While freelance work has grown more common with the rise of the gig economy, Democrats in Harrisburg say businesses are taking advantage of that trend by wrongly classifying an increasing number of workers as independent contractors. They have pledged to crack down on such misrepresentations now that they are poised to take control of the state House, pending the results of three special elections Tuesday in Pittsburgh-area districts that lean heavily Democratic.
“This has been a long-simmering issue,” said Democratic state House Rep. Nick Pisciottano, who represents suburbs south and east of Pittsburgh. “I think that there's a broad consensus across the political spectrum that there needs to be a bill that addresses some of these issues … in the new gig economy … to make Pennsylvania competitive and fair to its workers.”
Pisciottano led a Democratic subcommittee hearing on worker misclassification outside Pittsburgh last week. It’s unclear where Republicans in the GOP-controlled Senate stand on the issue. A spokesperson for Republican state Senate majority leader Joe Pittman did not comment.
Democrats' interest in misclassification, however, reflects a major shift in the U.S. economy: Between 2016 and 2022, the share of Americans who identified as gig, contract, freelance, or temporary workers jumped from 27% to 36%, according to the consulting firm McKinsey and Company. Their jobs ranged from delivering food and driving for ride-hailing apps to writing and substitute teaching.
One in every four of these workers reported that they like the flexibility and autonomy of freelancing. Another quarter of them said they engage in gig work out of economic necessity.
Yet independent contractors generally do not receive employee benefits such as health care coverage and paid time off, and their employers do not contribute to the cost of taxes that fund Social Security and Medicare. Independent contractors do not pay unemployment compensation taxes, either.
Last year, a state task force charged that businesses misclassify workers as independent contractors to avoid the cost of providing benefits and to gain an unfair advantage over competitors. The panel estimated that 49,000 Pennsylvania employers misclassify a total of 259,000 workers annually, costing the state tens of millions of dollars in tax revenue.
The task force recommended stiffer penalties for misclassification, and it advised lawmakers to adopt a single test for determining who can legally be considered an independent contractor.
Critics worry that new guidelines could have adverse consequences for people who like the flexibility of gig work. For example, many truck drivers object to a California law that could require companies with whom they contract to reclassify them as employees, even though they own and operate their own vehicles.
“A fundamental redefining of what it means to be an independent contractor is a much, much bigger conversation with profound implications that really all stakeholders should [at least be] involved in,” said Alex Halper, the vice president of government affairs for the Pennsylvania Chamber of Business and Industry.
Last month, he wrote an op-ed in The Hill that warned policymakers to avoid adopting sweeping changes to the meaning of independent contract work as part of their campaign against worker misclassification.
“I think there's probably a middle ground there,” state Rep. Pisciottano said. “We don't want to make the economy super inflexible, especially given the worker shortages that we're facing in a number of sectors.”
“But,” he added, “we also can't throw up our hands and say there's nothing that we can do at all to protect these workers.”
