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The number of workers who fall outside of workers compensation is likely to rise in the future, potentially impacting workers compensation, according to a report released Thursday by the National Council on Compensation Insurance.
The Boca Raton, Florida-based NCCI released its quarterly economics briefing, which revealed that more people are relying on nontraditional work as a secondary source of income, and that if this sector begins to pull people from traditional work, it could have an impact on workers compensation premium due from reduced payrolls.
While the proportion of workers in self-employment and nontraditional work arrangements has not increased with respect to primary employment, today about 30% of adults in the U.S. are engaged in some type of informal or alternative work, according to the report, and lawmakers continue to take notice and investigate ways to regulate workers and companies in this growing sector.
The biggest growth sector in nontraditional work is electronically mediated work, in which a worker is connected to a client or job via an app, such as Uber or Lyft, Upwork or Amazon Mechanical Turk. In the past five years, the number of Americans engaged in electronically mediated work has tripled, but accounts for less than 1% of total income, NCCI reported.
While the gig economy has so far not had an impact on the number of people engaged in traditional work assignment, and therefore not impacting workers compensation, if nontraditional work continues to grow and shifts workers out of traditional jobs, “this will decrease payroll in the workers compensation system” and impact premium, according to the report.
As of this year, NCCI began following 45 bills addressing independent contractor issues and the misclassification of employees. In California, the state’s Assembly passed a bill adopting a three-part test for determining worker status, and Arkansas passed a law codifying a 20-part test to determine whether workers were employees, which is applicable to the state’s workers compensation laws, NCCI reported.
While one factor attracting workers to gig jobs is ease of entry, NCCI said there is a “risk of workers compensation leakage” if and when the next recession hits and its aftermath.
The rise of the on-demand or “gig” economy creates new safety challenges for workers in the growing employment sector and raises questions about how to ensure they are covered if they are injured while working.