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New Pa. House bill seeks to right the wrongs of worker misclassification

A sign offering directions to an Uber and Lyft ride pickup location at Logan International Airport, in Boston.
Steven Senne
An estimated 259,000 workers in Pennsylvania were labeled as independent contractors but performed the work of employees, according to a 2021 report issued by a Pennsylvania state task force on misclassification.

After Rosilynn Gilliard was laid off from her nonprofit job, she sought out work as a delivery driver for a national retailer to help pay her bills. She assumed the job, which sends out delivery assignments through an app, would offer flexibility. But the app controlled what delivery opportunities were offered to her and the order in which she had to take them.

In theory, there was flexibility — Gilliard could reject jobs; however, doing so incurred a penalty that prevented her from being offered higher-paying routes.

For Gilliard and many other app-based gig workers, the flexibility was an illusion.

“They have not taken into account any of my ideas, opinions,” Gilliard said. “Nothing's ever been asked of me … and your life is really driven by the application.”

Under Pennsylvania labor law, workers who perform services for an employer and are subject to their control and oversight are employees. By contrast, independent contractors are self-employed and do not perform services that can be controlled by an employer, such as when and how that work will be done, according to the Internal Revenue Service.

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While many workers like Gilliard are offered the veneer of independence, some experts and advocates say they are instead employees misclassified as independent contractors.

“They're not like the local home builder who helps repair your porch and then helps fix up the third floor for one of your neighbors,” said Stephen Herzenberg, executive director of Keystone Research Center, a Pennsylvania-focused economic policy think tank. “They're really an employee.”

An estimated 259,000 workers in Pennsylvania were labeled as independent contractors but performed the work of employees, according to a 2021 report issued by a Pennsylvania state task force on misclassification. And despite a common misconception, misclassified workers aren’t all drivers for Uber or DoorDash.

“What people don’t realize is how widespread it is,” said Helen Gerhardt, a benefits advocate at Mon Valley Unemployed Committee, a nonprofit that helps people with unemployment claims. It impacts customer service workers, truck drivers, janitors, retail workers, landscapers and security guards, according to a 2023 study from the Economic Policy Institute.

New bill to protect workers

A new bill introduced in the Pennsylvania state house last week hopes to address many of the concerns for workers who have been misclassified as independent contractors and bolster enforcement of existing labor laws.

Workers who are misclassified are often not paid minimum wage and overtime pay. They lose eligibility for unemployment compensation, health insurance and worker's compensation and other protections of the National Labor Relations Act.

Since the pandemic there’s been a real push for employers to use a 1099 classification, which is the Internal Revenue Service designation for independent contractors according to Gerhardt. She said the practice has become pervasive in the healthcare field in Western Pennsylvania.

“So many facilities are now relying on staffing agencies,” Gerhardt said. “These health care workers don't receive support, training and oversight and are often working massive numbers of overtime hours. So that leads to much worse patient care and overall dysfunction of health care systems.”

Last year in Pittsburgh, this included in-home healthcare companies such as Reliable Home Health and residential healthcare providers like Sunrise Residential Care Services, which were charged with misclassifying workers and failing to pay overtime.

Misclassified workers lose out on thousands of dollars in income each year — from an estimated $5,500 for manicurists to over $14,500 for truck drivers, according to the 2023 EPI study.

“It really costs taxpayers as well,” Gerhardt said. “Those employers are not paying into our budget. And law abiding businesses are forced to compete on an even playing field against employers that are not doing the right thing.”

The new bill would define an independent contractor based on whether an employer exerts control over a worker’s tasks or if the business is independently established and controlled by the individual.

If approved, the measure would provide the Pennsylvania Department of Labor and Industry, which investigates these claims, with additional investigators and support staff. Right now, they only have 27 investigators to look into labor law violations. The bill would also give them the authority to acquire records of employers as part of investigations and issue administrative stop-work orders against employers that have been found to deliberately employ misclassified workers.

Some places, like Philadelphia, have their own labor law enforcement office. Allegheny County is working on setting one up.

“You’ve got a recipe for getting back to a situation where the norm is that employers comply with the law,” Herzenberg said. “The other part of this is stronger labor law enforcement — like a higher minimum wage or strong labor standards and prohibitions on child labor and strong health and safety laws. By and large, these kinds of laws and effective enforcement are very good for the economy.”