Tucked halfway through US president Barack Obama’s farewell speech on Tuesday was a small nod to a big debate about the future of American employment.
“[We] must forge a new social compact,” Obama said to an enthusiastic Chicago crowd. “To guarantee all our kids the education they need; to give workers the power to unionize for better wages; to update the social safety net to reflect the way we live now…”
For decades in the United States, the benefits of that social safety net—unemployment insurance, health insurance, Social Security—have been for the most part tied to employee status. But since the recession, most job growth (pdf) has been in part-time or “contingent” work, leaving a pressing gap between the benefits available to, say, a salaried receptionist and an Uber driver.
Indeed, the most visible players in this debate have been technology companies like Uber, Lyft, Postmates, and Upwork—pioneers of new, digitally infused methods for managing armies of independent contractors. Now one such company, a New York city-based cleaning and home maintenance service called Handy, thinks it may have the perfect way for those armies to receive benefits too.
A draft of a bill created with input from Handy’s government-relations firm, Tusk Ventures, and reviewed by Quartz, would amend New York state law to allow gig-economy app companies—any company that digitally facilitates “the provision of services by marketplace contractors or entities to individuals or entities seeking such services”—to subsidize benefits for their independent contractors. According to the draft, such companies could elect to contribute at least 2.5% of each transaction to benefits funds; in exchange, their workers would legally remain independent contractors. Workers could then put the funds towards things like life insurance and dental care, and take the money with them when they changed jobs. The independent contractor classification would apply retroactively, to work done before the funds even existed.
New York state legislators reportedly plan to introduce the bill this month, and Tusk Ventures says efforts to craft similar measures are already underway in California. Eventually, the firm plans to lobby for legislation on the federal level.
The bill would effectively remove the threat of misclassification lawsuits, which have dogged companies, like Handy, that distribute jobs on a gig-by-gig basis. Because providing benefits can be used as evidence of employer misclassification in such suits, few gig-economy companies have experimented with safety-net programs that might help workers, and help them compete for workers.
“The opportunity here is to find a way to get new Yorkers access to more benefits,” says Julie Samuels, executive director of Tech:NYC, a trade group with big-ticket members (Facebook, Google, Uber) that has helped line up political support for the bill. “To make it so that companies that provide [work opportunities] for New Yorkers can, frankly, exist.”
A small handful of gig-economy companies have come out in favor of the proposal, including Instacart and TaskRabbit. Jim Conigliaro, Jr., founder of the Machinists Union affiliate guild that represents Uber drivers in New York, offered tacit support of the idea for a company-funded portable benefits fund in an email to Quartz, adding that “more data is needed on earnings, expenses, and hours to inform this discussion and details like the appropriate contributions.” The organization does not endorse the proposed plan.
Some labor advocates say the bill would do far more to protect companies than their workers. Being called an “employee” in the US gives workers rights that independent contractors don’t have, among them the protection of anti-discrimination laws, a minimum wage, and the right to collectively bargain. The drafted bill would solidify that gap in entitlements for gig-economy workers by making it much more difficult for them to challenge their employee status.
“I don’t have anything against benefits,” says Wilma Liebman, a former chairman of the National Labor Relations Board. “But it’s a lot to be giving up in terms of rights, protections, and not get something more for it.”
Others fear the law would entice companies to classify more workers as digitally managed independent contractors, rather than employees. An employee costs an estimated 20% to 30% more than an independent contractor, due partly to obligations like 7.65% combined Social Security and Medicare payments. By comparison, a 2.5% benefits contribution is a steal. Tusk Ventures estimates that Handy’s contribution for a typical employee would be about $126 per month.
“I am very concerned that creative workers—[people who do] programming, software work, design—who often work as employees and also as freelancers, are going to be put in this bucket,” says Hector Figueroa, president of service workers labor union SEIU32BJ in New York.
The drafted legislation does include some restrictions: Even if a company contributes to benefits funds, contractors would still be required to choose their own schedules and provide their own tools.
“[Today], you’re either a full-time employee and get benefits, or you’re a contractor and you get flexibility, but you don’t really have access to benefits,” says Samuels. “That binary choice doesn’t makes sense in today’s economy and certainly won’t 10 years from now. Instead I think we need to approach this question with an understanding that the way people work is evolving, and find a path forward to incentivize employers and job platforms to create more job opportunities while also creating a space for workers to have access to more benefits.”
Figueroa is less loquacious. “The only way that this could be legislation we could support,” he says, “is if [workers] were clearly established as employees.”
This story has been updated to clarify that the Machinists Union affiliate guild that represents Uber drivers in New York does not support the drafted legislation.