Letter to the Hon. Eugene Scalia, Secretary of Labor - Cortez Masto Urges Administration to Improve Gig Workers' Access to Unemployment Benefits

Letter

Dear Secretary Scalia:
When Congress enacted the CARES Act, it created a new Pandemic Unemployment Assistance
(PUA) program for workers who otherwise fell through the cracks of our existing safety nets.
Specifically, PUA was intended to expand unemployment coverage to workers who otherwise
cannot access regular state unemployment insurance (UI).
We are deeply concerned with the reports of confusion and difficulty that misclassified workers,
many of whom already are eligible under law and should be receiving regular state UI as
employees, are being processed presumptively for the federal PUA program, with only bare
consideration--if any at all--for regular unemployment.
Across the country, in states like Nevada, Ohio, and many other states, millions of people
employed in the so-called "gig economy" have been out of work. Because their employers have
improperly classified them as independent contractors rather than employees, app-based workers
have long faced challenges in accessing regular UI. Meanwhile, the companies that hire them
avoid their obligations, such as paying into much-needed state UI trust funds. These workers are
employees and should have benefits as such, and their employers need to meet the obligations
shared by all employers.
In passing the CARES Act, Congress intended to provide emergency benefits for the many
individuals out of work who are excluded from traditional unemployment coverage during the
pandemic. Congress did not intend to supplant states' own laws and court decisions, cementing
business practices that have been determined unlawful.
Further, by creating a federal PUA program that supplements the existing UI system, Congress
did not intend to permit employers to inappropriately push their employees to PUA, absolving
employers of their obligation to pay into much-needed state trust funds during an unprecedented
crisis when states need to ensure they are fully and fairly resourced.
When employers skip out on paying their fair share, the public must make up the difference.
Federal, state, and local governments suffer hefty losses of revenue due to independent
contractor misclassification, in the form of unpaid and uncollectible income taxes, payroll taxes,
and unemployment insurance and workers' compensation premiums. A 2009 report by the
Government Accountability Office estimates independent contractor misclassification cost
federal revenues $2.72 billion in 2006. According to a 2009 report by the Treasury Inspector
General for Tax Administration, misclassification contributed to a $54 billion underreporting of
employment tax and losses of $15 billion in unpaid FICA taxes and UI taxes.
The availability of PUA during an unprecedented crisis is supposed to be a lifeline for truly selfemployed individuals who cannot otherwise access unemployment assistance. It should not be a
pathway for low road companies to undercut honest businesses, eroding competition in a fair
market. Employers that correctly classify workers as W-2 employees often are unable to compete
with lower-bidding companies that reap the benefits of artificially low labor costs.
Misclassification, as the Treasury Inspector General found, "plac[es] honest employers and
businesses at a competitive disadvantage."
Misclassification, especially when pervasive in an industry, skews markets and can drive
responsible employers out of business. Law-abiding employers also suffer from inflated
unemployment insurance and workers' compensation costs, as "free riding" employers that
misclassify employees as independent contractors pass off costs to employers that play by the
rules. A 2010 study estimated that misclassifying employers shifts $831.4 million in
unemployment insurance taxes and $2.54 billion in workers' compensation premiums to lawabiding businesses annually.
While PUA was meant to be an emergency benefit to meet the unprecedented crisis of the
moment, we are concerned that dishonest businesses will use the program as a tool to enshrine
their workers' misclassification and skew markets against fair competition.
It is essential that the Department properly administer the PUA program to fulfill Congressional
intent to support workers who "otherwise would not qualify for regular unemployment or
extended benefits under State or Federal law[.]" Many workers, in spite of their misclassification
as contractors by their employer, already do qualify as employees for regular unemployment
benefits.
The Department should immediately issue clarifying guidance that the determination whether
app-based workers are eligible for regular unemployment benefits is a state-by-state
determination. While ride-hail drivers and other "platform" workers are statutorily classified as
independent contractors in some states, it remains critical that state agencies apply their state
laws to determine app-based workers' eligibility for regular UI.
The urgent nature of this crisis demands swift action from the DOL. To that end, we request that
the Department issue guidance that clarifies that:
 While some "gig economy workers" may only be eligible for PUA, many workers are
misclassified and in some cases already are employees under state law, and that agencies
should process app-based workers by applying their state's existing laws to determine if
they are employees eligible for regular unemployment compensation, rather than
presumptively processing them for PUA;
 At the same time, state agencies should make it as convenient and quick for eligible
workers to receive regular UI benefits as it is to receive PUA benefits, including by
acceptance of workers' proof of earnings where wage records are not in the system and
the employer fails to provide them;
 A determination that a worker is eligible for PUA has no bearing on the question of
whether that worker is an employee under any state or federal law;
 As state agencies perform required quarterly reviews that individuals receiving PUA are
ineligible for regular UI and PEUC, the agencies transfer any workers who are
misclassified to regular UI;
 State agencies should audit companies for which there is a demonstrated pattern of nonW-2 workers who have been found eligible for UI as employees.
We appreciate your timely attention to this important issue for workers and states. We eagerly
await your response.