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​On July 20, a bipartisan group of legislators introduced a bill in the U.S. House to allow businesses to continue classifying their gig workers as independent contractors, while providing the gig workers with some legal protections.

Reps. Henry Cuellar, D-Texas, Michelle Steel, R-Calif., and Elise Stefanik, R-N.Y., proposed the bill, which would maintain flexibility of independent work and guarantee certain workplace protections for gig workers. The relationship between the worker and employer would be defined through a worker flexibility agreement and voluntarily agreed to before work begins.

"In this relationship, the worker is not treated as an employee by the employer for federal tax purposes and would receive a 1099 at the end of the calendar year, rather than a W2," said Sara Jodka, a lawyer with Dickinson Wright in Columbus, Ohio. "The law would create a clear way for employers to work with [gig workers] and save money on their federal tax liabilities, but at the same time [it would] require those employers to treat those workers the same way it treats its W2 employees for purposes of workplace treatment and federal leave laws." The legislation has been referred to the House Committee on Education and the House Committee on Ways and Means.

Under the federal Fair Labor Standards Act, hourly employees are entitled to minimum wage, overtime pay and other benefits. But independent contractors are not entitled to those benefits. A Trump administration rule still in effect made it easier for employers to classify workers as independent contractors, rather than employees. "Today's workers value independent work for the flexibility and economic opportunity it provides, yet too many restricting standards on independent work diminish freedom for workers and stifle these innovative work arrangements," Stefanik said. The proposal "will empower workers to choose the type of work that best fits their needs, while allowing businesses to offer workplace benefits traditionally only available to employees." Large corporations like Lyft, Uber, GrubHub, DoorDash, and Instacart have lobbied to continue classifying their drivers as independent contractors. In some cases, doing so allows them to save money on pay and benefits. Opponents of the bill, including several labor advocacy groups, have criticized this approach for its potential impact on workers, who would likely receive less pay and benefits. Workers seem to have a mixed reaction with some wanting to be employees, while others prefer to remain independent contractors because of the autonomy and flexibility in hours. Independent contractors generally have more flexibility than employees, while employees have more legal protections. The bill comes at a time when inflation and demand for workers are much higher than normal, as many companies continue to struggle with the aftermath of the COVID-19 pandemic. "As workers and businesses across the country continue to experience labor shortages and the highest inflation in 40 years, finding ways to promote employment flexibility should be a top priority for Congress," Steel said. "Independent work is here to stay, and it is long past time that Congress enact a permanent solution to provide independent workers and businesses with the certainty they need to engage in the modern economy," said Dao Nguyen, executive director of the Coalition for Workforce Innovation, a Washington, D.C.-based advocacy group for workplace modernization with members that include Uber and Lyft.

There's been a lot of state action on this topic in the last two years. For example, a new Washington state law gives ride-share drivers certain benefits like paid sick leave, but keeps them classified as independent contractors. Last year, California passed a similar bill, but a judge ruled it unconstitutional and unenforceable. A state supreme court in Massachusetts blocked a similar ballot proposal this year. A new U.S. Department of Labor proposed rule on independent contractors is expected soon. 

Members may download one copy of our sample forms and templates for your personal use within your organization. Please note that all such forms and policies should be reviewed by your legal counsel for compliance with applicable law, and should be modified to suit your organization’s culture, industry, and practices. Neither members nor non-members may reproduce such samples in any other way (e.g., to republish in a book or use for a commercial purpose) without SHRM’s permission. To request permission for specific items, click on the “reuse permissions” button on the page where you find the item.

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