Stimulus package: Gig economy independent contractor benefits would change drastically with coronavirus bill

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A proposed federal relief bill in response to the coronavirus outbreak is setting a new precedent for gig workers, the drivers and meal couriers for companies like Uber and Lyft. It promises weekly paychecks regardless of whether the recipients are employees or independent contractors.

Including gig workers—controversially considered contractors by the companies they work for—in a relief bill is a first, signaling the growing role they play in the economy. Uber and Lyft each employ hundreds of thousands of such drivers in their networks, laying the groundwork for their growing political clout.

“If you would’ve asked me a week or two ago whether we would ever pass legislation to provide unemployment benefits to Uber drivers I would’ve said I wouldn’t count on it,” said Lawrence Mishel, a fellow at the Economic Policy Institute, a left-leaning think tank. “This is quite amazing.”

The bipartisan bill would provide $600 weekly plus the amount determined by each state’s unemployment department to people who are either unable to work or whose wages have dwindled due to the outbreak. The payments would be over four months.

The U.S. Senate approved the bill on Wednesday, and the House is expected to vote on Friday. President Trump has indicated that he intends to sign the bill as soon as it hits his desk.

Beyond helping millions weather the current health crisis, the bill could serve as a catalyst for lawmakers to change gig workers’ status from independent contractors to employees who would then be entitled to benefits. That would be a controversial move that would threaten the business of many companies that heavily rely on gig workers to provide their services.

Conversely, the financial assistance could convince employers that the government will aid workers regardless of whether they’re employees, saving companies the expense of paying for benefits.

“The stimulus package may incentivize states to legally find gig workers to be independent contractors,” said Ivan Pardo, volunteer organizer at Rideshare Drivers United, a group that advocates for better working conditions for gig workers. “While the stimulus package will help them now, in the future, they may not be able to get unemployment insurance as a result.”

But Demetra Nightingale, Urban Institute fellow and former U.S. Department of Labor official in the Obama administration, and the EPI’s Mishel say the nod to gig workers could signal a shift in how regulators view people who work for companies like Uber, Lyft, and delivery service DoorDash—all of which are considered “essential” businesses during the coronavirus shutdowns.

“This is a major step at the federal level that could sustain some of the momentum toward regular employment status for the workers after the crisis is over,” said Nightingale. “We’re at a point where we realize there needs to be a consensus between companies and drivers.”

Mishel added: “If the drivers had been employees and had health benefits, sick leave benefits, and worker compensation systems, we would’ve been better prepared for this crisis. Under those circumstances, Uber would’ve been paying into the [unemployment] system.”

States and employees are already challenging Uber, Lyft, DoorDash, and other gig companies on their policy to label workers as contractors. Earlier this week, San Francisco’s Board of Supervisors announced a resolution, fueled by complaints from drivers, that asked California officials to fully enforce Assembly Bill 5, a law that went into effect in the state this year that makes it harder for companies to classify their workers as contractors. The companies have refused to reclassify their drivers, and instead have proposed alternate solutions to keep them from labeling workers as employees.

In a letter to the White House and Congressional leaders on Monday, Uber CEO Dara Khosrowshahi urged regulators to protect its drivers without forcing the company to classify them as employees.

Reclassifying workers “would radically change Uber’s core service and business model, and would ultimately lead to restrictions on access to income for millions of people looking for this type of work,” the letter said.

Meanwhile, on Thursday, the New York State Court of Appeals ruled against delivery service Postmates, saying that its workers should be considered employees for the purposes of unemployment benefits. Based on the ruling, Postmates is now required to pay into the state’s unemployment insurance fund for each worker.

“The courts have solidified what we all have known for a while — delivery drivers are employees and are entitled to the same unemployment benefits other employees can obtain,” New York Attorney General Letitia James said in a statement. “As the nation battles the spread of the coronavirus and more and more employees are laid off, Postmates drivers should know they have the same safety net millions of others in New York have today.”

Experts say that gig workers will likely have to go through their states’ unemployment departments to file for the federal relief funds. The states will then determine how much money is owed to them on the state level, though it will be funded by the federal government, and then will add the $600 on top of that, Nightingale said. That means some gig workers may actually end up making more money per week than they would’ve working for the app. However, those who rely on the apps for their entire income may be getting paid less.

“It’s very tough to set a fair, appropriate benefit amount for these classes of workers,” said Gary Burtless, a senior fellow at the left-leaning Brookings Institution. “Congress just has to pick a number out of a hat.”