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What does the CARES Act mean for Independent Contractors?

The $2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act) contains provisions providing benefits to independent contractors.  Under this legislation, gig workers are now eligible for unemployment.  Many of these workers have faced a difficult situation because shelter in place orders have kept them from working.

Independent contractors do not earn a salary.  They only receive compensation for services rendered.  Additionally, current U.S. employment laws do not require companies to provide employee health insurance, sick leave, family leave, disability, workers’ compensation or unemployment benefits to the independent contractors they engage.

However, the CARES Act will allow independent contractors to apply for unemployment benefits.  Additionally, they will be eligible for a weekly stipend of up to $600 in federal assistance for up to four months.  The benefit amounts will be based upon previous earnings.  The intent is that the CARES stimulus package will provide critical relief to this significant class of US workers.

Major gig companies promoted the legislation and pushed hard to have independent contractors included in the relief package.  This is consistent with the push to create a third class of workers that are classified as independent contractors and entitled to benefits.

Current worker classification laws, like California’s (ABC test) also address independent contractor rights to employee benefits and require companies to reclassify their independent contractors as employees when the company cannot demonstrate the engaged worker is in fact an independent contractor.  Reclassification of an independent contractor to an employee creates great costs to employers and gig economy companies continue to fight these laws in court, the legislature and through ballot initiatives.

The CARES Act provides relief for independent contractors through government assistance, rather than through the gig economy businesses that are also impacted by the COVID-19 pandemic.  However, a new precedent has been established in providing benefits assistance to independent contractors.  When the pandemic ends, gig companies may have to provide the types of benefits set forth in the CARES Act.

At iWorkGlobal, we help companies ensure their workers are properly classified and get back to creating real business value. Learn more about our services here.

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