The outbreak of the novel coronavirus has caused severe dislocations in the American economy, with immediate impacts felt most acutely by non-salaried workers who’ve been laid off, furloughed, or lost work as a result of social distancing measures enforced by the state. Although they lack health, pension, and other benefits enjoyed by salaried workers, hourly workers in traditional sectors are usually able to access unemployment benefits and health insurance through state exchanges in the event of job loss.
By contrast, independent contractors are typically ineligible for such benefits. Because they’re improperly classified as independent contractors and their employers don’t remit payroll taxes to the government, gig workers are typically ineligible as well. Moreover, independent contractors and gig workers may experience a near-total loss of working hours and wages but never a formal change in their employment status, a qualifying event that would enable them to purchase health insurance on state exchanges outside of the open enrollment period.
Because workes in the taxi and for-hire vehicle (FHV) industry are almost exclusively genuine independent contractors or misclassified as such, the novel coronavirus outbreak has hit this sector especially hard. FHV demand has cratered among both rideshare and traditional taxi service, leaving most drivers functionally unemployed. Remaining demand is often dangerous for both drivers and passengers: acutely sick people using rideshare as an alternative to ambulance service, or elderly people who need transit to medical appointments or other vital errands. Many rideshare drivers report spending considerable time and money sanitizing their vehicles between passengers without reimbursement from their companies, further cutting into their wages. In the event rideshare drivers do contract COVID-19, employers typically only grant paid sick leave if drivers test positive for it. But because testing is unavailable to all but the most severe cases, most have been unable to access paid sick leave. As genuine independent contractors, traditional taxi drivers also lack such protections.
The federal relief package that was recently enacted by Congress included funds to provide unemployment benefits both to traditional taxi drivers and rideshare drivers, but made no changes to their employment classification. Because many states’ benefits offices have been overwhelmed by applications from traditional workers, and no additional infrastructure has been set up to process claims from gig workers, many report being unable to access benefits after weeks of attempts. This is the case in New York, where poor outreach from the state Department of Labor has left many drivers in the dark about how to apply for benefits or that they’ve even eligible to receive them. Nor has New York updated its application process to reflect the eligibility of independent contractors and gig workers. The state’s online application still requires submission of W-2 forms, which only salaried employees receive, and applicants report difficulty in submitting materials via live representatives at benefits offices.
New York’s plans to address the plight of gig workers and reclassify them as employees, as the state of California did last year, now appear shelved after having been on both the governor’s and the legislature’s agenda as recently as January. In 2018, the state’s labor review board ruled that three Uber drivers who brought litigation against the company were employees for purposes of unemployment insurance, along with other “similarly situated” drivers. However, because the ruling has never been codified legislatively, drivers must undertake time-consuming measures to claim eligibility. Many are forced to bring litigation. A recent ruling from the New York Court of Appeals determined that Postmates drivers are employees for purposes of unemployment insurance, but the ruling applies only to food delivery drivers, not rideshare drivers or other gig workers.
The novel coronavirus outbreak has also exacerbated the crisis in the medallion taxi industry, whose drivers have long saddled with unpayable debts resulting from the speculative bubble that drove the price of medallions over $1 million. A proposed bailout now looks unlikely, and medallion owners will face even greater difficulties servicing their debts with the evaporation of most of their business.
Lessons for New York
The outbreak of the novel coronavirus has highlighted the unacceptable levels of precarity gig workers are forced to endure, and demands both immediate and longer-term remedies. We call on Governor Cuomo and the Democratic legislative leadership to enact the following measures without delay:
For rideshare drivers:
Direct the Department of Labor via executive order to classify rideshare drivers as employees for purposes of unemployment insurance. Although the latest federal relief package allows rideshare drivers to temporarily receive these benefits, access will be limited to the period of the crisis and is subject to change at the whims of Congressional Republicans and the Trump administration. New York must guarantee these benefits on an ongoing basis.
Immediately improve New York’s unemployment insurance processing system. Although the state has said it’s hiring new workers to cope with the increase in claims, clearly these efforts have been insufficient. New York should make whatever investments are necessary to process all incoming claims within the usual timeframe of about a week. It must also update all of its online applications and other materials to be accessible to rideshare drivers, and conduct outreach to inform drivers of the benefits to which they’re entitled.
Adopt the “ABC test” as the standard for employment classification across all areas of employment law via legislation. This test requires employers to prove that their employees are properly classified as independent contractors by showing they satisfy the following conditions: the worker is free from the control and direction of the employer, both under the terms of the hiring contract and in carrying out the work itself; the worker performs work outside the usual course of the employer’s business; the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the employer.
Unemployment insurance is only one aspect of the classification issue, which extends into many other arenas, such as wages, benefits, overtime, mandatory leave, workers’ compensation insurance, and others. The ABC test should prevail in all areas to ensure gig workers’ rights are identical to those of workers in traditional sectors, and exempt professions should be strictly limited.
Establish a rideshare taskforce with majority representation from drivers and organized labor to make recommendations specific to the rideshare industry. While ABC test legislation will apply to all gig workers, additional measures will be needed to address concerns particular to rideshare drivers. A taskforce originally proposed by the Cuomo administration earlier this year would have included representatives of drivers, organized labor, and management, and the Department of Labor would have been empowered to issue its own regulations if the taskforce was unable to achieve consensus. Any taskforce must not be structured to permit management to veto proposals supported by drivers and unions, and the Department of Labor must not supercede its recommendations. The taskforce should continue to meet regularly to evaluate the implementation of any new regulations and provide a forum for drivers to deliver feedback and raise concerns with lawmakers.
We recommend the taskforce take care to consider the following questions: establishment of a minimum percentage of the full cost of a passengers’ ride - including booking fee, duration of ride, and miles drives - that is remitted to the driver; elimination or regulation of excessive fees charged by rideshare companies; the establishment of a health and wellness fund for drivers and appropriate financing mechanisms.
For taxi drivers:
Cancel medallion mortgage payments during the period of the crisis. Much like with rent or residential mortgage payments, medallion mortgage holders should not be penalized for failure to pay under conditions the state has mandated that have limited their ability to work.
Suspend the congestion pricing surcharge. Given the collapse in taxi and rideshare demand, all negative incentives to patronizing the industry should be suspended during the crisis.
Allow drivers to keep the $2.80/ride in other surcharges during the period of the crisis. Given the collapse in taxi and rideshare demand, all surcharges should be eliminated in order to maximize the liquidity retained by drivers.
Purchase all outstanding debt on taxi medallions. For drivers who’ve already made at least $150,000 in payments, cancel the balance. For drivers who’ve made payments of less than that amount, cancel any balance above $150,000. Rather than simply eliminate all outstanding medallion debt above $150,000, as some have advocated, this approach ensures that anyone who’s already made at least $150,000 in medallion mortgage payments won’t have to pay further, and that no one who’s paid less will exceed a $150,000 cap.