To explore how Governors and state leaders may better understand and support the on-demand workforce, in 2018 the National Governors Association Center for Best Practices and the Institute for Work & the Economy, with support from the Annie E. Casey Foundation and Walmart, accepted a bipartisan cohort of states into the State Collaborative Consortium to Understand and Support the On-Demand Workforce (the Consortium): Alabama, Colorado, Connecticut, Hawaii, Illinois, Maryland, New Jersey, Pennsylvania and Virginia.

In the context of emerging technologies, increasing automation, and rapid globalization, national and state policymakers often focus on skills, education and training when considering how to best prepare for the ‘future of work.’ It is, however, equally important to understand how policy, legal frameworks and corporate structures can affect or incentivize specific work arrangements and how those work arrangements impact workers – particularly in light of the increasing shift toward on-demand work. By focusing on these issues as part of their broader economic and workforce development strategies, Governors can enhance their state’s economic competitiveness and increase access to economic opportunity and financial stability for all workers in their state, including those engaged in on-demand work.

On-Demand Worker

Any worker who does not receive a W-2 tax form for some or all of their compensated work, such as entrepreneurs and the self-employed, as well as workers whose income is reported on a W-2 form but whose schedules and places of work are unpredictable and episodic.

The Current Legal Protections and Opportunities to Support American Workers framework presented below describes existing legal protections and opportunities for states to shape policy to benefit all workers, including on-demand workers. The framework is based on the Consortium’s work over the past two years, including the development of an ontology of characteristics and classifications of the on-demand workforce as well as recommendations for understanding and supporting the on-demand workforce, and is organized around four key categories of worker-employer relationships, each with their own legal protections:

Traditional Employee – Full-time, salaried workers who receive a paycheck and whose income is reported on a W-2 form.

Shift/Temporary/Seasonal Employee – Workers who receive a paycheck and whose income is reported on a W-2 form but whose scheduling, terms and conditions of short-term or temporary employment, are episodic and determined by the entity that pays them.

Dependent Non-Employee – Workers who whose income is not reported on a W-2 form and whose scheduling, terms and conditions of short-term or temporary employment, are episodic and determined by the entity that pays them.

Incorporated Entrepreneur – Workers who have established a legally incorporated businesses and who have a primary goal of growing the business into an ongoing enterprise.

Key
 

Workers in this category benefit from this type of protection or support under the law. Ellipses indicate additional information is available; click the box to view.

 

Some workers in this category benefit from this type of protection or support under the law. Ellipses indicate additional information is available; click the box to view.

Workers in this category do not benefit from this type of protection or support under the law.

Protections To On-Demand Workers

Most workplace benefits are tied to formal and (often) full-time employment, leaving many on-demand workers without the types of protection that workers with formal employment agreements enjoy. Workers in formal employer-employee relationships are guaranteed certain protections, stability and working conditions under federal regulations, including the Civil Rights Act of 1964, the Fair Labor Standards Act of 1938, the Age Discrimination in Employment Act of 1967 and the Occupational Safety and Health Act of 1970. However, those protections do not extend to those who are not classified as employees. In some cases, they do not cover part-time or temporary employees, either. This absence of protections and benefits may leave independent, part time and temporary workers in precarious financial, safety and legal circumstances. States can explore how they can provide on-demand workers with opportunities to achieve stability and security and create a more level playing field so that employers can benefit from the flexibility of on-demand work.

Legal Protection or Institutionalized SupportTraditionalShift/Temporary/Seasonal EmployeeDependent Non-EmployeeIncorporated EntrepreneurOpportunity to Expand Protection or Support (click to view)
Hourly minimum wage protections




Expand existing minimum wage requirements or equivalent to more workers.
Consistent and predictable work schedules




Require that workers be given adequate notice of their schedule.
Workers compensation




Create a workers' compensation equivalent for on-demand workers.
Unemployment Insurance




Expand access to unemployment insurance to on-demand workers.
Employer sponsored healthcare, retirement and paid leave




Expand access to benefits to on-demand workers.
Recourse for legal challenges




Establish an entity to which on-demand workers can report questionable activity and receive legal counsel.

Legal And Administrative Clarity For On-Demand Workers

Persistent lack of clear rules, regulations and oversight for the on-demand economy makes enforcement of and compliance with existing laws more difficult. Certain actors may benefit from this lack of clarity, to the detriment of on-demand workers. As result, states may look to fairly and clearly enforce existing laws as well as provide new guidance to make clear the definition of “employee” for purposes of determining whether workers are entitled to the benefits and protections of formal employees.

Legal Protection or Institutionalized SupportTraditionalShift/Temporary/Seasonal EmployeeDependent Non-EmployeeIncorporated EntrepreneurOpportunity to Expand Protection or Support (click to view)
Consistent enforcement of worker classification




Audit state processes for enforcing worker classification and develop clear guidelines for determining classification.
Clear expectations and documentation of tax obligations




Provide on-demand workers with official documentation that clarifies their tax obligations.
Fair and unbiased hiring and work scheduling




Require greater transparency and independent evaluations of worker information and employment algorithms.

Mobility And Development Of On-Demand Workers

The growth of the on-demand economy poses new challenges for traditional education and training systems. Over the past several decades, workers have faced an increasing economic burden for training and education that could exacerbate existing disparities among populations and geographies. Many barriers that all workers face in achieving career mobility and advancement are especially burdensome for on-demand workers. Addressing these barriers for all workers can support a more dynamic workforce where workers have the ability to advance and move into and out of the type of work that they prefer.

Legal Protection or Institutionalized SupportTraditionalShift/Temporary/Seasonal EmployeeDependent Non-EmployeeIncorporated EntrepreneurOpportunity to Expand Protection or Support (click to view)
Affordable opportunities for reskilling and upskilling




Support and incentivize participation in lifelong learning.
Regulatory system that promotes job mobility




Reduce barriers to work such as occupational licenses and noncompete agreements.
Opportunities to enhance entrepreneurial skills




Support programs that provide entrepreneurial opportunities and skill development.

Related Resources


Contact

Please direct inquiries related to this resource to Madelyn Rahn, Policy Analyst, Workforce Development & Economic Policy Program.

The US Equal Employment Opportunity Commission enforces federal laws that make it illegal for most employers to discriminate against employees based on race, color, religion, sex, national origin, age, disability or genetic information.

The Affordable Care Act requires that employers provide health insurance for some employees, including some who work on a part-time or shift basis. Some employers also offer other benefits like retirement and paid leave to employees.

The Affordable Care Act requires that most employers provide health insurance for full-time employees.

Employees who meet their state’s work and wage requirements are eligible to receive unemployment insurance if their employment is terminated through no fault of their own.

Employees who meet their state’s work and wage requirements are eligible to receive unemployment insurance if their employment is terminated through no fault of their own.

Employees are protected by the Occupational Safety and Health Administration workplace safety requirements and can file to receive workers compensation benefits through their state office in case of a job related illness or injury.

Full-time employees generally work consistent schedules and receive consistent compensation. Non-exempt employees are guaranteed over-time pay under the Fair Labor Standards Act.

The Fair Labor Standards Act requires that all employees are paid at least the federal minimum wage.

All employees receive a W-2 form from the IRS that specifies their tax obligations.

All employees receive a W-2 form from the IRS that specifies their tax obligations.

Incorporated entrepreneurs choose to pursue legal classification as a limited liability company (LLC).

Workers that are classified as employees benefit from a variety of protections and supports under the Fair Labor Standards Act, Occupational Safety and Health Act and other federal statute.

Workers that are classified as employees benefit from a variety of protections and supports under the Fair Labor Standards Act, Occupational Safety and Health Act and other federal statute.