
Steven Senne/AP Photo
For years now, app companies have been coming under threat from regulatory scrutiny and class action lawsuits for employee misclassification.
The Trump administration has come right out of the gates with a clear message that the White House is open for business, especially if you’re a tech executive hailing from Silicon Valley. This coziness with industry sets up a clash, however, with the droves of working-class voters who delivered the GOP their first popular-vote presidential victory in 20 years and don’t exactly share all the same interests as the Big Tech C-suite.
Nowhere is this tension more apparent than on a host of ongoing labor issues dividing the GOP.
Sen. Josh Hawley (R-MO), one of the rare Republicans not entirely hostile to labor, is circulating a bill drafted with help from the Teamsters to strengthen labor law by forcing employers to actually come to the bargaining table with newly formed unions. It’s a loophole currently denying many unions first contracts.
But at the same time, the new Republican chair of the Senate’s Health, Education, Labor and Pensions Committee, Sen. Bill Cassidy (R-LA), is pursuing legislation to undermine existing labor law for the rapidly growing gig economy.
Last week, Cassidy unveiled his priorities for the committee this Congress, the top one being a bill to expand “portable benefits” for independent contractors that can be accessed by workers across employers rather than being tied to one job.
All this means is that employers could voluntarily pay contractors some form of stipend for retirement savings or to help them purchase health insurance on the open market, none of which they’re currently guaranteed because of their employment status.
Cassidy portrays it as a moderate bipartisan solution showcasing the GOP’s supposed new commitment to workers, and it sounds fairly innocuous. There’s similar legislation making its way through state legislatures around the country.
But in reality, the details of these bills reveal that they’re actually a huge gift to tech companies. Cassidy’s own statement about his proposal indicates as much. “The Biden-Harris administration attempted to erode the flexibility of independent workers, threatening their ability to provide for their families, but that anti-worker agenda is over,” he said in the committee’s first executive meeting this Congress explaining this benefits plan. He’s referring to a rule set by Biden’s Department of Labor to close loopholes in the misclassification of workers as independent contractors.
Business groups, led by Uber, Lyft, and other app companies, have dragged the rule through court, because their entire business model relies on a precarious workforce whose existence could be threatened by the rule.
Labor groups representing rideshare drivers warn that portable benefits are at best an inadequate arrangement.
Fundamentally, rideshare and delivery app companies classify their workforce as independent contractors rather than employees because it allows them to deny them federal protections such as a minimum wage, overtime pay, health care benefits, Social Security, unemployment insurance, paid sick days, family leave, as well as the right to unionize. Indeed, the only real innovation that the gig economy brings is a way to circumvent 100 years of labor law. The practices are spreading to other sectors like retail and even health services, which have been turning to gig-ified app-based employment.
“The issue is being used to obfuscate who’s really an employee and who’s a contractor by layering in this portability of benefits as a distraction,” said David Weil, the former head of the Wage and Hour Division at the Department of Labor under the Obama administration.
Labor groups representing rideshare drivers warn that portable benefits are at best an inadequate arrangement that only offers meager compensation to cover massive expenses like health insurance. At worst, the bills are designed as a Trojan horse to permanently enshrine contractor status for gig workers.
Conversely, it’s not like Cassidy is proposing genuine portable benefits that would benefit all workers, something like expanding Medicare. “Portable benefits like Social Security, worker compensation, Medicaid are exactly what workers have fought to enact for decades … but this industry-pushed bill is exactly the opposite of that,” said Nicole Moore, president of Rideshare Drivers United.
THE MAIN QUESTION HANGING OVER Cassidy’s prioritization of this bill and ones at the state level is why the government even needs to step in at all to pass legislation. There’s no law stopping companies from paying workers a health stipend or retirement right now, though a few versions peddled by free-market think tanks would create greater tax incentives for employers to provide this option. What’s really going on is that if the gig apps started widely offering portable benefits, it would likely be used against them in a misclassification lawsuit as a clear indication of the employment relationship with workers.
To preempt that, they’re seeking a legal shield from the government as part of a much broader national campaign they’ve waged to protect their business model.
That’s explicitly what a new law does in Utah, passed by the state legislature in 2023 at the behest of tech companies. It does nothing other than state explicitly that benefits are not “evidence of an employment relationship.”
A similar bill making its way through the Pennsylvania legislature would more broadly establish app workers as contractors rather than just exempting companies from legal action. Democratic Gov. Josh Shapiro helped grease the skids for this bill by setting up a public-private partnership last year with DoorDash for a portable benefits initiative with the platform Stride Health.
The lobbying for these bills reveals the big-money interests at play. The Pennsylvania bill is being pushed by an astroturf campaign funded by the app companies under the guise of neutral-sounding experts or even labor interests representing drivers. One of the groups that testified in favor of the bill in Pennsylvania is the Washington-based “Chamber of Progress,” which received funding from Uber that was not disclosed in their written testimony to the Pennsylvania legislature.
Those two bills in Utah and Pennsylvania may be the basis for what Bill Cassidy is preparing to unveil this Congress. In the last Congress, he supported a related law called the Portable Benefits for Independent Workers Pilot Program Act that is co-sponsored by pro-tech Democrats like Sen. Mark Warner (D-VA). As a stepping stone, it sets up a federal pilot to help connect employers with various platforms offering individual savings accounts.
The main lobbying muscle on Capitol Hill for that bill came directly from Uber, Lyft, DoorDash and Grubhub, and other pro-business groups. Uber and Lyft’s go-to lobbying firm in D.C., Akin Gump, has been a major campaign contributor to Sen. Cassidy, cutting him a check for almost $20,000 during his last re-election campaign.
THE CURRENT PUSH FOR PORTABLE BENEFITS fits into a much longer-range national strategy by the app companies to preemptively kneecap pro-worker regulations.
For years now, app companies have been coming under threat from regulatory scrutiny and class action lawsuits for employee misclassification. They’re an obvious target because of the poor working conditions faced by drivers, who are unable under existing law to fight back through unionization.
The first major shock to the apps came in 2019 when California successfully passed a bill changing the “ABC test” for independent contractors, which would make it clear that rideshare drivers would be employees moving forward.
Uber and Lyft went ballistic and funneled over $20 million into a state ballot initiative the following year to undo the new contractor test just for their drivers. Yet they mostly promoted the ballot measure as providing drivers with “portable benefits” to pay for health insurance with a stipend. The campaign worked and the measure passed.
However, Uber and Lyft recognized that this looming crackdown wasn’t going away in other states.
“They basically decided to try and shape the inevitable regulations coming down to make them work on their terms and defend classification,” said Veena Dubal, a professor of law at the University of California, Irvine, who’s researched the gig economy and specifically Uber for a number of years.
The labor movement has to some degree been divided over how to fight against tech behemoths like Uber and Lyft.
The companies have gone about methodically cutting deals with lawmakers across a host of states, promising to make various concessions to their workforce in exchange for enshrining the contractor employment status.
Uber and Lyft secured a victory in Washington by getting a bill passed to guarantee some basic protections, like unemployment insurance, while of course legally solidifying the contractor status for drivers. One state local of the Teamsters actually endorsed the bill, though International President Sean O’Brien disavowed it as inadequate.
The rideshare apps also managed to strike major settlements for misclassification cases in Massachusetts and New York by agreeing to some baseline protections like minimum pay, while blocking a legal standard for full employment of their drivers.
According to active drivers in Massachusetts, those new pay baselines have not meaningfully raised the floor for what they already made on many drives. Uber and Lyft followed up by somewhat unexpectedly endorsing a ballot measure last year to allow a sectoral bargaining unit for drivers, a measure also backed by the Service Employees International Union.
The labor movement has to some degree been divided over how to fight against tech behemoths like Uber and Lyft. The unions generally are not keen to sacrifice the hard-won federal protections from over a hundred years ago.
Most of the gig worker groups argue that the modest concessions app companies are offering are wholly inadequate compared to the protections workers would receive as legal rights if they were full-time employees.
In California, for example, the health insurance stipend is not meaningfully helping the majority of drivers. A survey published in collaboration with Rideshare Drivers United found that just 10 percent of respondents were even receiving the stipend at all. Many haven’t been able to qualify because of various restrictions and hour minimums slipped into the ballot measures.
Through one of its benefit partnerships, DoorDash is only paying 4 percent of its delivery drivers’ pre-tip earnings to their savings account. For an average delivery driver, who makes poverty wages at $8.96 an hour and uses the app for about 20 hours a week, that would amount to just $7. That stipend would hardly cover a single co-pay, much less actual health insurance premiums.
Drivers groups also warn of another risk: that the expansion of portable benefits may ultimately undermine the government-provided programs all workers rely on. Take Social Security, for example, a public, genuinely portable benefit that provides payments to the elderly and disabled. But app companies don’t pay into the program because of their workforce classification.
As gig employment grows as a share of the overall economy, the current employment conditions for the sector could threaten to deplete the funds for the social insurance safety net. The tech-backed private benefit plans are also far inferior to the pension funds or multi-employer plans that transient workers, such as in construction, receive through their unions.
The fight in Washington over portable benefits will squarely pit workers against the tech companies lining up behind the Trump administration.