Employer Prevails in Gig Economy Claim by Proving Worker's Independent Contractor Status
The Maryland Workers’ Compensation Commission recently sided with the employer and insurer on a “Gig Economy” case in a significant victory for Tarpine, Heller & Pendergrass and its client.
Over the past few years, we have seen the rise of a new and rapidly growing workforce known as the “Gig Economy”, e.g. Grubhub, Uber, Doordash, etc. The gig economy workers provide a variety of on-demand services including ridesharing, food delivery, package delivery, and more. Employers classify these gig economy workers as independent contractors. Independent contractors are paid only for the services that they provide to the company. As opposed to an employee, they do not receive benefits, insurance coverage, a retirement plan and payroll taxes are not taken out of their checks. Relevant to this case, an employer is not legally required to provide workers’ compensation coverage for an independent contractor.
However, with the rise in the gig economy, there has been a strong push by gig economy workers to be classified as employees and obtain these benefits. Designating these vast numbered gig workers as employees would lead to drastic consequences. Employers would face significant, increased liability and costs to provide workers’ compensation coverage, other benefits, and potentially sinking their businesses altogether. This issue holds high stakes and is being litigated across the country with a majority of judges siding with gig economy workers.
Tarpine, Heller & Pendergrass pushed forward with defending a gig economy case on behalf of its client despite the perceived obstacles. The gig economy worker was involved in a motor vehicle accident and claimed they were entitled to workers’ compensation coverage by the employer. Although judges have shown to be sympathetic towards gig economy workers, we focused on the facts and the law at hand. Simply designating a gig economy worker an independent contractor is not enough to maintain that status. We must look beyond the title and address the degree of control the employer exercises upon the gig economy worker. In this case, Tarpine, Heller & Pendergrass focused on the gig economy workers’ independence in performing their work through effective cross-examination, providing relevant materials, and argument. We contended the gig economy worker has just about unfettered discretion to set their schedule, if and when they want to work, control over the delivery route, and freedom of conduct within basic industry standards. The gig economy worker seeks out work from the employer – the employer does not actively select the workers and there is no formal interview process. The worker does not have taxes withheld and is not paid at an hourly rate. We persuaded the Administrative Agency that the client did not exercise a significant degree of control over the worker that made them a de facto employee.
By challenging these cases, Tarpine, Heller & Pendergrass can better assess what factors hold weight in the eyes of judges and advise clients on how to structure their gig economy business to avoid unwarranted liability.
Daniel Andorsky