Greg Lang, RAIN
In the last of a four-part series on the growing role of the gig economy and its implications, Greg Lang of the Reinsurance and Insurance Network discusses the trade-off between employee protections and flexibility.
The gig economy has brought to light employers’ increased ability to monitor their employees’ performance, efficiency, and job conduct.
The gig economy is replacing skilled workers with less skilled independent contractors. What was once done by people can increasingly be done by an app, meaning there is less steady, reliable work for traditional employees. This process has been described as “de-skilling” and is in evidence all over the world.
At the beginning of the gig economy in 2008, gig workers were part-time, supplementing their wages from a traditional job. Ten years later, we are seeing one-to-one job losses: new Uber drivers create job losses for traditional taxi drivers, resulting in lost livelihoods.
Some app companies deny that their full-timers are employees at all, perpetuating a fantasy that gig workers are solo entrepreneurs. It is a business model that reduces everything to an app-enabled transaction. Some people are starting to fight back.
Restaurant owners are understandably frustrated by the cost and disruption of meal delivery services such as Uber Eats, DoorDash, and Grubhub. Some do not provide bathroom access while gig workers are picking up their food.
Drivers say restaurants will post signs or tell drivers that bathrooms are reserved for customers, forcing them to use the bathroom outside or pee in cups in their cars. Think about that the next time you take your food and tip the driver.
“Restaurants are developing their own apps to eliminate the delivery service middleman.”
As middlemen who shuttle food between businesses and customers, gig workers who deliver food and groceries often find themselves occupying a marginalised position.
Other entrepreneurs have started digital-only restaurant establishments that do not have a dining room or waiters. Meanwhile, traditional fast-food restaurants are limiting dine-in hours and focusing on drive-through services to limit the number of employees needed, and the liability associated with in-store dining.
McDonald’s reported a 22 percent drop in March sales in the US during the COVID-19 quarantine, highlighting the appeal of the drive-through model. Restaurants are developing their own apps to eliminate the delivery service middleman. Pizza Hut is heavily advertising its delivery tracking app, while Dominos has had an app for some time.
In March France’s top appeals court recognised the right of an Uber driver to be considered an employee. This could upend Uber’s business model and potentially require it to pay more taxes and provide its drivers with benefits, such as sick pay.
The court upheld a previous decision, saying the Uber driver could not qualify as a self-employed contractor. Being unable to build his/her own clientele or set the price tariff made a driver a subordinate of the company, the court found.
The court ruled: “When connecting to the Uber digital platform, a relationship of subordination is established between the driver and the company. Hence, the driver does not provide services as a self-employed person, but as an employee.”
This decision could potentially pave the way for other drivers to ask for a reclassification of their work relationship with Uber which, under the current framework, does not pay a wide range of taxes that fund France’s welfare system. The decision also follows a series of legal challenges to Uber and similar companies from countries including Brazil and Colombia.
California’s Assembly Bill 5 or (AB 5) addresses concerns about the exploitation of gig and app workers’ low pay and a lack of security or benefits in that state. Supporters of the California’s gig worker bill argue that some corporations want to avoid paying employee benefits. I agree, but the 21st century workforce does not always value stability over flexibility.
The other side of regulation
The expectation of gig-based work is that workers have control over when and how they work. This flexibility creates opportunities to pursue other ventures, or makes room for duties such as childcare. In a state such as California, filled with gig workers trying to make ends meet while they pursue their dreams of performing on the big screen or building the next Uber, this bill seems to crush those dreams.
While some will argue that employers have simply found a new way to exploit their employees, others believe society should shift away from expecting individual employers to be solely responsible for every aspect of a person’s wellbeing.
The promise of full-time employment is changing. Drawing income from one company is now viewed by some as equal leverage for abuse. Considering companies to be ultimately responsible for the quality of life of their employees is questionable given that almost no-one works for the same company for their entire career these days.
Today’s workforce is changing, and ignoring this shift will not help anyone. These new laws are an archaic solution to a modern problem, the results of which will be costly.
Under the new California law, like the French court, independent contractors must be “free from corporate control and direction” and be “customarily engaged in an independently established trade, occupation, or business”. Few contractors pass this test. Other states and countries are considering similar bills.
Does it have to be this way?
Human Resources for Health is a peer-reviewed open access public health journal that publishes original research and case studies on subjects such as the state of the healthcare workforce. In a 2016 study, it estimated that 80 million healthcare workers will be needed worldwide by 2030.
Supply is expected to reach just 65 million, leaving a shortage of 15 million worldwide. Where will all the extra people come from? Can technology be a solution?
Around 44 million Americans currently care for loved ones who are ill, disabled, or frail. About 87 percent of this care is provided by friends and family and is therefore unpaid. Caregivers on average provide 24 hours of care per week.
The US government recognises this and is willing to pay. It is cheaper to keep people at home than to put them in a facility, and home has the added benefit of being where most people want to be.
Home healthcare means home healthcare tracking: lots of remote employees and lots of care to coordinate. If the government is going to pay this, care needs to be validated.
If you want to get paid for a visit, you need to prove you were there. This is good for employers too. This Medicare tracking mandate has made it easier for employers to monitor job performance, efficiency, and conduct. It is also helping insurers validate work performed for liability and workers’ compensation purposes.
What about those poor app workers?
Here is an example of how technology can help caregivers and insurers support aging in place. An article in this publication in January mentioned a new insurtech, CareValidate, which was working with a risk retention group focused on assisted living facilities.
Let us imagine that a CareValidate user is not sleeping as well as she used to. CareValidate’s technology will automatically detect this and notify her caregiver. When a caregiver, paid or unpaid, comes in to check on this patient, not only will this same technology log the visit analytics on a room-by-room basis, but the app will also guide the caregiver on how best to use this visit to make the patient safer in her own home.
Pre-claim interactions like this fundamentally change the relationship between the insurer and the insured for the better.
Long-term care insurers want you to age at home. It is cheaper. They are now paying for technology to help make seniors safer and make it easier for caregivers, paid and unpaid, to do their jobs.
Workers’ compensation carriers now track employee hours and charge employers only for the hours that employee is actually working. The idea is to pay only for what you need, and not to be forced to pay for losses that happen away from the job.
Professional liability carriers and their insureds now have access to technology-assisted risk management with documented activities to both prevent and defend against future claims.
Technology can also change the insurance sales process, creating for example new on-demand insurance. A large portion of US gig workers are independent 1099 workers rather than W-2 employees for tax purposes.
The on-demand insurance paradigm provides coverage to these independent workers only when they are working. This technology truly matches the premium to the exposure—a win for both the insured and the insurer.
Greg Lang is the founder of the Reinsurance and Insurance Network. He can be contacted at: email@example.com
Greg Lang, Reinsurance and Insurance Network, RAIN, Gig economy