These days, ‘gig work’ is changing the way that hundreds of thousands of people work. The ‘gig economy’ was at a high point just before the arrival of COVID-19. Everywhere you turned people young and old were either using ‘gig businesses’ or ‘gig jobs’ as their primary or supplemental sources of income. A survey was conducted by ADP earlier this year and (highlighted within Insightful Accountant on February 4th) cited that ‘One in Six Workers’ were Gig-workers of one type or another. And Gig-work is on the rise, or at least it was until COVID-19 got here.
For some Millennials and Gen Z workers, Gig work has more appeal than any other form of income generation, and the prospect of not having a position that offers benefits like health insurance or other traditional protections against ‘wage loss’ in the event of some catastrophic situation didn’t seem to alter their opinion at the time of that earlier study. Of course, it isn’t known if the resultant conditions arising out of the economic shutdown and situational unemployment that may impact Gig workers might alter that opinion, although the CARE Act did extend Unemployment Benefits to many of those workers who would otherwise not have been eligible for such benefits under traditional state unemployment coverage.
But this article deals with another aspect of Gig Work and catastrophic situations that might arise, that of job-related injuries or illness and workers’ compensation, or the lack thereof. When you consider Gig Workers who are essentially independent contractors like those performing services for Uber and Lyft, they are not currently covered by workers’ compensation insurance or benefits.
While some states have tried to change the status of such ‘independent contractors’ to force an ‘employer-employee’ relationship upon the Gig-worker and such companies like Uber and Lyft, both those companies and groups of Gig-workers have protested such changes, generally successfully. Accordingly, Gig-workers are still ‘not employees,’ and most workers’ compensation carriers refuse to provide any form of coverage for them because workers’ compensation policies are written specifically concerning ‘dollars of payroll for employees of the company based upon defined work codes of those employees.’
Source: ADP Research Institute report, Illuminating the Shadow Workforce: Insights into the Gig Workforce in Businesses (used with permission).
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But many so-called ‘Gig workers’ are not these truly independent contractors like those working for Uber and Lyft. Many others are in fact ‘short-term W-2 employees’ who do appear on the employer’s payroll and who are subject to workers’ compensation coverage. At the same time some of those same employers may have other Gig-workers who insist they are 1099-contractors because they have formed their own small company under which they do business for tax purposes, yet they are doing the same type of work as their ‘short-term W-2 counterparts.’ In the event of a major accident, or company-wide illness such as COVID-19 hitting a business going from worker to worker, it might be very hard for a business owner to convince a court that the 1099-contractor wasn’t an ‘uninsured worker’ for purposes of workers’ compensation.
The U.S. Treasury, the I.R.S., State Employment (tax) officials, and State Workers’ Compensation Courts and Funds are all looking at the issue of ‘Gig’ employment, workers and employers. They are looking at it from the perspective of lost revenues, and lost opportunities under the guise of what’s best for these Gig-workers.
As is typical, most Workers’ Compensation Insurers are still of the ‘old school,’ still defining employees as a typical worker on the traditional payroll who they can measure in dollars per year (or pay period) assigned to a singular work task with a traditional job code. To them, the idea of someone who ‘gigs from one task, one work assignment, or one place to another’ of his own accord, on his schedule, when he wants, at his leisure, with the aid of an App, and his own car, motorcycle or bike simply is beyond the ability of ‘actuarial computation’… in other words “it doesn’t compute.” And for any insurance company, that’s a very dangerous business to be in because risk prediction is supposed to be a science, not a guessing game!