Bill would require ‘gig economy’ employers to pay for freelancer benefits

Daniel J. Munoz//February 14, 2020

Bill would require ‘gig economy’ employers to pay for freelancer benefits

Daniel J. Munoz//February 14, 2020

A new bill would effectively require app-based companies that use freelancers – such as Uber and Lyft – to pay for their health, retirement, paid leave and other workplace benefits.

Senate Bill 943 creates a so-called “portable benefits system” in the state where an entity, independent of any business, would broker those benefits for participants.

Under a portable benefits system, which have grown in popularity nationwide as more companies use freelancers, the worker, or whoever contracts them, pays into the benefits provider, which the freelancer can use for benefits regardless of where they work.

While not explicitly listing any companies, the bill is crafted to apply to large app-based services such as those that provide ridesharing services. It only applies to “contracting agents” that have coordinated the services of at least 50 individual workers within the last year.

Assemblyman Troy Singleton.
Singleton. – AARON HOUSTON

“New technology has yielded a modern economy that allows greater flexibility for independent contractors, but because many of their jobs do not come with health insurance, retirement plans or paid leave, these workers are more vulnerable than many of their counterparts in the traditional workforce,” the bill’s main sponsor, Sen. Troy Singleton, D-7th District, said in a Thursday statement.

The measure has been eyed across the country as a viable system for “gig economy workers” who do not have a single full-time employer, and might be left out from receiving benefits.

“New hiring practices, including subcontracted, temporary, and other non-traditional forms of work, have resulted in jobs that offer fewer or no benefits,” reads a June 2019 report from the Washington D.C. think tank The Aspen Institute.

“The idea of portable benefits is not new. Social Security is an early example of a program that provides portable, prorated benefits that have become more universal over time with important eligibility reforms,” the report adds. “The Affordable Care Act has demonstrated the value of making health coverage more portable.”

The Senate Labor Committee approved the measure in a 3-1 vote at its Feb. 13 meeting.

Its introduction comes amidt a more controversial measure that would have reclassified thousands of independent contractors across the state as regular employees, and as the state clamps down on businesses illegally classifying employees as freelancers in order to skimp out on paying employment states.

The measure was watered down so that it would just codify the Murphy administration’s current interpretation of the “ABC” test which differentiates workers from freelancers, but the bill was ultimately pulled before the end of the previous voting session. It was reintroduced as Senate Bill 863 on Jan. 20.

A Lyft driver and passenger. -LYFT
A Lyft driver and passenger. – LYFT

“Portable benefits are a smart, innovative solution that reflects the modern way people work, and we look forward to continuing to engage in the conversation about how such a system could best balance providing further protections for those who earn on our platform with the flexibility and independence they overwhelmingly value,” reads a statement from Lyft.

Companies would have to contribute either $6 for every hour the freelancer does work for them, or at least 25 percent of the total fee collected from the consumer, whichever is less. The company would have up to 15 days after the end of the month where the service was performed to actually contribute those benefits dollars.

“This structure as a surcharge, that’s imposed on top of the base rate, you create a disincentive for doing work with individuals who are based in New Jersey,” Alida Kass, president of the conservative policy group New Jersey Civil Justice Institute, told lawmakers on Thursday. “Hourly rates just don’t work for a lot of platforms that don’t track the amount of time.”

Workers would have to actually select their benefit provider, and be granted an open enrollment period each year. The benefits provider would have to show the state’s labor department that it is financially sound, that it has a “fiduciary duty” to act in the best interests of whoever they cover, and that at least half of its governing body is made up of independent contractors or representatives from businesses that hire those kinds of workers.