Five years ago, in an article for Workforce Magazine, I wrote about the need to create a third class of U.S. workers. This “Quasi-Independent Contractor (IC)” would better fit the economy and reality of modern times. A new class of worker that lays somewhere between a W-2 and IC could continue to supply the workforce necessary to allow the gig economy to thrive (e.g. flexibility to worker, disruption of entrenched industries, convenience to consumer), but not at the cost of worker protections that many lower-skilled gig workers need, such as unemployment, disability or health benefits. Because ICs are not eligible for employee-type benefits, these types of workers would suffer in a downturned economy.
As I wrote then, “A quasi-IC could enjoy safety-net benefits provided to employees while enjoying much of the independence of a contractor, all while allowing on-demand companies to leave the courtroom and keep innovating.”
Fast-forward to spring of 2020. The country and the world have entered the realm of a nearly unimaginable health and economic crisis. The number of people who have filed for unemployment exceed any other time in our Nation’s history. On March 27, 2020, the U.S. government, through the CARES Act, took steps to address the needs of ICs during this time, by providing them with employee-like protections.
Subject to certain conditions, the benefits that the CARES Act may provide to ICs include:
- Eligibility to collect unemployment assistance
- Eligibility for paid sick time and expanded family and medical leave
- Availability of paid sick leave if the IC is unable to work or telework because the IC is under quarantine or order of isolation due to COVID-19
- Availability of paid family leave if the IC is unable to work or telework because the IC needs to provide care for a family member who is under quarantine or isolation, or advice by a health care provider to self-quarantine, or to care for a son or daughter whose school has been closed or whose childcare provider is unavailable due to COVID-19
While the government’s actions are clearly needed, there are concerns about adding further opaqueness to the already grey framework surrounding correctly classifying your workers as either IC or W-2. If the rules for misclassification dictate that unemployment can’t be provided to non-employees, is it courting an audit for misclassification to provide them now? I’d answer that question by stating that the extreme circumstances that we’re living through require extreme measures, such as blurring the lines between IC and W-2 for the greater good.
My question is whether we are now at the point to seriously consider the creation a third classification. Were we moving in that direction already?
In the five years since I wrote that article, the wheels of change have slowly been in motion. Legislators, like those in NYC, have passed laws that now offer workplace protections to ICs that once only covered employees. Companies like Postmates, SurveyMonkey and Uber have created benefits plans for ICs or partnered with companies that can provide them. A contributing factor to businesses moving slower in providing employee-type benefits is the fear that it could backfire: it’s well-settled law that providing benefits to an IC is an indication that they are actually a misclassified employee. Therefore, businesses don’t want to run afoul of an opportunistic plaintiff’s lawyer, who cites the provision of benefits as a reason that a class of ICs is misclassified. A clear-cut creation of a third-class could remove that fear.
We’ve also seen the unintended consequences that can occur when legislation looks to cover new ground with old rules: see the many challenges to California’s AB5. With all of this, and finally the CARES Act at the Federal level, the framework for a third class may be well in place already.
While the protections offered to ICs under the CARES Act is temporary at this point, once it’s gone, consideration should be given to finally sculpting a clear third class: The Quasi-IC. Our current two classification system doesn’t reflect the times, confuses parties who want to comply, and keeps businesses from reconsidering how they interact with and engage ICs. I said in the 2015 article “that changing times necessitated new regulations that met the realities of the modern workforce.” Countries like Canada and the UK have sought to address changing work engagements and may serve as examples to draw upon for what works and what doesn’t.
Many things will be different when this is all over. While worker classification is far from the most important of those changes to come and challenges to overcome, perhaps laws and processes will finally be changed and the so-called ‘new normal’ will support the ongoing realities of our workforce and economy.