S.7508 / A.9508, Part GGG

STAFF CONTACT :

Director, Center for Human Resources
518.455.7180

BILL

S.7508 / A.9508, Part GGG

SUBJECT

Establish the New York Digital Marketplace Worker Classification Task Force

DATE

None

This legislation proposes to establish a task force to study the “classification” of workers in the “gig” economy (i.e. should these workers be considered employees or independent contractors) and, therefore, to what extent current labor protections would be provided such workers. To achieve our mission to “create economic growth, good jobs and strong communities,” The Business Council believes it is vital the state have a business climate that supports innovation while ensuring important basic worker protections. It may sound cliché, but workers are our members’ most important resource, a fact even more obvious in the modern “gig” or “sharing” economy. We support study of this important topic with the following concerns.

We all recognize that the nature of work has changed since the adoption of the National Labor Relations Act of 1935, the Taft-Hartley Act of 1947, and current IRS law regarding the definition of employee. It is important that state and federal labor laws change and adapt in response to the new realities of the nature of work and the desires of workers. Any changes, however, should share a couple of important characteristics: 

Efficiency – Any new or amended law or regulation should be workable and provide certainty to employers, digital marketplace companies, and to the workers with whom they are engaged. An excellent example of inefficiency would be California’s recently passed Assembly Bill 5 - with its myriad of provisos and exceptions – resulting in legal challenges and potential ballot referendums that have caused nothing but uncertainty and confusion. 

Fairness – Any new system of laws or regulations should not provide employers an unintended incentive to structure themselves in such a way to avoid basic obligations and gain an unfair advantage over other employers.

As mentioned above, the nature of work is changing – and this change will require innovative ideas to balance the needs of businesses and their workers with the desire of regulators to protect those workers and support a positive business environment. Merely applying the current definition of “employee” to more of these workers is not innovative, creative or new. It’s unimaginative, parochial and only serves certain special interests. The Business Council urges the task force to work with business interests, as well as employee interests, to develop a “third way” to be as innovative as these businesses have been in creating these services that have benefited their communities and provided opportunities for workers.

Toward these objectives, we urge any task force to consider the following when crafting recommendations:

Protect Independence – Protect the right of “gig” workers to work as independent contractors if certain conditions are met. Allow workers to have complete freedom over their own hours including when, where, and how long they work. Retain the right to decline jobs without penalty. Limit termination of “gig” workers to only reasons specified in their contracts. 

Civil Rights Protections – Every worker deserves to work in an environment free from discrimination or harassment based on age, race, sex, religion or any other characteristic protected by law. The task force should consider extending these existing statutory protections to independent workers without creating a statutory employer-employee relationship. Unless modified, federal law will most likely still restrict these workers from access to federal redress of grievances.

Minimum Earnings Guarantee – Allow digital marketplace companies to devise compensation systems - if they choose - that provide a certain level of income security by devising a “minimum earnings guarantee” based on the minimum wage, hours “engaged” with the company, and other factors. The role of the regulator will be to enforce these provisions and ensure the full and timely payment of wages.

Benefit Pools – Digital marketplace companies are often better positioned to provide certain worker benefits due to economies of scale and risk diversification. Applicable laws should be amended to allow these companies the ability to voluntarily provide workers the opportunity to opt-in to certain benefits, e.g., benefits such as liability insurance services, guidance on tax withholding and payments, disability insurance, retirement products, auto insurance, etc. 

Health Insurance – Unfortunately, New York’s ability to affect change in the health insurance arena is hamstrung by the Employer Shared Responsibility provisions of the Affordable Care Act. Changes to federal law would be required to address this issue. Still, any task force recommendations should consider flexibility that could allow digital marketplace companies - again if they desire - to provide health insurance subsidy payments that could support workers looking to purchase coverage through New York State of Health (the state’s health insurance exchange). 

Workers’ Compensation – Some will argue that the liability of digital marketplace companies for injuries sustained by workers who are not on premises or using equipment provided by the intermediaries is limited. Even so, New York State already has a “pooling” of risk mechanism within the Black Car Fund. Participation in this fund could potentially be extended to other such companies.

Retirement Benefits – The task force should consider options to modify New York State’s soon to be launched Secure Choice program, which as adopted is an employer-based opt-in retirement program, to accommodate participation by individuals who are not in a legal employer/employee relationship. 

There are, however, several instance in which it would be impractical and unworkable to extend to independent workers certain statutory protections due to the unique nature of the work being performed. These include:

Minimum Wage and Overtime – Independent workers benefit from the flexibility to work only when they want to, rather than on a schedule set by an “employer;” as such, the trade-off is that they are outside the protections of the Fair Labor Standards Act and New York State wage and hour law. Furthermore, the impracticability of accurately and fairly measuring “hours worked” makes providing these protections infeasible. For example, in the case of a driver working for more than one app-based digital marketing company and having multiple apps open, two questions arise: Should the driver be compensated for waiting time? And if so, who should compensate the driver?

The Fair Labor Standards Act suggests a worker “waiting to be engaged” is not entitled to compensation while workers “engaged to wait” are entitled to compensation. One would argue a driver who is not obligated to pick up a passenger or deliver food is “waiting to be engaged” and not entitled to have those hours count as hours worked. But even if the driver was deemed to be “engaged to wait,” it is unclear which digital marketing company is responsible for payment of that time. The ability of workers to work for multiple entities at the same time is a unique and desirable characteristic of the gig economy. In fact, the National Labor Relations Board recently issued a decision - related to Uber - that the entrepreneurial opportunity provided by the nature of work with these companies is key in determining that they are indeed independent contractors and not employees subject to minimum wage and overtime.

Moreover, it should be recognized that the state’s minimum wage law does far more than set a wage standard; it also imposes a broad array of detailed record-keeping and reporting obligations on “employers” (such as mandated meal breaks). Obligations that would be impossible for digital marketplace companies to monitor and enforce.

Collective Bargaining – Current National Labor Relations law delineates mandatory, permissive and illegal subjects of bargaining. Major reforms of federal labor law would be required before a digital marketplace company could possibly engage in legally required good-faith bargaining. Add to this the difficulty of determining appropriate bargaining units, determining whether workers are engaged in lawful or unlawful work stoppages, or even conducting lawful representation elections, it becomes clear that extending current collective bargaining rights to this unique group of independent workers in impractical.

Unemployment Insurance – The UI system was intended to provide benefits to workers who lose their jobs through no fault of their own. This 100% employer-funded insurance program was never intended to provide benefits to workers who voluntarily opt out of their jobs or are dismissed for cause. Although a state Labor Department ALJ has ruled that some “app” drivers can qualify for UI benefits based on their hours worked and earnings, in our view, such workers would not receive benefits if they voluntarily disengage from such “app,” i.e., the same treatment under law as for traditional “employees.” As mentioned above, workers desire the freedom provided by these intermediaries to work when and how often they wish. It is impractical to apply the basic premises of the UI system to these new work arrangements.

As we have demonstrated, many state and federal laws would need to be amended to effectively meet the goals of efficiency and fairness, from federal tax, labor, employment and health laws to New York wage and hour and insurance laws. We suggest a federal solution to this issue is the best course.

Any efforts by New York to address the independent worker issue needs to be looked at through the prism of how this will affect New York’s general business climate. Any unilateral action will set New York apart from surrounding states and could hamper our business competitiveness. Major changes to law that creates an employer-employee relationship between digital marketplace companies like Uber, Lyft, Instacart, Wag, etc. could result in these companies limiting their services in, or withdrawing their services, from New York - making New York a less desirable as a location for business expansion and job growth and causing real hardships for the communities they serve.

Again, The Business Council urge’s any task force to be innovative and seek a new and creative “third way.” We look forward to participating in the process.