Garden State Bill Would Require Benefits Coverage for Gig Workers

In what could become the next benefits skirmish between the states and the federal government, legislation pending before the New Jersey state legislature would create a portable benefits system for gig economy workers. 

 

Sponsored by Sen. Troy Singleton (D-Burlington), the bill, S.B. 94, was approved Feb. 13 by the state’s Senate Labor Committee and is now pending before the Senate Budget and Appropriations Committee. In general, it would require gig economy companies like Uber and Lyft to provide benefits for their New Jersey-based workers through a “portable benefits system” that would allow workers to take their benefits with them from job to job. 

 

The bill would require “contracting agents” that facilitate the provision of services by at least 50 workers (i.e., independent contractors) over a 12-month period to contribute funds to qualified benefit providers to provide benefits to the workers. 

 

The contribution amount would be the lesser of 25% of the total fee collected from the consumer for each transaction or $6 for every hour the worker provided the services. For those workers employed simultaneously by multiple app-based companies, each company would be required to contribute to that worker’s benefits.

 

Qualified benefit providers would be required to use the contributions to provide benefits to workers, which would include retirement benefits, health insurance and other benefits determined by the providers. A worker entitled to benefits under the bill must select a qualified benefit provider and be allowed to change the qualified benefit provider once a year.

 

If a worker elects not to receive any of those benefits, an amount equal to one half of the contribution would be provided as compensation to the worker. Up to 5% of the contributions may be used for administration. In addition, workers would be permitted to bring a private cause of action against a contracting agent for failure to comply with the bill’s contribution requirements.  

 

 

While this legislation has been introduced previously and still faces several hurdles in the state legislature, it bears watching, particularly as more people voluntarily opt to work in the gig economy.

 

In an op-ed in New Jersey’s Star Ledger, Sen. Singleton argues that the nature of work is changing, as more people are employed as independent contractors in the gig economy but still want access to retirement and health benefits. Citing Gallup polling data, Singleton notes that over one third of the American workforce is estimated to be currently employed in some form of gig work.  

 

“This idea isn’t about trying to make new employees fit into an old-world classification structure. It is purposely designed to recognize that work relationships in the 21st Century are vastly different than they once were,” says Singleton.  

 

With few employers offering subsidized benefits to their gig population, several studies, including a recent one by MetLife, warn that employers will need to adjust their talent strategy or they will be “left behind” in an increasingly competitive marketplace, as more workers turn to gig work as their primary employment.

 

Similar legislative initiatives are also taking place in California and New York that would treat gig workers like employees, rather than independent contractors. Meanwhile, the U.S. House and Senate have held hearings over the past couple of years, looking at whether gig workers should be treated more like employees and how to help gig workers save for retirement. 

 

Consequently, there also are a few legal issues that must be considered. The federal government’s current legal and regulatory framework effectively discourages companies that utilize independent workers from offering retirement benefits. 

 

Independent contractors currently cannot be offered benefits that are governed by ERISA. As a result, gig economy companies cannot include independents within ERISA plans offered to company employees or even facilitate transfers into retirement plans for independents. 

 

There also would appear to be ERISA preemption issues and the administrative complexities of having to keep track of how many hours gig workers work, particularly for multi-state employers. Consider also that the SECURE Act included the open MEPs/PEPs concept that may help facilitate retirement plan coverage, as well as a provision to extend retirement benefits to long-term, part-time workers.  And don’t forget about the ongoing state auto-IRA efforts.