The gig economy in the United States has solved many problems for companies and presented several opportunities for workers. But it also presents several regulatory and HR compliance issues, which are exacerbated by competing legislation around the country.
Some states are increasing benefits and protections for online and other contract workers and making it harder to classify them as independent contractors, while others appear to be going in the other direction.
California passed a gig work law—often referred to as AB 5 because it was Assembly Bill 5 as a piece of legislation—that makes it harder to classify workers as independent contractors. The new law, which goes into effect in 2020, would move some gig workers to employees, which entitles them to benefits like sick leave, unemployment benefits, overtime pay, and more.
And in New York, a state senator is advocating new legislation that would extend protections to gig workers. Worker advocacy groups are pushing for even more protections and benefits for New York workers who have been labeled independent contractors until now.
On the other hand, the Texas Workforce Commission proposed a new rule earlier this year that would strip protections from workers who are dispatched by digital platforms, such as food delivery, home repair, and other services. The change would save employers from paying unemployment insurance.
The contradictions of these state rules and regulations only scratch the surface of the types of HR challenges companies must navigate when it comes to the gig economy. Regulatory compliance is essential because failure to comply with regulations or misclassifying workers can result in hefty penalties.
It’s an issue XPO Last Mile Inc. intimately understands. The organization agreed to pay $16.5 million earlier this year to settle a misclassification class action lawsuit from 2016. The lawsuit involved 847 delivery drivers who said the company misclassified them as independent contractors, which left them without minimum and overtime wages and forced them to pay out of pocket for business expenses.
Tackling the Challenges of Hiring Online Talent
Not only do companies want to avoid hefty fines, but they also don’t want the negative publicity associated with this kind of problem. Are you sure your business is in compliance with its online talent? Use this HR compliance checklist to determine whether your company is handling everything correctly:
1. Use a vetting service to help determine the status of workers. Organizations must remain compliant with the ever-changing and increasingly complex federal and state employment regulations. Ensure you have a sound vetting service in place to ensure your independent contractors are correctly classified. Online services help companies address rules and requirements set by law, including overtime, independent contracting, minimum wage, and more.
You can also partner with a payrolling firm that can do the compliance work for you. Payroll companies can take on the burden of employee or independent contractor classification, and some take on the liability in the event of misclassification.
If your company is using online staffing platforms when hiring full-time workers, you need to ensure they meet compliance standards. Companies such as Fulcrum, which works with my company to ensure W-2 compliance, vet online staffing platforms and integrate them into one place for enterprise clients to use.
2. Make sure candidates are qualified and vetted. With unemployment low, online staffing platforms may struggle to find qualified applicants. It’s important to make sure your company standards are being met and workers embody your company’s core values when using these services to hire workers.
Find out the procedures the platform uses to vet candidates, and ask it to show you its analysis for candidates you are considering. It should have documented analysis showing the level of misclassification risk each candidate poses.
The online staffing platform must take responsibility, but companies should also do their own vetting. Companies can do this by obtaining the regulations for the jurisdictions they are in and then assessing the risk associated with each independent contractor. They must keep detailed files to prove their position in case of an audit.
The Society for Human Resource Management and Koch Industries recently launched an initiative to encourage companies to hire individuals with criminal records. If your online staffing platform is participating in these types of initiatives, ensure it’s handled judiciously, with stringent guidelines, to ensure only the most qualified individuals are hired.
3. Make sure online staffing hires understand company policies, values, and processes. Treat your online and gig workers just like you would any other employee. You must have a sound onboarding process to ensure you’re following HR compliance best practices and fully training workers on all tasks and company procedures.
Your onboarding process should ensure new team members understand the company’s culture and can access the tools they need to be successful in their roles. Follow-ups with workers should last at least a year so new team members feel like they’re part of the organization, which will ensure they stick around.
Hiring online staff can be challenging but also rewarding, as these workers can contribute a lot to your company. Use these best practices to avoid future HR challenges, maintain compliance, and ensure your workforce is moving in the right direction.
|Peter Limone is the Chief Financial Officer of Innovative Employee Solutions (IES), a nationwide provider in contingent workforce solutions and outsourced payrolling management for businesses looking to streamline their bottom line. Founded in 1974 in San Diego, IES specializes in payrolling and contractor management services for today’s contingent workforce.|