The Gig Economy, Independent Contractors & Workers Comp
The so-called “gig economy” refers to the growing use of independent contractors to perform various types of work. Uber and Lyft drivers, Door Dash Delivery personnel, graphic designers, freelance writers, and many IT workers including coders are all examples of gig working.
The COVID-19 pandemic has triggered a surge in the number of Americans turning to gig economy jobs. Many of these individuals are new to the gig economy and need to understand their rights, particularly in relation to workers’ compensation.
The growing gig economy has implications for workers compensation law, since independent contractors or “gig workers” are not typically covered by workers compensation insurance. In this article the experienced workers compensation attorneys at Cantrell Green explore the issues and challenges surrounding gig economy workers compensation claims, such as the definition of an independent contractor and the liability of employers for injuries sustained by independent contractors.
Understanding the Gig Economy
The gig economy is not a new concept, but it has gained significant traction in recent years. With the rise of digital platforms, the number of people turning to freelancing or short-term contracts is growing exponentially. This shift in the workforce has led to new challenges and considerations, particularly surrounding workers’ compensation.
The gig economy is characterized by a labor market comprising short-term contracts and freelance work, as opposed to traditional, long-term jobs1 and includes a wide range of professions.
As of 2021, it is estimated that about a third of the working population is engaged in some form of gig work. This figure is expected to rise as more individuals seek flexible, independent, and convenient working conditions.
A number of factors have contributed to this trend:
- The labor shortage and high turnover rates in the aftermath of the pandemic,
- Employers’ need for temporary workers to maintain productivity,
- The desire to reduce business costs,
- Changing values among the workforce, particularly with the influx of Gen Z employees.
Independent Contractors and Workers’ Compensation
While it’s a well-established fact that independent contractors do NOT qualify for workers comp benefit, with a third of the population engaging in gig work these lays are expected to change and evolve. The biggest issue in the gig economy is the classification of workers as independent contractors or employees. This distinction is crucial when it comes to workers’ compensation.
Independent contractors are self-employed individuals who offer their services on a contractual basis. They are not entitled to workers’ compensation under the principal’s insurance if they are injured during their work. Instead, they may file a personal injury lawsuit for damages if they lack their own insurance coverage.
However, the definition of an independent contractor can vary. Both the U.S. Department of Labor and the Internal Revenue Service (IRS) have their own criteria, focusing on elements such as the degree of control the employer has over the work and the economic dependence of the worker on the employer.
And, when an employer misclassifies workers as independent contractors it can lead to a host of problems for them – including fines, penalties, back taxes, and back wages due to minimum wage and overtime pay requirements. Moreover, the exposure to workers’ compensation is misrepresented, as the earnings of independent contractors are not reported, which can result in increased premiums.
Classifying Gig Worker Independent Contractors
Independent contractors are not entitled to company benefits like health insurance and retirement or workers compensation, nor are federal and state payroll taxes withheld from their earnings. They are also not reimbursed for business and travel expenses.
However, in recent years, some tech companies in the ride-sharing and food delivery sectors have created exceptions to how independent contractors are perceived. However, in a recent legal battle in California, two major ride-sharing companies, Uber and Lyft, successfully overturned a state law requiring them to classify their drivers as full-time employees.
So, determining whether a person is an employee or an independent contractor is crucial. However, whether a worker is an employee or a contractor is NOT controlled by what name the employer uses for the worker, but by the circumstances surrounding the employee’s work. This can be done by considering factors such as control over work hours, provision of tools for the job, and the degree of autonomy in performing the job.
Alternatives to Workers Comp for Injured Independent Contractors
While independent contractors typically lack the eligibility to access workers’ compensation benefits due to their classification, there exists an avenue through which they might pursue compensation for workplace injuries. This alternative route involves initiating a third-party civil lawsuit. Unlike employees covered by workers’ compensation, independent contractors can potentially bring a legal claim against a third party, such as the client, company, or individual responsible for the hazardous conditions that led to their injury.
This legal strategy allows independent contractors to seek damages for medical expenses, lost wages, pain and suffering, and other related costs. While the process may be more complex than a straightforward workers’ compensation claim, pursuing a third-party civil lawsuit can provide independent contractors with a means to obtain financial redress for their injuries sustained during the course of their work.
What To Do If Your Workers Comp Claim Is Denied
As the gig economy expands, it is important for businesses and workers to understand their rights and responsibilities, particularly when it comes to workers’ compensation benefits. While the landscape is complex and often confusing, staying informed and seeking the professional advice of a workers compensation attorney can help injured workers navigate the challenges and uncertainties of workers comp law.
Remember, some employers and their workers comp insurance companies will try to deny legitimate workers comp claims by any means possible – and this includes calling some actual employees independent contractors.
If your workers compensation claim was denied because you are a classified as independent contractor, it is extremely important to have an experienced workers comp attorney assess your situation and determine whether you are eligible for workers’ compensation benefits as an employee.