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January 2, 2018

Worker protection policies should adapt to the changing structure of employment

January 2, 2018

The relationship between workers and employers is changing. More businesses are outsourcing activities that regular company employees used to do, and businesses are using more contract, temporary, and other contingent workers, sometimes for short periods or irregular schedules, or working through third-party agencies.

Here are three reasons policymakers should reexamine US worker security policies to adapt to this changing employer-employee relationship.

Workplaces are becoming more fissured

Companies have always contracted out some activities, but it is now more common for businesses to contract out core functions, such as information technology, facility maintenance, accounting, and legal services. This gives a firm more flexibility to adjust the number of workers in peak and slow periods, but it also contributes to what David Weil calls a “fissured workplace,” where the primary company is not the direct employer of all workers in the business.

A hotel, for example, may have the brand of a national chain, but the brand company only owns the name. Other firms own the restaurants (sometimes as franchises), and others own the lodging operation. Each firm could, in turn, outsource some of their functions, such as accounting, information technology, housekeeping, and maintenance. As a result, workers in the same facility may have different wage rules and benefits.

More workers are in nonstandard employment arrangements

A small but growing share of people, in fissured and traditional workplaces, work in nonstandard arrangements rather than as regular employees. This includes temporary workers (sometimes through agencies), freelancers, independent contractors, and on-call workers.

According to the Bureau of Labor Statistics’ National Survey of Contingent Workers, in 2005 (the last year the survey was done), nonstandard work arrangements still made up 3 to 4 percent of the formal US workforce. Another 5 to 10 percent were independent contractors. Even using the low estimate, that share represents 4 million or more contingent workers.

The bureau’s definition includes what today is referred to as “gig” jobs (still a small but growing share of the economy), such as ride hailing, delivery services, or other work where online platforms are used to request, match, and schedule jobs.

Because gig jobs and contracting continue to grow, many experts expect to see increases in contingent and nonstandard employment when the next survey findings are released in 2018.

Employer-employee relationships are increasingly ambiguous

Health insurance, retirement savings, workers’ compensation, family leave, and unemployment insurance are generally tied to employment status. Fissured business models and contingent work arrangements can confuse the categorization of employees and employers.

Under the Fair Labor Standards Act, Occupational Safety and Health Act, Family and Medical Leave Act, and other laws, employers must comply with minimum wage, overtime, health and safety, and other labor standards.

In standard employment arrangements, it is clear who the employer is. But in nonstandard work arrangements, the designation is not always straightforward. Some workers are misclassified as independent contractors when they should be classified as regular employees. And some workers are not clear about their employer-employee arrangements. Workers with nonstandard employee status are generally not eligible to receive those benefits.

Policy implications of a changing employment landscape

Researchers continue to untangle this new reality of work, analyzing the size of the nonstandard workforce and the extent of the fissured workplace. Meanwhile, worker protection policies should be reexamined and updated in the following ways to reflect this changing nature of work.

  • Clarify and reinforce “worker classification” and “joint employer” rules. Clarifying federal labor standards in fissured and outsourced situations and expanding public information will improve workers’ and employers’ understanding of their rights. Restoring the expansion of the joint employer rule, withdrawn by the Trump administration, would reinforce the labor standards responsibilities of all employers.
  • Revise employment insurance and security policies to cover nonstandard workers. The rapid changes in the structure of work suggests unemployment insurance and workers’ compensation insurance should cover workers in nonstandard arrangements, such as independent contracting or nonagency temporary jobs.
  • Expand portable benefits. The Affordable Care Act provides portability of health insurance, and nonstandard workers can purchase insurance on the Exchange. Similar portability for pensions, workers’ compensation, family leave, and unemployment insurance could help workers in nontraditional work arrangements secure benefits that may not be available to them otherwise.

Photo via Shutterstock.


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