Mark Warner’s Curtain: Portable Benefits, the Gig Economy, and a Grander Opt-Out

Workers’ compensation observers have in recent years become accustomed to a narrow version of legal “opt out.” In 2013, Oklahoma passed a law, ultimately found unconstitutional under state law in 2016, authorizing (even encouraging) employers to opt-out of that state’s workers’ compensation law. I want to suggest that a broader version of “opt out” has been playing out in the form of the “Gig economy.” It is often contended that literally everything about the Gig economy is so different from the “traditional” economy that different workplace legal rules must be applied. Gig economy employers, it is claimed, are simply unable to comply with workers’ compensation laws, employment discrimination laws, or labor relations laws. It is never quite clear why this is so.

Much of the alleged legal struggle of applying law to the Gig economy centers on the threshold concept of “employee”: whether an individual working for a Gig employer is, or is not, an employee within the meaning of a particular employment statute. If not, the individual is not covered by the law, and the employer need not comply with it. This is hardly a new question; the test for employee status is as old as the onset of comprehensive employment statutes first passed in the twentieth century, statutes employers have long resisted. My law students apply this test in virtually every exam I give. It is unsurprising that contemporary companies utilizing labor—including Gig employers—claim not to understand the well-known test as part of their broader argument of needing to opt-out from labor statutes and the costs imposed on them (while failing to acknowledge the benefits conferred by the statutes on the broader society).

The Gig economy, opt-out project (“we are not employers”)—unlike the much narrower workers’ compensation opt-out gambit in Oklahoma (“we are not ‘regular’ workers’ compensation employers”)—has been almost exclusively “unilateral.” By unilateral, I mean it has been actuated primarily by employers. States’ regulatory structures have either opposed radical deregulatory efforts or, at a minimum, have not wished to encourage them. One of the disorienting questions surrounding the Oklahoma debacle, however, was why that state would simultaneously wish to have, and not to have, a workers’ compensation statute. The politics of the situation are perhaps not so complicated. Imagine trying to explain to the general public that a hundred-year old benefits system had been jettisoned simply because businesses (like all of us) wanted to save money. The question surfacing immediately is how far such a rationale can go. What are its limits? Much easier, and less provocative, to provide an elastic “legal” vehicle allowing sophisticated employers to incrementally and virtually imperceptibly escape from a century-old legal guarantee.

I recently read in WorkCompCentral (behind a paywall) that a movement for “portable” benefits for Gig workers is emerging. I think this is a terrible concept, for it buys into the idea of what I call a “bi-lateral” opt-out. By “bi-lateral,” I mean that, like the situation in Oklahoma, governments “partner” with business to concede the rule of law and erect “government-lite.” At the state level, a statutory-lite benefits regime is probably preempted by ERISA, which strictly forbids state regulation of any employee benefit plans, except those maintained solely for the purpose of complying with state workers’ compensation, unemployment compensation, or disability laws (not, by the way, “lite” versions of those laws).  At the federal level, a “Gig” structure (which Senator Mark Warner of Virginia has apparently championed), may effectively frustrate state attempts to compel employers to simply obey state law (much of this project would represent federal intrusion into historically state law). Whether of federal or state origin, the touchstone of the bona fides of “portable benefits” will be the extent to which the benefits are commensurate with traditional benefits. If they are not, any such opt-out scheme is, in my view, deeply pernicious and inimical to the rule of law. Better to compel employers to be the employers they already likely are under well-established traditional rules and not assist them in escaping their responsibilities under the law (and as part of the social contract). In short, pay attention to the man behind the curtain offering “portable benefits.”    

Michael C. Duff