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Gig Economy Workers Now Eligible for Unemployment Compensation under the CARES Act

There’s an old saying that out of crisis comes opportunity – and the gig economy may be on the verge of living that adage. Thanks to the two trillion-dollar Coronavirus Aid, Relief, and Economic Security Act (CARES) Act signed into law last week, the entire industry may be forever altered because independent contractors will temporarily be able to recover unemployment benefits. The Pandemic Unemployment Assistance program expands coverage under the state-by-state unemployment compensation system to individuals “not eligible for regular compensation or extended benefits under state or federal law or pandemic emergency unemployment compensation,” which includes, but is not limited to, certain gig economy workers. Who is now eligible, and what will this mean for the gig economy?

Who Is Eligible?

To be eligible for the new classification of benefits, the individual contractor must “provide self-certification” that they are otherwise able to work and available for work within the meaning of applicable state law, except the individual is unemployed, partially unemployed, or unable or unavailable to work because:

  • they have been diagnosed with COVID–19 or are experiencing symptoms of COVID–19 and seeking a medical diagnosis;
  • a member of the individual’s household has been diagnosed with COVID–19;
  • they are providing care for a family member or a member of the individual’s household who has been diagnosed with COVID–19;
  • a child or other person in the household for which the individual has primary caregiving responsibility is unable to attend school or another facility that is closed as a direct result of the COVID–19 public health emergency and such school or facility care is required for the individual to work;
  • they are unable to reach the place of employment because of a quarantine imposed as a direct result of the COVID–19 public health emergency, or because the individual has been advised by a health care provider to self-quarantine due to concerns related to COVID–19;
  • they were scheduled to commence employment and do not have a job or are unable to reach the job as a direct result of the COVID–19 public health emergency;
  • they have become the breadwinner or major support for a household because the head of the household has died as a direct result of COVID–19;
  • they have had to quit their job as a direct result of COVID–19;
  • their place of employment is closed as a direct result of the COVID–19 public health emergency; or
  • they meet any additional criteria established by the government for unemployment assistance.

However, those able to telework or who are receiving paid sick leave or other paid benefits are not eligible to receive unemployment compensation, even if they meet the above definitions.

What Are The Further Details?

The expanded unemployment compensation program will last until December 31, 2020, and it will also add an additional $600 to every weekly unemployment benefit, effective until July 31, 2020.

What Does This Change Mean For Gig Businesses?

Yes, this change is temporary. And yes, there is a chance that this change will be relegated to the dustbin of history once normalcy returns to the country. But some are holding out hope that this change could be transformational in nature.

In the short term, many gig economy businesses – particularly those involved in the home delivery of food from restaurants and grocery stores – are looking to increase their workforces. These ranks are being augmented by laid off individuals and those seeking additional hours of work. But by expanding and increasing unemployment compensation benefits to cover a greater number of people, the government’s actions may well deter some individuals from pursuing gig economy work opportunities – especially those that might compromise personal health concerns. This may slow the growth of some gig economy companies and create an obstacle to meet current business demands.

On the other hand, providing greater economic security for gig economy workers may tend to attract more individuals into the industry. Knowing they now have a bit of a safety net under them may aid their decision-making. This will obviously be true if the expansion of the unemployment compensation program becomes permanent or somehow modified to fit into our normal working lives.

At the present time, gig economy companies should continue to look for ways to promote work opportunities and stress its positive aspects, including the flexibility it offers. Despite the “disincentives” inherent in expanded unemployment compensation and COVID-19 health concerns, as a practical matter, many individuals are experiencing “cabin fever” and are looking for ways to get back to work.

In the future, the CARES Act’s extension of unemployment compensation benefits may improve the prospects for passage of future federal legislation – or state-by-state legislation – that would provide gig economy workers with greater legal rights given their increasingly important role in the U.S. economy. Regardless, it is certain that state lawmakers will continue to press for greater legal rights for these workers regardless of whether a further expansion of legal protections occurs at the federal level. Gig economy businesses should continue to develop worker-friendly policies that provide for greater economic security for workers consistent with their business model and within the confines of the law. This may help preempt well-intended legislation aimed at helping workers, but which fundamentally alters business models.


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