Even if Congress and the President agree on a bill that extends unemployment benefits, millions of workers who are eligible for unemployment benefits aren’t receiving benefits due to administrative logjams at state labor departments administering unemployment insurance programs.
I want to untangle one particularly ugly thread of the ghastly tapestry of the failure of our social insurance programs during the pandemic: how worker misclassification has complicated the paying of unemployment benefits.
Contractors and gig workers who lost their job during the pandemic can apply for Pandemic Unemployment Assistance (PUA). Typically, independent contractors aren’t eligible for unemployment insurance (UI), but the CARES Act made these workers eligible for unemployment benefits through PUA. Gig economy companies like Uber pushed for separate benefits for their drivers who are classified as contractors rather than employees.
Tax reform legislation in 2017 encouraged workers to self-classify as contractors, so when it came down to applying for unemployment many self-defined contractors went the PUA route rather than applying for traditional unemployment insurance.
But, a state labor department may look at a self-defined contractor and decide the individual is an employee, which means that they should apply for traditional unemployment insurance instead. In practice this has meant workers have applied for PUA only to be told they need to apply for UI. Some workers who apply for UI are told they need to apply for PUA.
From a legal and academic point of view, I would agree that most workers classified as contractors are probably employees. But if you are waiting on benefits to pay for food and shelter, who cares where the money comes from PUA or traditional unemployment so long as you get the money. Forcing state labor departments, often staffed by overworked and/or undertrained claims examiners, to decide on how to classify workers just adds more delay to an already backlogged unemployment insurance claims process.
PUA was pushed by firms like Uber to provide some benefits for their workers who the company classifies as contractors. Five years ago, a think tank aligned with the corporate wing of the Democratic Party held a symposium about how to provide some benefits for gig workers without making gig companies pay for full employee benefits. PUA would be the first mass effort to provide benefits to contractors.
Critics of this so-called “Third Way” approach were vindicated. But unfortunately the critics corporate Democrats being right means millions of people are suffering. Former National Labor Relations Board Member and AFL-CIO General Counsel Craig Becker pointed out in 2015, that the more classifications you have for workers the more litigation and uncertainty you have about legal obligations. That uncertainty is likely playing out within state labor departments weighing whether workers are eligible for PUA or UI.
That uncertainty leads to delay which means unemployed workers go without unemployment benefits – and families go without food and shelter in the winter during a pandemic.