Amid a global pandemic and economic crisis, state lawmakers are rushing through legislation that could make it harder for West Virginians to file for unemployment if they lose work and pay for medical care if they get sick on the job.
West Virginians could also lose state-level protections that became especially important during the pandemic, like guarantees they would be paid on time, earn minimum wage, and receive overtime pay.
Senate Bill 272 adds a new section into state law called the West Virginia Employment Law Worker Classification Act, which aims to clarify the definition of an independent contractor.
At the same time, the bill, which is based on American Legislative Exchange Council model legislation, creates new opportunities for businesses to classify workers as independent contractors, which could greatly widen the number of people who would fall into that definition.
Lawyers who support the bill, including lawmakers, say it will lead to more certainty for both businesses and workers, especially as an increasing number of people work as independent contractors in the “gig” economy.
But two lawyers with expertise in employment law said Monday that the bill, introduced on behalf of Republican Gov. Jim Justice, creates an incentive for employers to classify workers as independent contractors, potentially denying them the protections they currently have under the law.
Employers could save money; workers could lose it
David McMahon, a lawyer and lobbyist for the nonprofit legal firm Mountain State Justice, predicted that tens of thousands of West Virginia workers would be reclassified as independent contractors should the bill become law.
McMahon noted the bill extends to several areas of state law, including unemployment, workers compensation, human rights law, and wage payment and collection — the last of which includes minimum wage and overtime protections.
He said employers would naturally want to save costs by reclassifying workers, and paying them as contractors rather than employees.
“Employers don’t like you drawing unemployment benefits because they have to contribute to the fund,” he said. “Employers don’t like paying into the workers compensation fund for people that work for them. If employers underpay you, they don’t like being sued for the money.”
Under current state law, employers don’t have to contribute to your unemployment if you are free from their control and direction while performing work for them, perform a service outside the scope of their normal course of business, and work in an independently established trade, occupation, profession or business. The bill would make it so independent contractors are defined as those who have signed contracts agreeing they understand various components of being a contractor, and meet three of the nine criteria outlined in the bill.
As part of those contracts, workers would agree they don’t have access to unemployment benefits, as well as workers compensation and employer contributions to Social Security and retirement benefits, among other provisions.
McMahon used the example of a janitor who cleans on his own schedule, using his own supplies, working as an independent contractor. Another janitor, classified as an employee, works under the direction of the employer.
If the employee got hurt on the job and didn’t get paid, he could use the state workers compensation program to recover those costs. If he lost work, he could file for unemployment.
Those protections do not exist for the independent contractor, McMahon said.
“And if they didn’t pay him for his last week, he’d have to hire an attorney to sue,” McMahon said.
Companies that use independent contractors could pay the contractors less, and undercut the services provided by companies that use full-time employees. This, in turn, could mean more people would end up working as independent contractors, and accepting less money for the same work, he said.
Certainty and clarity
Gov. Justice won’t say why he asked lawmakers to introduce the legislation. Jordan Damron, the governor’s spokesman, did not respond to that question Monday.
But the bill says there is currently uncertainty as to what types of employees count as independent contractors, pointing to the rise in “gig” work. More people are making money from those jobs, like using their own vehicles to bring people food or drive people to work.
The bill says the rise in those services “highlighted the uncertainty that currently exists with determining the correct classification of workers as independent contractors or employees. The proper classification of workers as employees or independent contractors is a complex legal issue that vexes workers and businesses as well as lawyers and the courts.”
“Clarity in a worker’s classification allows businesses to comply with applicable laws, provides workers with certainty as to their benefits and obligations, and minimizes unnecessary mistakes, litigation, risk, and legal exposure laws concerning” workers’ compensation, unemployment compensation, the Human Rights Act, and wage payment and collection, the bill states.
After consideration in one committee, Senate Bill 272 has already passed the Senate and is nearing passage in the House. It was up for second reading, the amendment stage, in the House of Delegates Monday, but that reading was postponed amid widespread flooding and has yet to be rescheduled.
“The bill will provide certainty where there is uncertainty now,” said Senate Judiciary Chairman Charles Trump, R-Morgan, speaking in support of the bill last week.
Danielle Waltz, a lobbyist for the U.S. Chamber of Commerce, has told lawmakers the Chamber of Commerce supports the bill. Waltz, a lawyer for the Charleston-based law firm, Jackson Kelly, said the Chamber supports a uniform definition of independent contractors, to provide clarity for both employers and workers.
She said, in a brief interview by phone, that she doesn’t think there is any way to know whether workers would be reclassified.
“The practical effects would be to provide less confusion/provide more clarity on the Rules on who are classified as employees or independent [contractors],” she said in a follow-up email.
Regardless of clarity, Walt Auvil, a Parkersburg employment lawyer, said the practical effect would be to do away with employment as a legal concept in West Virginia.
The effect, he said, would be a dramatic increase in people working as independent contractors, without unemployment coverage, workers compensation, and other protections.
“It’s not a theory,” he said of his prediction. “It’s just what has already happened.” He was referring to the time period before the Wage Payment and Collection Act — which is altered in the legislation — became law during the New Deal era.
The Wage Payment and Collection Act essentially said, according to Auvil, that “if you work for somebody, you have to be paid on a certain timely basis.
“You can’t be made to waive any of the rights to be paid your wages. You can’t be forced to purchase things from the employer like you, you know, miners used to have to buy their own picks and buy their own shovels….All this was passed just to protect workers from this kind of abuse, and it specifically said in the law, you can’t contract away these rights.’ Well, this would waive all that. You can contract away all those rights.”
According to the West Virginia Division of Labor, the Wage Payment and Collection Act includes the “rules for meeting payroll, the payment of hourly (and salaried) wages, commissioned wages, final wages, the accrual and payment of employee fringe benefits, the rules for authorized and unauthorized payroll deductions, employer responsibilities concerning employee notifications and recordkeeping requirements.”
But in order for the Wage Payment and Collection Act to apply, an employment relationship must exist between the employer and the worker. That means it doesn’t apply to independent contractors.
Auvil said the idea that employers are uncertain about who classifies as an employee or contractor is “nonsense.”
“That’s a complete red herring,” he said.
He said that if lawmakers want to talk about the shift to a gig economy, they should remember gig economy workers already lack protections.
That lack of protection has become especially noticeable during the pandemic, he said.
“They have no unemployment,” Auvil said. “They have nothing to fall back on. If there’s a pandemic, they have no workers compensation. They have no protections under the Wage Payment and Collection Act. They don’t get paid.”
Uber and Lyft drivers have been less in demand, and many do “gig” work in addition to other jobs.
Auvil agreed that there isn’t a way to determine how many workers may be reclassified.
“I don’t think there’s any way to have an absolute test of this because no one’s been dumb enough to pass it in the country,” he said.
Similar legislation has been pushed by the conservative policy group American Legislative Exchange Council; the group did not immediately respond to an email Tuesday seeking to know whether other states had passed similar bills.
Auvil added that someone would still have to pay for work-related medical bills incurred by independent contractors — and that may end up being taxpayers, he said.
“It’s a socialization of the cost and a privatization of the profit,” he said.
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