House Subcommittee Discusses Expanding ‘Portable Benefits’ for Gig Workers

Lawmakers and several witnesses voiced support for giving employers the ability to offer benefits to gig workers, without harming their classification as independent contractors, at an April 11 hearing of the House Subcommittee on Workforce Protections. Such “portable benefits” are tied directly to the worker rather than an employer, and follow the worker from job to job, according to the National Conference of State Legislatures.

“How can we ensure that American workers remain secure and prosperous in the modern economy?” Rep. Kevin Kiley, R-Calif. and subcommittee chairman, asked at the hearing’s outset. “Expanding access to benefits is central to that goal. Benefits—including paid leave, retirement, health insurance, life insurance, child care allowances and more—are indispensable to the American workforce.” He noted that SHRM has found that 60 percent of employees say benefits are extremely or very important when considering future jobs.

“However, millions of hardworking individuals across the country lack access to these benefits,” he said. “Independent contractors who are not covered by federal employment statutes have indicated that benefits are important to them—but not at the expense of their flexible work schedule.”

Kiley said he sees two options moving forward. The first is to accept that tomorrow’s workforce, which increasingly will be made up of independent contractors, will have less access to benefits than today’s. Or, there can be a transition to a new model in which benefits are attached to the worker and not the employer.

Support for a Creative Solution

“The transition is already underway,” he said. “Many states are spearheading portable benefit programs.”

Legalizing independent contractors’ access to fringe benefits would enhance the lives of gig workers, said Liya Palagashvili, a senior research fellow at the Mercatus Center at George Mason in Arlington, Va.

Localities in addition to states, such as Utah, are experimenting with various portable benefits models so workers aren’t forced to choose between structured employment with benefits or flexible work without benefits, she said.

She called for federal policy that provides a safe harbor for state and local experimentation with portable benefits systems.

“Companies should not be penalized for creativity,” testified Kristin Sharp, chief executive officer of Flex Association in Washington, D.C.

In addition, independent contractors should not be forced into employee relationships that aren’t of their own choosing, said Gabriella Hoffman, senior policy analyst of Independent Women’s Forum Center for Economic Opportunity in Alexandria, Va. “Flexibility and freedom are key,” she testified.

Independent contractors have control of their own time, Sharp said. They can decide how long they want to work, the frequency of their work and whether they will work for a competitor at the same time. “That’s not true of employees,” she said.

Concerns About Portable Benefits

While Kiley expressed hope that there may be bipartisan support of portable benefits for independent contractors, several Democrat representatives attending the subcommittee hearing said it was an attempt to evade protections against misclassification.

Rep. Alma Adams, D-N.C., subcommittee ranking member, said that as companies shift away from direct employer relationships, they are offloading risk to workers. The problem, she said, is that workers are deprived of basic rights. Portable benefits seem on their surface to be a generous supplement, but they would result in the misclassification of workers as independent contractors, Adams said.

Independent contractors can pay for their own health insurance if they want benefits, said Rep. Bobby Scott, D-Va., ranking member of the House Committee on Education and the Workforce. Scott said if employers provided portable benefits, they would be taxable income to independent contractors. Employees’ health insurance is not taxable income, he noted.

Scott also said that independent contractors aren’t entitled to such rights for employees as minimum wage; workers’ compensation; unemployment compensation; and, for nonexempt employees, overtime.

Portable benefits are “negligible in size” and restricted to certain industries, testified Katie Wells, a postdoctoral Fritz Fellow at the Tech and Society Initiative at Georgetown University in Washington, D.C. Workers do want benefits and flexibility, and they’re not incompatible, Wells said. But she criticized employers for misclassifying workers as independent contractors when they should be classified as employees and stated that flexibility “is held up as a red herring.”

However, Kiley said the government should not force workers to be employees if they don’t want to be. Kiley said he was in favor of a safe harbor and would take other steps to seek out bipartisan support to help provide the growing number of gig workers with portable benefits.