Worker classification series, part 3: benefits portability, the right to organize and retirement
June 3, 2019
Over the last two weeks, we’ve focused on what worker classification is, why it’s important and the various tests our government uses to determine who’s an independent worker and who’s an employee. This week, our focus is on tangential developments in our economic ecosystem such as benefits portability, and their implications for independents everywhere.
What’s behind secret door number 3?
One core issue with worker classification rulings is that it appears there are only two possible outcomes.
In one scenario, employers have more opportunity to classify workers as independent contractors. The downstream effect is that currently those independent contractors are less likely to have access to affordable benefits, protections and insurance. This can make it hard for those independent workers to stay independent for the long haul.
In the other scenario, employers must classify more of its workforce as employees. While this might be the right thing to do, some unintended consequences could include:
- less profitable companies that are hiring overall fewer workers, independent or not;
- an independent workforce that may find it hard to find the kind of work they like to do without being traditionally employed.
When 75% of the freelance workforce is independent by choice, both scenarios seem like a lose-lose.
But what’s behind secret door number three?
It’s a new buzzword in the insurance and benefits industry, but it’s an important one for the independent workforce. Benefits portability means that things like your health insurance, your disability insurance, your retirement, don’t have to be tied to an employer. That as you move from one employer to the next or from traditional employment to self-employment, your benefits can come with you.
Secret door number three is about making access to these benefits evolve to meet the future of work. Here’s just a few things on the horizon that point to possible change.
It’s not that you can’t save for retirement as an independent worker, it’s that it’s not as easy.
Congress is working to pass bipartisan legislation (“RESA” in Senate; “SECURE” in House) that would provide more affordable workplace retirement options (ex: 401k) for small businesses workers and self-employed workers through a multiple employer plan or “MEP.”
The legislation would allow these workers to join a quality retirement plan for up to 50% less cost than today’s market options.
MEP’s aren’t new, they just aren’t widely used for two key reasons:
- Currently, to start a MEP, the various employers must be tied by a common bond- i.e.- industry
- Right now, if one employer is non-compliant, all the employers in the plan are held liable. Hello, group punishment.
The other issue is that MEP’s that were used to cover unionized workers in specific industries are currently at serious risk. According to the Washington Post, they have a $20 billion gap to cover, which puts the pensions of many working-class Americans at risk.
The RESA and SECURE bills are both looking to resolve not only the issues of past MEP’s but pave a way forward for retirement savings plans that would be both accessible and achievable for both small businesses and independents.
The right to organize
The National Labor Relations Board (NLRB) is the federal government agency that oversees unions and the right to unionize. As it currently stands, independent contractors do not have the right to form an officially recognized union, but that’s not stopping some groups.
Unions have long been associated with “blue collar” jobs (think manufacturing, construction), but in the last decade, union membership has declined rapidly in those industries. Union membership did grow substantially, however, in the last 10 years in traditionally white collar and professional roles (think teaching, government work, hospital staff, etc.).
And now, even though these unions wouldn’t be recognized as such by the NLRB, independent workers across several industries are organizing in new ways.
As the Atlantic and Vox reported last month, Union Memes is an organized group of independent content creators on Instagram who want to hold Instagram accountable for some of its practices. Gig workers
Uber and Lyft drivers are organizing across the country as well, despite being fully aware that they don’t have the right to fully unionize. Strikes in cities like San Francisco, New York, Los Angeles, London and more, while not officially supported by the NLRB, are impacting the companies’ abilities to deliver on their service. Uber settled several worker classification lawsuits in advance of it’s IPO last Friday, but even still, they heavily underperformed against expectations.
Professional services contractors
And then there is Google. Did you know that Google employs more independent contractors than it does actual employees? In November 2018, 20,000 independents and employees alike, walked out to protest Google’s handling of harassment claims, among other things. Then in December 2018, the independent workforce sent Google an open letter, demanding fair pay and opportunity, and access to necessary information for their jobs and lives.
Google’s response was to issue a new policy that required companies that provide independent contractors to Google to provide those contractors with:
- comprehensive healthcare
- a $15 minimum wage
- 12 weeks of paid parental leave
- a minimum of eight days of sick leave
- and $5,000 per year tuition reimbursement
Whether or not you support the right to unionize, what’s clear is that independents across the country are finding ways to make their voices heard.
How are we feeling?
We said earlier that 75% of independent workers we surveyed made the choice to go solo. 62% plan to remain a business of one. What this indicates is that self-employed people WANT to be self-employed. And it’s not just our data that indicates soloists are happy with their choice.
An NPR/Marist poll indicates that 1 in 5 people are independent, and while there are definitely challenges to being self-employed, they love the lifestyle.
The challenges? Variable income and limited access to benefits and insurance they need to make their lifestyle more sustainable.
The worker classification argument across the country is trying to solve for a new way of working and living with historic norms. Either you are independent and totally on your own or you are an employee and you get all the perks.
By creating a new environment where all those necessary insurances and benefits aren’t tied to the employer-employee relationship, perhaps we can find a win-win where employers can operate with the freedoms they need to do business, independent workers can stay independent and everyone (literally) reaps the benefits.