Federal Legislation Introduced to Advance Portable Benefits for Independent Workers
June 7th, 2017 |

In late May, US Sen. Mark R. Warner (D-Virginia) and US Rep. Suzan DelBene (D-Washington) introduced legislation designed to test and evaluate portable benefit models designed for the independent workforce. The legislation proposes to establish a grant fund to incentivize states, localities and nonprofit organizations to experiment with portable benefits models.

This bill endeavors to help solve one of the frustrating challenges of the new economy: Independent contractors and other contingent workers are not currently eligible for workers’ compensation, disability benefits, health insurance coverage, and pension benefits under federal and most state laws.

What the Bill Proposes

The Portable Benefits for Independent Workers Pilot Program Act would establish a portable benefits pilot program to be administered by the US Department of Labor. It authorizes a total of $20 million for competitive grants to states, local governments and nonprofits for pilot projects to design, implement and evaluate new models or assess and improve existing models for portable benefits for independent workers such as contractors, freelancers, temporary workers and self-employed workers.

Eligible models could provide any number of work-related benefits and protections – such as retirement savings, workers’ compensation, life or disability insurance, sick leave, training and educational benefits, healthcare, and more. In order to encourage innovative thinking on these challenging issues, programs focused solely on retirement-related benefits will not be eligible. In awarding grants, the US Secretary of Labor will be directed to prioritize models that can be replicated on a large scale or at the national level.

“Whether by choice or necessity, a growing number of Americans are working without a safety net and have difficulty planning and saving for retirement, healthcare needs, or on-the-job injuries,” said Sen. Warner. “The nature of work is changing rapidly, but our policies largely remain tied to a 20th century model of traditional full-time employment.”

Sen. Warner continued, “As more and more Americans engage in part-time, contract or other alternative work arrangements, it’s increasingly important that we provide them with an ability to access more flexible, portable benefits that they can carry with them to multiple jobs across a day, a year, and even a career. These incentive grants will accelerate experimentation at the state and local levels to better support a more independent 21st century workforce.”

A Change in Direction, and a Reality Check

It is interesting to observe that this bill represents a dramatic shift in the approach taken by Democrats in Congress with regard to independent contractors. Instead of focusing on sponsoring legislation designed to limit the use of independent contractors and crack down on companies that misclassify them, the focus appears to have shifted towards recognizing that legitimate independent contractors should be eligible for benefits, and those independent workers should be able to carry those benefits from one project to the next.

Prior to introducing this bill, Sen. Warner had been a frequent proponent of creating a third classification of workers in the U.S., somewhere between employees and independent contractors. With the evolving political landscape in Washington, this bill illustrates that while some companies misuse the independent contractor classification, there is definitely a place for independent contractors in the U.S. economy. Furthermore, this bill effectively acknowledges that because federal laws and almost all state laws permit the use of legitimate independent contractors, Congress should look for ways to better the economic well-being of those workers who are properly classified as independent contractors.

While the bill is being introduced during the Trump presidency, it should be noted that the study this bill would fund would will not be completed and reported to Congress until the early fall of 2020, just before the next presidential election will occur. In addition, this bill, if passed, does not propose to change the qualification standards for independent contractor status nor will it provide companies with a safe harbor to misclassify employees as independent contractors. This will also not affect state regulators, or prevent plaintiffs’ class action lawyers from targeting companies that misclassify workers as independent contractors.

Conclusion

For companies seeking to engage skilled independent contractors, freelancers, gig workers, and other categories of independent workers to get vital work done this bill may eventually result in a benefits solution that makes such contingent workers even happier with their independent work arrangements.

In the meantime, it is clear that this bill will not provide any relief of independent contractor misclassification liability to companies that improperly engage ICs and fail to comply with applicable federal and state laws. Enterprise companies are frequently the subject of multi-million dollar judgments and settlements in class action lawsuits and administrative proceedings for IC misclassification. Fortunately, independent contractor compliance and engagement experts, like TalentWave, are there to help.

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