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New classification aims at ‘gig’ economy

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in Compensation and Benefits,Human Resources

Traditionally, there are four possible ways to classify people who perform work. Volunteers can donate their time at nonprofits. Interns can work for no pay or for a small stipend to gain experience. But two classifications—independent contractors and employees—cover most work.

Except, some say, in the emerging sharing or “gig” economy.

Now two economists at the Brookings Institution think tank in Washington, D.C., have proposed a new category: independent worker.

It’s designed to cover people such as Uber drivers and TaskRabbit repair persons who take short-term contractor assignments, usually brokered through a smartphone app. The customer pays the app company, the worker pockets part of the fee and everyone parts company pleased with a simple transaction neatly executed.

But the gig economy doesn’t always work so smoothly. Many of those who toil in it gripe that independent contractor status may provide compensation and a flexible schedule, but it doesn’t provide everything real employment does. Several class-action lawsuits claim Uber drivers and others should be classified as employees rather than independent contractors.

Enter Brookings economists Seth Harris and Alan Kreuger. Their independent worker classification would grant the freedom and flexibility of contracting, plus the benefits and protections employees receive.

What kind? Harris and Krueger propose the right to unionize, along with civil rights protections. Employers would handle income tax withholding and contribute an employer’s share to payroll taxes.

The upside for employers? The Brookings economists argue that independent workers shouldn’t be due a minimum wage or overtime pay.

Never going to happen, right? Probably not. Don’t look for an amendment to the Fair Labor Standards Act incorporating an independent worker classification. But it could gain traction in the executive branch. After all, Kreuger is the former chair of the White House Council of Economic Advisers.

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