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Republicans Seek to Shield Employers on Contractor Benefits (3)

April 10, 2020, 6:42 PMUpdated: April 10, 2020, 10:04 PM

Republicans on a key House committee are proposing that Congress implement a statutory “safe harbor” that would allow businesses to offer benefits to gig workers and other contractors without fear of being sued for not classifying them as employees.

Such a provision in the next large-scale stimulus package would help protect the health and safety of workers and the public while allowing an important piece of the economy to continue operating during the Covid-19 crisis, House Education and Labor Committee Republicans said in a blog post Friday.

“Businesses should be allowed to assist independent contractors without risking the independent status that the vast majority of these workers prefer. Doing so would protect businesses from additional legal and regulatory burdens at a time they can least afford it, while preserving workers’ flexibility and earning opportunities when they need it most,” the Republicans said in their post.

The Republicans’ idea is in direct opposition to Democrats’ plans to expand contractor benefits like unemployment during the coronavirus. Whether or not to offer contractors temporary benefits or businesses protection to do so may become a hotly contested issue between lawmakers as they try to reach bipartisan consensus for the next stimulus package.

Contractors working for Postmates, GrubHub, DoorDash, and Instacart have become crucial to delivering essential products during the pandemic, with many Americans remaining at home to limit social interaction and the spread of the virus. This increasingly has put workers in a bind who are sick or who fear exposure to the illness because they generally don’t get paid if they don’t work.

Independent contractors aren’t typically eligible to receive benefits like unemployment insurance or paid leave. They also aren’t covered by new paid leave requirements under the most recent coronavirus relief legislation, the CARES Act (Public Law 116-136). Some app-based companies, like Uber, have offered a limited sick leave policy for workers who prove they were infected.

Businesses don’t often give contractors benefits, like sick leave, because it leaves them vulnerable to litigation from workers who could point to the benefits provided as proof of a direct employer-employee relationship, altering many business models that rely on contractors. Uber Technologies Inc. previously said reclassifying workers would add 20% to 40% in labor costs for on-demand companies.

House Democrats in the last year have aggressively gone after the misclassification issue with legislation geared toward making it harder for businesses to classify workers as contractors generally. Some states, including California, are making it harder for gig companies to categorize workers as contractors, and class actions challenging contractor classifications are pending in courts across the country.

Democratic members are trying to give contractors and other traditionally ineligible workers benefits during the pandemic but aren’t taking advantage of the pandemic as a means to rewrite labor law, as Republicans indicated in their post, a committee spokesperson said.

“None of the Committee’s proposals in response to COVID-19 has sought to revise federal labor laws, though this crisis is highlighting inequities in our economy. Our immediate focus is on ensuring that we support as many workers as possible during this incredibly difficult time,” the spokesperson said.

Gig Companies Offer Some Leave

Uber previously urged Congress and the White House to include gig economy workers in stimulus relief legislation, and also pushed a proposal that would create a third worker classification so that their drivers could receive some of the benefits of an employee. In the absence of congressionally authorized paid sick leave policies for gig workers and other contractors, Uber and Lyft both offer policies that provide some sick leave for drivers. There have been some media reports that drivers for both companies experienced challenges getting the leave, however.

Uber on Friday announced an expanded plan to offer leave for drivers beyond those who are diagnosed with Covid-19. Uber spokeswoman Kayla Whaling said that Uber has spent $3 million to date on leave for drivers in the United States, but wouldn’t specify how many people that covers. It began to offer the policy on March 15.

“We are continuing to update our processes and understand how we can best help drivers. We remain committed, and we have provided relief to people around the world,” said Uber spokeswoman Kayla Whaling.

Lyft said it decided to continue its leave program on Friday. Qualifications and the amount of assistance are determined by a driver’s previous activity on the platform. A Lyft spokeswoman said that 1,500 drivers have received the benefits.

“Lyft will provide funds to qualifying drivers who are diagnosed with COVID-19 or put under individual quarantine by a public health agency—this helps support drivers financially when they can’t drive, while also protecting our riders’ health,” Lyft spokeswoman CJ Macklin said. “Qualification for the program and the amount of assistance are determined by the driver’s previous activity on the Lyft platform, and payments range from $250 to $1,000.”

A California federal judge rejected Lyft drivers’ request for sick pay benefits in an ongoing case and sent the case to state court. The drivers argued for an emergency action in their case seeking employee status that the coronavirus is a reason for the court to enforce a California law that makes it harder for the drivers to be considered contractors.

Lyft, like other gig companies, has policies to make it appear they’re doing something for their workers, but scores of drivers continue to have trouble qualifying, said Boston-based attorney Shannon Liss-Riordan, who represents workers in cases against Lyft and Uber. Lyft has denied accusations that it changed its policy to take back sick benefits it said it would offer.

In response to the Republicans’ proposal, she said the tests used to determine who is a contractor or an employee don’t hinge on whether the companies provide benefits to the workers. The fact that they receive federal stimulus relief wouldn’t be used during litigation to convince a judge that the company is actually an employer, she said.

“They are worried about looking like employers, but that’s not what the tests are about,” she said. “If anything, that helps our argument.”

For additional legal resources, visit Bloomberg Law In Focus: Gig Economy (Bloomberg Law Subscription)

(Updated with comments from Uber and Lyft in 13th and 15th graphs. An earlier version clarified a judge denied an emergency order and didn't rule on whether drivers should be employees. )

To contact the reporter on this story: Jaclyn Diaz in Washington at jdiaz@bloomberglaw.com

To contact the editors responsible for this story: Bernie Kohn at bkohn@bloomberglaw.com; Martha Mueller Neff at mmuellerneff@bloomberglaw.com

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