New Rule Deprives App-Based Workers of Unemployment Benefits

Workers’ rights advocates in Texas expressed outrage in late March over a new rule crafted by the Texas Workforce Commission. The rule makes it easier for companies that provide app-based services to treat their workers as independent contractors – meaning they will not qualify for unemployment insurance benefits.

This could leave millions of workers, whose livelihood depends on digital apps, without a safety net.

Misclassification of workers, one of the most common wage and hour law violations, leaves out many workers who should qualify for benefits. And this new rule makes misclassifying even easier for employers. 

How the New Rule Affects the Status of App-Based Workers

Generally, employees who lose their job through no fault of their own can collect unemployment compensation – funds that come from unemployment insurance payments. Employers pay for unemployment insurance based on the number of employees in their organization.

The Commission’s new rule adds new conditions under which a company can treat someone as “not in employment.” Under the new provisions, a company can deny unemployment benefits to workers who are:

  • Paid on a per-job basis
  • Allowed to have another job
  • In control of where and when they work
  • Expected to provide their own equipment or tools

For workers who provide services through Uber, Lyft, TaskRabbit and other apps, this rule makes it even easier for those companies to say they are not employees. It also could lead brick-and-mortar businesses to enter the app-based market as a way to dodge taxes and cut costs.

As similar initiatives crop up across the country and the “gig-based” economy grows, these issues are unlikely to go away. Workers should keep an eye on developing state laws and consult with employment advocates to ensure their rights are protected.