Regressive Federalism

As we approach January 20th, labor advocates and other progressives are placing their hopes in a handful of states and cities.  The hope, as part of a “progressive federalism,” is that these states and cities will have the capacity to chart a course distinctly different from the one being pursued by the federal government.

Among these promising localities is New York, where both the state legislature and the the City Council and Mayor are already at work on a number of innovative and promising bills. But Josh Eidelson at Bloomberg Businessweek and Cole Stangler at The Village Voice report on a bill under development in New York that should be a concern to progressives and to labor. This bill, being pushed by Handy and by Tech NYC (“a newly formed statewide tech-industry trade association that includes Uber”), would allow companies to categorize their workers as independent contractors if those companies contribute to a “portable benefits” fund.  Although we haven’t been able to track down the official legislative language yet, news reporting on the bill suggests that it will function as follows: Gig-economy firms that wish to take advantage of the new law would contribute 2.5% “of the fee for each job performed by the gig economy worker” to a portable benefits fund. Workers would then be permitted to use the monies in their account to purchase a health or retirement plan, or perhaps other benefits.  In exchange, all those who work for participating firms would be classified as independent contractors under state law as long as they are permitted to choose their schedules and work for other companies.

Put somewhat bluntly, the proposed bill would allow gig firms to buy their way out of New York employment law for a fee equal to 2.5% of each job performed by their workers. According to the Village Voice’s calculations, for an Uber driver who works about sixty hours a week, this amounts to about $3.21 per day.  For that $3.21, the driver loses the chance to be protected by a host of state laws: state minimum wage and overtime law, workers compensation, unemployment insurance, safety and health law, and on and on.

This is not progressive federalism.  This is regressive federalism. Why?  Even under existing law, workers like Uber drivers are appropriately classified as employees, even if they can choose their own schedules and work for other companies.  Tech companies like Handy and Uber object to this classification, but, at least as I read the law, their position is legally incorrect.  That means, even under existing law, the right approach for gig workers in New York – as elsewhere – is classification as employees.  A law that allows gig companies a cheap way to lock workers, who ought to be classified as employees, into independent contractor status does not constitute progress for those workers.

In New York, however, this bill is a particularly bad idea.  Why?  Because, instead of making it harder for gig workers to access employment law’s protections, New York could very well make it easier for them to do so.  Instead of this bill, New York could and should expand the definition of employee so that it is unmistakably clear (even clearer than it is today) that gig workers meet the definition.  This would ensure that workers like Uber drivers have access to the basic protections of state employment law.  And, if New York wants to make sure that gig workers have access to health and retirement benefits, the state could consider legislation that creates a portable benefits fund as a supplement to employment law, rather than as a cheap substitute for it.

Asked about the bill, Diane Savino, a Democratic senator in the state and former chair of the labor committee, told the Voice:

The world of work is changing, whether we want to believe it or not.  We can stand by and do nothing…ignoring the fact that more and more people are taking these nontraditional pathways to compensation, and leave them in some gray limbo, or we can try and be creative.

New York should indeed be creative. It can do that by clarifying that gig work is employment, and by adding portable benefits to employment law’s basic protections.