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Bar News - August 17, 2016

Workers’ Comp & Personal Injury: Gig Economy: Is There a Place for Dependent Contractors in America?


In nearly every city across the United States, travelers are just as likely to hop into an unmarked private vehicle with a stranger as they are to hail a traditional yellow taxi. Ride-sharing apps such as Uber and Lyft have become popular and, perhaps unsurprisingly (especially to attorneys), litigation and legislation concerning these enterprises of the “gig economy” has flourished.

Although most enterprises and jurisdictions in the United States, including New Hampshire, have deemed most of the people who find work through the gig economy to be independent contractors, a new category of worker with limited protections has emerged in other countries: the dependent contractor.

The gig economy – those businesses centered around mobile applications and quickly matching labor with jobs – now goes far beyond ride-sharing: Popular sites such as TaskRabbit and Zaarly seek to match people who want various tasks done, such as mowing the lawn, washing the car, or designing a website, with people who have the skills and inclination to get it done.

Most of these enterprises in the gig economy currently classify their workers as independent contractors. Those workers are provided the freedom to set their own hours and work as often or as little as they wish, but lack the protections an employee would gain, such as unemployment or workers’ compensation benefits. If an independent contractor is injured on the job, he or she is not eligible to recover workers’ compensation benefits from the organization through which they contract.

Though most of these services of the gig economy began in larger cities, New Hampshire has seen its share. Uber alone operates in parts of Hillsborough, Merrimack, and Rockingham counties. Municipalities across the state have grappled with how to best regulate these services – just last year the Manchester Board of Alderman voted to require Uber to perform background checks on all those using the app to provide driving services.

These businesses have not escaped the notice of the New Hampshire Legislature, either. On June 21, 2016, Governor Maggie Hassan signed into law HB 1697 (now RSA 367-A), which regulates all Transportation Network Companies (TNCs) in the state by requiring that they carry certain levels of insurance and conduct criminal background checks on potential drivers. RSA 367-A also adopts regulations prohibiting discrimination of users of these ride-sharing services.

From a workers’ compensation or employment law perspective, perhaps the most impactful directive of RSA 376-A is section V, which creates a presumption that drivers using these platforms are independent contractors. RSA 376-A V states that a TNC “shall not be deemed to control, direct, or manage the personal vehicles or transportation network company drivers that connect to its digital network, except where agreed by written contract.” Although those driving for companies such as Uber or Lyft in New Hampshire may be employees if agreed to by contract, in New Hampshire they are now presumed to be independent contractors and to have control of their work. By classifying drivers as independent contractors, a TNC does not need to provide a host of protections for these drivers, including unemployment or workers’ compensation benefits.

The tension between classifying workers in the gig economy as employees or independent contractors is taking place across the country, and includes a class action lawsuit against Uber for alleged misclassification of those utilizing the app to provide driving services. This ongoing fight over classifying workers in the gig economy might be solved by cutting the Gordian knot.

Rather than forcing workers into the category of independent contractors, jurisdictions in the United States could adopt a “dependent contractor” category of workers, which can already be seen in foreign jurisdictions.

The dependent contractor is recognized, for example, in Canada. This intermediate category of workers is found where a work relationship exhibits a “certain minimum economic dependency, which may be demonstrated by complete or near-complete exclusivity.” McKee v. Redi’s Heritage Homes Ltd., 2009 ONCA 916 (CANLII). A driver for a ride-sharing app or a laborer through TaskRabbit fits neatly into such a category: A worker with one of those enterprises may have the freedom of a contractor, but in many cases depends almost entirely on a specific provider in order to secure gigs.

But what would a dependent contractor in the United States look like? A worker classified as a dependent contractor might receive protections, such as the right to organize, under the National Labor Relations Act. They might also be subject to a requirement that employers contribute half of Social Security and Medicare payroll taxes, as suggested in The Hamilton Project’s paper, “A Proposal for Modernizing Labor Laws for Twenty-First-Century Work: The ‘Independent Worker,’” by Seth Harris and Alan Krueger.

Some of the protections of the workers’ compensation system also might follow the classification of dependent contractors. A hybrid system might emerge where a person engaged in the gig economy would receive some protections of the workers’ compensation system, but not all. Perhaps a dependent contractor would receive payment for a portion of medical expenses or a smaller percentage of their wage through indemnity benefits than a traditional employee would under workers’ compensation benefits, or receive medical benefits but no indemnity benefits.

A 2015 study by Intuit forecasted that the gig economy would grow 18.5 percent per year for the next five years. How legislatures and courts across the country deal with these issues and the classification of workers will determine how these businesses grow and shape opportunities for the next generation of workers.

Joshua Hilliard

Josh Hilliard practices at Bernard & Merrill in Manchester, where he focuses on defense of employers and insurers in workers’ compensation and liability claims.

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