By Joseph Wells, Head Workers’ Compensation, Everest1
In today’s technological driven demand for on-line fast, “On-Demand” products and services, an emerging phenomenon is evolving in the labor force used to deliver them. On demand labor is best described through the Uber & Lyft business models. Each company delivers services through a network of individuals that have applied on-line and meet selected pre-qualifying criteria. These companies then provide each individual with the tools and instructions to complete their assignments through a software platform and downloadable application.
The first part of this two part article will outline the new challenges faced by employers, employees and the Workers’ Compensation Industry.
There is no formal place of business or defined work hours. Work assignments are made when the individual reports that they are available for hire. With the Uber or Lyft business model they collect the fares and pay the individual according to an agreed structure. Customers wishing to use their services download one of the company’s application and request transportation. The nearest driver receives the request and handles the pickup. Transportation is just one of the industries taking advantage of this new technology and connectedness. Others include:
- Honor Care Pros – arranges both skilled and unskilled professionals to provide services to seniors
- TaskRabbit – matches freelance labor with local demand, allowing consumers to find immediate help with everyday tasks, including cleaning, moving, delivery and handyman work
- Clickworker – connects freelance technology workers with customers to complete software development projects
- Iggbo – partners with phlebotomists looking to earn more money and greater flexibility
The On-Demand workforce model seems to have evolved from earlier temporary worker models such as staffing agencies and professional employment organizations (PEO). The key difference being that companies adopting this model disclaim having employees, insisting they are “independent contractors.” While ongoing court actions in California and other states seek to challenge this position, in its present state, the On-Demand economy is impacting the workers’ compensation market by significantly decreasing the number of employees for companies adopting the platform concept and effectively deferring to the independent contractor much of the responsibilities for employee safety and accident prevention.
Today’s economic realities are making the On-Demand model attractive to both the workforce and business. Intuit’s 2020 report (PDF) and their more recent news article, “How the On-Demand Economy is Reshaping the 40-hour Work Week” cite the following:
- In today’s economy about 25-30 percent of the U.S. workforce is contingent labor and this is expected to increase to 40% by 2020.
- About 80 percent of large corporations plan to substantially increase their use of a flexible workforce.
- 63% of On-demand workers indicate that their primary reason for this type of work is to supplement income.
- Traditional full-time full benefit jobs will be harder to find
- Small businesses will develop their own collaborative networks of contingent workers
- Attracted by the autonomy, flexibility and ability to control their own careers the number of freelance workers is expected to grow 19% over the next four years, representing 43% of the workforce.
Business adopting the On-Demand model claim to be able to be more competitive as a result of lower overhead costs related to an employee workforce. They do not have to comply with government regulations that require them to provide health care, paid leave benefits and workers’ compensation insurance. These businesses can much more easily select, approve, change and remove the freelance workers they use to deliver these services than the traditional employer-employee model.
As this model becomes increasingly attractive to both businesses and workers, it is creating a number of employee safety and injury prevention questions. With the blurring of the employer – employee relationship, the responsibility for providing a safe workplace may no longer be a company’s responsibility. The responsibility for providing a safe workplace is passed down to the freelance worker. As such individuals are bearing more risk for their personal welfare with fewer resources to keep them safe. Since businesses will be able to select and replace individuals based solely on production and service quality, their workforce might be encouraged to take more risk with their own safety with questionable regulatory oversight.
Part two will provide more detail on how On-Demand models are impacting Workers’ Compensation.
1“The views and opinions expressed in this article are those of the individual author and do not reflect the views of Everest National Insurance Company and/or its affiliates.”
About Joseph Wells
Joseph Wells joined Everest Insurance as Head of the Workers’ Compensation Division in November of 2015. In his 30 plus years in the Insurance Industry he has held a variety of roles in workers’ compensation with increasing leadership responsibilities, primarily in underwriting and product management. Joseph’s depth of experience in both the California and broader U.S. workers’ compensation marketplace supports Everest’s selective expansion initiatives for this product line across the United States.
Everest Re Group, Ltd. is a Bermuda holding company that operates through the following subsidiaries: Everest Reinsurance Company provides reinsurance to property and casualty insurers in both the U.S. and international markets. Everest Reinsurance (Bermuda), Ltd., including through its branch in the United Kingdom, provides reinsurance and insurance to worldwide property and casualty markets and reinsurance to life insurers. Everest Reinsurance Company (Ireland), Limited provides reinsurance to non-life insurers in Europe. Mt. Logan Re, a segregated cell company, capitalized by the Company and third party investors, is a specialty reinsurer of catastrophe risks. Everest National Insurance Company and Everest Security Insurance Company provide property and casualty insurance to policyholders in the U.S. Everest Indemnity Insurance Company offers excess and surplus lines insurance in the U.S. Everest Insurance Company of Canada provides property and casualty insurance to policyholders in Canada.