Will gig workers be classified as employees?

A bike delivery worker in NYC in March of this year.
A bike delivery worker in NYC in March of this year.
John Minchillo/AP/Shutterstock
A bike delivery worker in NYC in March of this year.

Will gig workers be classified as employees?

Gig workers have been on the frontlines during the pandemic, but their fight for more employment benefits still continues.
August 31, 2020

At the beginning of the year, it seemed like gig worker classification was going to be one of the biggest issues of New York’s state legislative session. California’s 2019 reclassification of gig workers such as ride hail app drivers as employees put the spotlight on New York, the next largest labor-friendly state. Few expected that Albany would pass major legislation reclassifying workers this year, but momentum was building. Hearings were held, and multiple bills were introduced taking varied approaches to deciding whether gig workers should remain classified as independent contractors, be reclassified as employees or be granted employment benefits in some other way. In his January budget proposal, Gov. Andrew Cuomo proposed a task force to study how gig workers should be classified and make recommendations by May 1 – or leave it to the state Department of Labor to introduce new regulations on its own. Dueling coalitions representing labor groups and gig companies were gearing up for a lobbying battle in Albany. By 2021, it seemed, the state might actually pass one of those bills. 

You can probably guess what happened next: the coronavirus pandemic blew up the legislative agenda, bringing that momentum to a halt. When the Legislature passed a budget in April, it left out Cuomo’s task force proposal. Despite the fact that gig workers for companies such as Instacart and Grubhub found themselves on the frontlines of the pandemic, delivering food and groceries to those able to work from home, comprehensive reform to grant those workers benefits like paid sick leave or overtime fell off the agenda. 

Nonetheless, labor advocates are encouraged by a recent slate of small steps to grant those workers traditional benefits and by their belief that the financial stresses of the pandemic highlighted the need to change the rules for gig workers – potentially building political momentum for reclassification. A handful of court rulings this spring and summer affirmed that gig workers in certain industries should be considered employees for the purposes of receiving unemployment insurance. 

State Sen. Diane Savino, who was one of the first to introduce legislation to change gig workers’ classification, and who held a hearing on the issue last fall, said that when the conversation over gig workers began a few years ago, some weren’t sure whether these app-based workers would need the same protections as employees. “A lot of people thought, ‘Well, maybe they don't need it in this new world,’ and that people can go out and make their own way and be masters of their own universe,’” she recalled. “And then the pandemic came and knocked everybody on their ass.”

While gig workers in New York are broadly classified as independent contractors – meaning they work for themselves and aren’t eligible for traditional employment benefits – two court rulings this year add some nuance. In March, just days after New York entered its pandemic lockdown, the New York Court of Appeals ruled that Postmates delivery workers could receive unemployment benefits. The court found that the relationship between a former Postmates driver and the platform did in fact constitute an employer-employee relationship, despite the company’s claims that its workers are self-employed. 

Then, in July, a federal judge in New York ruled that the state must begin paying unemployment benefits to Uber and Lyft drivers, affirming a 2018 ruling that Uber drivers and other “similarly situated” drivers should be considered employees for the purposes of unemployment insurance. 

The two court rulings are limited in the kind of benefits they extend and address only two kinds of gig workers. They don’t suddenly make Uber drivers eligible for overtime pay or give Postmates workers the right to organize. They also hold no immediate impacts for on-demand dog walkers or handymen. But together, union and labor leaders say they are an important first step of recognizing that these kinds of app-based gig workers should be considered employees for the purposes of all employment benefits. “If you’re an employee, you’re not just an employee for one particular right,” said Mario Cilento, president of the New York State AFL-CIO. “You can’t be a little pregnant. Either you’re an employee or you’re not.”

Cilento said that he now wants to see those rulings codified by the state and apply to all kinds of benefits. Some state lawmakers have expressed interest in reclassifying gig workers as employees, while others have tried to find solutions for granting workers more benefits without going that far. But Bhairavi Desai, executive director of the New York Taxi Workers Alliance, said that these court rulings make such a “third way” approach unrealistic. “I think that those court decisions were a real game changer,” Desai said. “Now, if the Legislature wants to pass a watered down, third way bill – as the companies have been lobbying for – there's no question that they would be taking away benefits from gig workers that have been established by the courts.”

But even those who believe gig workers in New York deserve a comprehensive policy change admit that the state would be on dangerous ground if it simply followed in the footsteps of states that have triggered a cascade of lawsuits and unintentionally harmed some freelancers. The best-known example of a state reclassifying gig workers as employees is in California, where a recently passed law doing so has resulted in a series of court challenges, including from Uber and Lyft. When a California judge ruled in August that the companies had to comply with the law and start classifying their drivers as employees, both companies threatened that the order would force them to shut down in order to retool their business models. But just before a shutdown was set to begin, an appeals court granted the companies a reprieve that delays the requirement to reclassify their workers while the companies appeal the ruling.

Known as “AB5,” this new California law uses a more stringent method of worker classification and ends up reclassifying many gig workers as employees. It uses what’s called an “ABC test,” under which a worker is only classified as an independent contractor if they are (1) free from the control of their employer, (2) doing work outside the usual course of business of an employer and (3) engaged in an independently established business. For example, an accountant who runs her own firm and is retained by a non-accounting business to do its taxes would still be an independent contractor. But, under this test, most app-based gig platforms would have to start treating their drivers, couriers and task-doers as employees. 

When it passed in California, it garnered ferocious opposition from companies including Uber, Lyft and Doordash. The financial cost of treating workers as employees, which would include providing them with health insurance, would be massive. The companies say there are other ways to grant their workers employment benefits without fundamentally altering their business models. Some have proposed creating portable benefits programs for their workers. Uber CEO Dara Khosrowshahi recently wrote an op-ed in The New York Times calling for gig companies to contribute to benefits funds that their workers could use for the benefits that they want. Uber and Lyft have both released polls showing broad support for this kind of plan among drivers and others currently classified as independent contractors.

AB5 hasn’t just been controversial because it upset gig companies, though. Others said that the state’s approach was overly broad. It has been overwhelmingly unpopular with freelance writers, for example, because it bars companies from accepting more than 35 submissions a year from freelancers; any more, and the company would have to treat them as employees. A weekly opinion columnist, who is typically only working one-two days per week on his or her column, would now have to receive a full benefits package. But instead of suddenly hiring up all of their freelancers when the law went into effect in January, some of those companies simply cut back on the work they gave freelancers to get them below the 35-assignment threshold. 

The fate of AB5 is still in flux. Uber, Lyft and Doordash have raised over $100 million to campaign for a ballot measure that would exempt them from AB5 – keeping workers for companies like theirs classified as independent contractors, while requiring the companies to start paying for some employment benefits for their workers, such as minimum wage and health care contributions. Californians will vote on that measure this November.

Though much of the focus of the gig worker issue has been on AB5 in California, a similar debate has taken shape in New York over the past few years, though to much less fanfare. Multiple pieces of legislation have been introduced in Albany that would change how app-based gig companies have to treat their workers. State Sen. Robert Jackson and Assembly Member Deborah Glick introduced a bill last fall that would classify workers under an ABC test, similar to AB5. Before that, Savino and Assembly Member Marcos Crespo introduced legislation last spring that would create a third classification of worker – a “dependent worker” – which would capture app-based gig workers and extend to this group the right to organize and collectively bargain, along with other protections. 

Groups on both sides of the issue have coalesced to promote their interests in Albany as the debate heated up. The NY Do It Right Employment Classification Test (DIRECT) Coalition, which is made up of labor groups including the New York Taxi Workers Alliance and 32BJ SEIU, favors a full reclassification solution using an ABC test. On the other end of the spectrum is the Flexible Work for New York coalition, which is made up of business industry groups and individual gig companies such as Grubhub and TaskRabbit. This group argued that what gig workers value is their flexible work schedules and that classifying them as employees would eliminate the ability to work whenever or wherever they want. 

The fact that New York’s gig worker debate has taken place in the shadow of California’s controversial AB5 saga means that lawmakers have proceeded cautiously. Even those who say they favor an ABC test acknowledge that New York has to be careful to avoid California’s pitfalls. Rafael Espinal, the former City Council Member who now serves as president of the Freelancers Union, has been paying especially close attention to California’s efforts. “I think it's important that the bill sponsors here in New York take a closer look and learn from the lessons, and make sure that whatever moves forward has the best interests of all parties in mind,” Espinal said. “We understand that there are misclassified workers, and we support any effort to deal with that issue, but we also have to ensure that professional freelancers and the freelance workforce as a whole is not hurt through unintended consequences.”

But even though California’s gig worker debate is arguably more fraught than ever, the pandemic is adding a new urgency for New York to address gig worker rights now. “I just feel like we’re, as a country, collectively guilty of appalling hypocrisy,” said New York City Council Member Brad Lander. “We stood out on our stoops and cheered at 7 every night. We were cheering for a lot of people – doctors and nurses and grocery store workers – but the ones most likely to actually go down the block while we were cheering were restaurant delivery workers.” This spring, Lander introduced legislation that would use a modified ABC test to make New York City gig workers entitled to paid sick leave, noting the risk that the majority of these workers faced during a public health crisis. 

While workers classified as independent contractors received federal Pandemic Unemployment Assistance, they were left out of New York’s emergency paid sick leave legislation. In the spring, some gig companies began offering paid sick leave because of the pandemic, but critics say workers shouldn’t be reliant on the goodwill of companies to receive ad hoc benefits. 

And the status quo creates a public health risk. If a delivery worker, for example, has COVID-19 but goes to work because they can’t use paid sick leave, they could end up spreading the virus. 

Using examples like app-based couriers delivering food to people in quarantine or Amazon Flex workers delivering packages amid a surge in online shopping, Lander also noted that a lack of employment protections hits already-marginalized communities especially hard. “In the context of the racial reckoning, (there’s) a real understanding that we’re talking overwhelmingly about workers of color, and yet we’ve just totally failed to show up for them and provide them even the basics of paid sick leave – much less the broader set of benefits that workers need, in terms of health care, retirement security and workers comp,” he said. 

Lander’s paid sick leave legislation still has not progressed in the Council, but he pointed to Council Speaker Corey Johnson when asked about the delay. “Legislation in the City Council moves forward when the speaker moves it forward,” Lander said. “To me, it’s now like the City Council has denied these workers paid sick leave that we could be giving them.” A representative for Johnson did not immediately respond to a request for comment.

Even if that legislation does pass, it won’t be the complete solution that gig workers need, Lander said. “We need that big comprehensive change at the state level,” he said. “This was designed, in part, to be a step to build momentum for it. Paid sick leave is the one area that we have figured out that the city could implement on its own. In other areas of employment law, we’re preempted.”

Jackson, the sponsor of the state bill that would create an ABC test for workers, echoed the notion that the pandemic only makes the need for reclassification more clear. “So many home healthcare workers, app-based drivers, nail salon workers, childcare providers, and other so-called ‘freelancers’ have been left out in the cold when it comes to unemployment benefits and workplace protections,” he said in an emailed comment. “The need to reclassify these workers as ‘employees’ is more urgent now than ever before, and I continue to work on legislation that addresses those needs.”

Meanwhile, some of those fighting against attempts to reclassify New York’s gig workers as employees readily admit the fact that the pandemic has brought these workers’ lack of protections into harsh light, but say that the state can create a new way to grant those benefits without requiring reclassification. “Everyone agrees that workers deserve benefits and protections, but there are many wrong ways to pursue a worthwhile goal,” Ryan Naples, deputy director at Tech:NYC, a technology industry group whose members include gig companies such as Uber, Lyft, Doordash and Handy, wrote over email. “Just as California is dealing with the consequences of capriciously reclassifying millions of workers, so too could New York create a mess for itself without a thoughtful, flexible framework.”

Though the state Legislature has been largely silent on the gig worker issue during the pandemic, Savino hinted that new legislation may be forthcoming. While she wouldn’t detail what a new approach would look like, she acknowledged that both the pandemic and the recent court rulings on Postmates, Uber and Lyft, have changed the conversation. “We’re certainly taking a different look at it than we were in January,” she said. 

Annie McDonough
Annie McDonough
is a tech and policy reporter at City & State.
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