The WFCA will create all sorts of problems with unemployment insurance claims handling and more litigation over waiver enforceability. While it may not impact workers’ compensation directly, it will likely indirectly suppress workers’ compensation claims as employees may not believe they are covered even if they are

The so-called “Worker Flexibility and Choice Act” (WFCA) introduced by Rep. Henry Cuellar (D-Texas) and Rep. Elise Stefanik (R-N.Y.) would create a new class of worker with fewer rights than a typical employee and would allow more employers to get in on the employee misclassification game.

The WFCA would allow workers to “agree” to what amounts to an independent contractor status where employers wouldn’t play employment taxes like unemployment, social security or Medicare, but workers would still be covered by anti-discrimination laws.

Importantly the WFCA would also pre-empt state laws. This legislation is a bad idea for a lot of reasons.

Unemployment insurance

During the mass layoffs in the early part of the pandemic, Congress authorized separate unemployment insurance for gig employees, PUA, who weren’t otherwise eligible for unemployment insurance.  But when states had to decide whether a worker was eligible for regular unemployment or PUA it just lead to more delays for already overwhelmed state agencies trying to determine eligibility for unemployment benefits. If something like WFCA becomes law before the next recession, expect even more delays for unemployment.

Maybe the pre-emption under WFCA would make those decisions easier as it would be clear that those workers wouldn’t be eligible for unemployment benefits.  But if the WFCA waiver is interpreted similar to arbitration waivers (see below), state agencies may argue correctly argue that they aren’t bound by such waivers.

Litigation over enforceability of waiver of employment law and tax

Proponents of the WFCA will argue that workers will have to voluntarily agree to contractor status. This “agreement” will probably be the similar to how employees “agree” to arbitrate employment disputes through checking a box on a form during an “onboarding” process. Unfortunately, arbitration “agreements” are routinely upheld by courts. I fear the same will happen if something like WFCA becomes law.

Workers’ compensation?

Workers’ compensation laws are state laws, so the WFCA shouldn’t directly impact workers compensation. But the same impulse behind WFCA is at work in the states. Jeff Blackwell recently wrote about Alabama passing a qualified marketplace contractor law that would exempt gig workers from workers’ compensation laws.

But even if federal laws that allow employers to misclassify workers don’t directly impact workers’ compensation, my belief is that they will discourage employees from bringing claims anyway. They will indirectly suppress workers’ compensation claims. Workers who think they are contractors tend not to bring workers’ compensation claims.

What about employment law claims?

Yes, the WFCA does allow for discrimination claims. But the fact that employers are willing to allow those claims for certain kinds of contractors underscores how anti-discrimination law is skewed towards employers.

Big picture

Supporters of the WFCA,  seems to think that the problem with employee misclassification isn’t that workers are being misclassified as contractors, it’s that not enough employers can misclassify their workers as contractors. The Guardian recently ran a series about how former Obama administration officials used their influence to lobby for Uber in the mid-2010s. These Democratic operatives helped normalize the gig economy by giving it a strong bi-partisan sheen. As we move into the 2020s, the employee misclassification normalized and de-stigmatized by the gig economy is allowing more employers to legitimately get into the misclassification game.