ailing social safety net. As we move forward, we make an open call for collaborators. Insurance companies seeking to serve this large and growing market, we look to you for innovative new financial products tailored to this modern economy. The platforms will clearly play a role in any solution, and we encourage them to ask how they can support their workers today, in advance of any legal or regulatory change or requirement.
We welcome the recent support from Senator Mark Warner, and call to other lawmakers and regulators to address the issues in our employee classification. In the meantime, we seek creative mechanisms that would allow forward-thinking companies to contribute to worker benefits without risk of employee reclassification, and we welcome collaboration in that effort or funding from philanthropies who might help subsidize critical protections while solutions are pursued.
Finally, of course, workers in the on-demand economy, we want to hear your stories. Your first hand perspective will help us better understand these issues, and optimal solutions. If you have a story we should hear or have advice to share with others, please email us at hello@peers.org.
