Hey Compliance Warriors!
This article is a great read and really highlights some of the issues that need to be addressed when it comes to employees and economic hardship. Obviously nobody ever wants another large-scale shutdown to happen like it is currently, but if it does, what will we learn from it happening right now to make sure the next one isn’t so economically catastrophic? Read on…
Article Via: lexology.com
“COVID-19 has highlighted that during times of crisis the underlying difference in the way gig-economy workers and traditional employees are treated needs to be addressed. Samantha Gilbert looks at why companies should ensure gig-sector workers are financially supported to stem the spread of the virus, but also to help preserve their reputations.
As the outbreak of COVID-19 continues to unfold, one group of workers that have faced increasing difficulties are those working in the so-called gig economy, whereby workers are paid per job, rather than hourly. Such roles include event staff, taxi drivers and delivery drivers, to name but a few. Given that gig sector workers are not “employed” in the traditional sense, they are often caught between choosing to remain at home, self-isolating to avoid potentially passing the virus onto others or remaining in work to support themselves and their families.
Companies who fail to respond to this issue without implementing measures to protect their workers and customers could, therefore, not only be placing people in danger, they could also be facing huge reputational damages. Catherine Casserley, a barrister specialising in employment and discrimination at Cloisters warns “companies could find themselves at the receiving end of a boycott or a drop-in trade because people are worried about catching the virus… It is extremely important, that companies take measures so far as possible to reduce the risk to its workers of contracting the virus – not only for its own business but for the population at large – the sooner this stops spreading, the sooner that the economy can return to normality,” she says.
Businesses in the gig sector should ensure they are putting in place protocols for their employees, vendors, and contract workers that focus on the Centre for Disease Control and Prevention and other public health guidance according to Ellen Feeney, VP and counsel at ADP. “Being clear in company policies that steps are being taken to protect all workers, including gig workers” she says, will help protect companies against damaging accusations of treating gig-economy workers discriminatorily or even unethically in comparison to full-time or contracted employees.
Providing greater financial support for workers
One way to ensure companies in the gig sector can ensure they are helping to protect employees, while also ensuring they are not perceived to be acting in an unethical or irresponsible manner, is to provide workers with pay when they have contracted COVID-19.
On 30 March 2020, for example, gig-economy workers commenced a strike on delivering groceries across the US, demanding their employers expand protective benefits like sick pay to workers beyond those who have tested positive for COVID-19 or have been put into mandatory quarantine by an official body. The events brought the issue to the attention of media outlets, which can be very damaging to the public perception of the companies involved, which included Instacart and Amazon; it also raises the question of exactly what the responsibility of companies should be towards employees during times of crisis such as those resulting from COVID-19. “This is a time when ultimately delivery firms are likely to be one of the few industries financially benefiting from what is a devasting time for many sectors,” says Casserley.
Some companies have already found solutions. Uber and Lyft now offer drivers and delivery people 14 days of paid sick leave if they fall ill with coronavirus or are placed in quarantine. In the US, Instacart will cover up to 14 days of pay for its contractors and part-time employees diagnosed with COVID-19 or placed in mandatory quarantine. It also introduced sick pay coverage for part-time employees. In the UK, Hermes has set aside a £1 million support fund to provide sick pay for its 15,000 courier workers, following warnings from trade unions that a lack of sick pay for the over 1 million UK gig-economy workers could accelerate the spread of COVID-19 in the country. What is interesting about Hermes’ approach, Casserley points out, is that in addition to sick pay, Hermes has pledged to “assist drivers in finding a substitute driver to cover their shift (the responsibility usually falling upon the workers) while guaranteeing that roles are left open for them when they return.” While the company is having to increase its responsibilities towards gig-workers during this time, it is also ensuring the brand and reputation are protected by showing that it is taking a more ethical approach to its relationship with gig-workers under exceptional circumstances.
Companies may feel that temporarily providing gig-workers with sick pay sets a precedent, but Casserley emphasises that since “we are in unprecedented times, it is unlikely that payment in these circumstances makes it a custom and practice in future – unless another pandemic occurs, and work is in similar demand.”
While temporarily providing sick pay may not necessarily set a precedent for the gig sector, it may pose challenges post-crisis once these rights are taken away, according to Elliot Dinkin, CEO of employment compensation and compliance consultancy Cowden Associates Inc. “Giving a gig worker sick pay crosses the line where you start giving out benefits as if they’re regular employees”, he says. Some companies who are concerned that giving gig workers sick pay will open to door to workers expecting sick pay after COVID-19, or could demotivate their healthy workers from performing their roles, might choose to implement a payment percentage system that maintains the distinction between a gig worker and a contracted employee.
Instead of offering sick pay, Dinkin suggests companies could agree to pay a worker a percentage of their salary (eg, 70%) for the duration of the pandemic, which is based on the shifts they have completed in the previous six months. This amount, although only 70% of their usual pay, will be a guaranteed amount that will be paid to the worker even if they are unable to work due to COVID-19 or self-isolation during this period. This establishes a system where workers will receive a reduced amount of pay in the interim, but also means they have a reliable source of income even if they fall ill during the pandemic.
Given that some workers will be taking on extra shifts while getting a reduced salary to cover for absent colleagues, Dinkin suggests a quarterly “true-up” of wages to reflect any extra shifts. This is where the amount a company owes for a service provided by a party is recalculated based upon the amount of work or services completed, rather than contractual estimates. This model also gives workers a financial incentive to continue to attend work, while feeling assured that they can rely on the 70% pay calculation should they fall ill or need to self-isolate.
The downside of this system, however, and one that may discourage some companies, is the risk of overpaying a worker. For example, if an individual self-isolates or becomes very ill with COVID-19 and cannot work for weeks, the company has committed to paying them a percentage of their pay for this time, but Dinkin says “that is a risk companies have to take from a business perspective,” because under the circumstances, it could cost a business a great deal more to do nothing.
Giving workers a framework where they are receiving money when they stay at home is an effective way of protecting employees and helping to stem the virus, agrees Casserley, but by the same token “ultimately people need to know that there will not be an impact upon their income which means that it is not worth their while to work when ill.” From a reputational perspective, Casserley says it is “better in many ways to get ahead of the curve to ensure workers are protected and incentivised to stay home if necessary, engendering loyalty and public appreciation for a company that is doing its bit to help stem the spread of the virus in these challenging times.”
Furthermore, acting in advance avoids any future action from the unions, particularly since gig-sector workers are becoming increasingly unionised. This can be seen in the UK, where the chancellor amended the coronavirus bailout policy to include provisions for freelancers or self-employed individuals after lawyers for a trade union threated the government with legal action based on the differential treatment of self-employed workers compared to employees. Now self-employed workers qualify to receive 80% of their monthly net earnings based on earnings over three years or an amount of £2,500 per month, whichever is the lower. Unfortunately, the money is unlikely to come through until the end of April.
Ultimately, Casserley concludes, whether a company decides to offer sick pay or a reduction in pay, both methods can help reassure ill or vulnerable workers that they have a dependable source of income during COVID-19.
Perceptions of risk
For compliance teams, it will come down to assessing the risks for their specific company and deciding which approach fits best: a percentage payment model or temporary sick pay, but either way “communication is key”, Feeney says, and “companies should be communicating not just with their employees during the pandemic but also with their vendors and gig workers.” To lessen the risk of gig economy workers being disgruntled once the sick pay provisions stop, companies should notify them of any changes to policies or pay regimes as a result of COVID-19 and emphasise the measure may only be a temporary one.
Good communication will also demonstrate to gig workers that their health and interests are being considered equally to full-time employees, tackling the perception of discrimination. If employees feel financially supported, they will also feel encouraged to report potential exposures to COVID-19 in the workplace, reducing the risk of contamination and further disruption to the business. Setting up a culture of openness and communication with gig workers will also help a company ensure positive reporting practices, which will benefit the organisation’s reputation should a future pandemic or similar crisis occur, because the sooner a risk or outbreak is reported, the faster they can respond to contain the exposure to their employees or customers. This will then reduce the wider impact on operations, productivity and reputation because if fewer employers are taken ill, business as usual can be returned to more quickly.
Finally, while the gig economy offers flexibility and independence for the workers, COVID-19 has highlighted the risks associated with companies that rely upon a vast network of self-employed and freelance workers. Though companies may be implementing different strategies to manage the risks resulting from the pandemic, it is clear that many are having to rethink worker protections to protect their employees and customers in a crisis.
The pandemic is “a very eye-opening situation” for companies who saw the gig economy as the holy grail of cost-efficiency, says Dinkin. “Companies thought they were going to save costs by having contract workers, [but now] may lose out in their top-line revenues because gig-workers will get dissatisfied with their arrangement and go back to the more traditional approach.”