Alabama considers employment benefits for gig, nontraditional workers

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by Alander Rocha, Alabama Reflector
August 28, 2024

Alabama lawmakers and industry officials are trying to figure out how nontraditional full-time workers can get employment benefits through their jobs.

The Alabama Portable Benefits Task Force Tuesday, August 27, 2024, discussed the potential for developing a portable benefits system for independent workers in the state.

Portable benefits are employment benefits that are not tied to a single employer but instead follow the worker across different jobs or gigs. The meeting centered on the absence of an existing framework across the United States. to provide benefits like health insurance, retirement savings, and paid leave to gig workers, who currently lack access to such services and protections.

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“It’s important work for us to review and see the landscape, and see if there’s a way our state can address this issue even incrementally, bit by bit,” said task force co-chair Sen. Arthur Orr, R-Decatur.

The rise of the gig economy has created a growing population of workers who do not have access to traditional employment benefits. In Alabama alone, an estimated 79,000 active app-based workers are engaged in the rideshare and delivery work and it’s “a growing kind of work,” said Kristin Sharp, CEO of the Flex Association, an organization representing app-based economy workers.

“There are also some number of millions — 23 to 30 million — app-based workers, and the app-based workers are very much prioritizing the flexibility that goes with their work and is interested in what would it look like to sort of get some kind of equivalent benefits in a nontraditional way,” Sharp said.

The task force was established in the 2024 legislative session. Orr said developing a model for the future is an important issue to address for independent contractors, freelancers, and gig economy workers who do not have access to traditional work benefits, but also for employers, though he did not say why.

Co-chair Rep. Neil Rafferty, D-Birmingham, said that creating a structure that provides benefits to independent contractors and gig workers is especially important for families who depend on this type of work, though there is not a successful example of a framework from other states that have worked.

“I hope that Alabama can at least be putting our foot in the door to be on the forefront of this innovation,” Rafferty said.

Unlike traditional benefits tied to full-time employment, portable benefits are either self-funded, employer-funded, or supported by contributions from multiple organizations. The task force briefly discussed an employer-funded model, and Orr asked which benefit to start with or if it’s “all the above,” but settled on keeping options open.

“I think it’s all of the above. I really think we ought to have a very wide scope here for now,” said Mark Smith, director of state government affairs for Shipt, an app-based delivery service.

States like Utah and Pennsylvania have begun exploring portable benefits through legislative action. Utah passed SB 233 in 2023, allowing both public and private entities to offer portable benefits plans while protecting employers from liability concerns related to employee classification.

Pennsylvania’s approach includes a pilot program where DoorDash drivers can access benefits like those provided to formal employees. These state-level initiatives could offer possible models for Alabama to consider, though Orr showed concern about legal challenges from the federal government.

Legal issues surrounding portable benefits primarily revolve around federal versus state jurisdiction in defining employment and benefits. Sharp said the U.S. Department of Labor’s multi-factor test for determining employee status could complicate state efforts to implement portable benefits.

The task force plans to meet in late October or early November. Orr also said there is no deadline for developing recommendations for the Legislature.

“It’s very important for us to take this on — and again, we’ve got time, the luxury of time — do it and do it right and keep our eyes and ears open and see what’s going on across the country,” Orr said.

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