Growing Pains in the Sharing Economy
A recent finding that an Uber driver is an employee rather than an independent contractor has focused attention on the future of the sharing economy.
Whatever that future, observers don’t expect that the sharing economy, with its business models that rely on smartphone apps like Uber’s, will have a significant impact on workers’ compensation insurance.
They are, however, watching to see how state labor commissions, courts and legislatures nationwide will address the employment status of people providing a range of services through technology platforms such as those offered by ride-sharing companies like Uber and its rival Lyft.
“We are very interested,” said Peter Burton, senior division executive for state relations at NCCI Holdings Inc., a workers’ comp ratings and research organization.
“We actively are watching work comp commission decisions as well as legislative decisions.”
But NCCI’s interest in how states will eventually rule on whether workers in the sharing economy will be legally designated as contractors or employees is mostly technical. NCCI wants to stay abreast of matters, for instance, should it need to develop new rates.
So far, there have been few definitive legal determinations on the classification of on-demand workers, and whether app companies linking them to customers must purchase workers’ comp insurance. Consensus may also be elusive.
“It’s going to have to be adjudicated state by state and you are probably going to have all sorts of different opinions,” Burton said.
“Right now it’s still uncharted ground.”
The issue of whether the sharing economy’s on-demand workers should be classified as employees and legally entitled to a range of benefits and expense reimbursements has surfaced before.
“It’s going to have to be adjudicated state by state and you are probably going to have all sorts of different opinions. Right now it’s still uncharted ground.” — Peter Burton, senior division executive for state relations,
NCCI Holdings Inc.
But the topic recently gained increased attention when news stories reported that rapidly-growing Uber — valued at $40 billion — is appealing a California Labor Commission finding that a former chauffeur was an employee rather than an independent contractor as the company classifies its drivers.
The Labor Commission said that Uber could not exist without the work performed by the former driver. It essentially found that Uber exercised enough control over how the driver conducted her work to make her an employee. The ruling requires Uber to reimburse the former driver $4,152 in expenses and interest.
Uber argued that it is merely a technology company that allows drivers and passengers to conduct transportation business. It filed its appeal of the Commission’s ruling to a San Francisco County trial court on June 16.
The California Labor Commission’s decision applies to a single plaintiff. But the case’s eventual outcome, and other ongoing cases including class-action lawsuits with similar allegations against a range of sharing-economy app companies, could substantially impact Uber’s profitability and business model.
However regulators and courts in California and other states decide the employment-classification issue, the overall impact on workers’ comp insurer operating results will not be significant, said Robert P. Hartwig, president of the Insurance Information Institute.
If courts and regulators find that sharing economy companies are employers, then workers’ comp insurers would gain only modest opportunity to write new coverage for workers not currently covered by comp policies, he added.
“It would bring the payrolls associated with tens of thousands of workers into the workers comp exposure base,” Hartwig said. “The vast majority of which is not there right now. That would represent a modest opportunity for some insurers who are inclined to write these.”
Any premium volume growth would be limited because the number of people participating in the sharing economy is “very small,” Hartwig explained. About 7 percent of the U.S. population aged 18 and older has engaged in providing sharing-economy services.
Their participation typically is limited, rather than full time, and mostly conducted to supplement other income, Hartwig added. For instance, about 16 percent of people over the age of 65 have participated in the sharing economy, doing so to earn additional income.
Any new revenue workers’ comp insurers might gain from a group of newly insured workers could be offset by losses, Burton said. Insurers already understand how to rate taxi and limousine companies, but time would tell whether losses for ride-sharing companies differ.
Hartwig also wouldn’t expect significant impact on insurers should labor departments and courts take the opposite position, finding that people providing sharing-economy services are not employees.
Evidence does not exist that workers leave traditional jobs, where they are counted as part of employer payrolls and employers’ workers’ comp insurance exposure base, to exclusively participate in on-demand economy work, he said.
“There would be some very small amount of leakage from the overall payroll base to the extent that some occupations can migrate on net to this online platform, but that leakage is very, very small,” Hartwig said.
While there have been scant definitive rulings nationwide on whether shared economy participants are employees or independent contractors, “in most cases we have seen states leaning toward the side of independent contractor status,” Burton said.
That is consistent with Uber’s position.
In a June 19 press release announcing that it will appeal the California Labor Commission ruling, the San Francisco-based company said six states have found that Uber drivers perform services as independent contractors.
Uber also said that the recent California Labor Commission ruling is contrary to a previous finding by the same body. In 2012 the Commission ruled that a driver performed services as an independent contractor and not as an employee, Uber said.
“It’s important to remember that the number one reason drivers choose to use Uber is because they have complete flexibility and control,” the release states.
“The majority of them can and do choose to earn their living from multiple sources, including other ride sharing companies.”
Asbestos Claims Dwindle, but Slowly
Claims demanding compensation for illnesses caused by working around asbestos still haunt employers who struggle to determine whether insurance coverage exists for exposures alleged to have occurred decades ago.
The claims no longer surface in the mass quantities like they did a couple decades ago when workers from industries such as construction, oil and gas, boiler and automotive parts manufacturing filed claims alleging mesothelioma and asbestosis.
But neither have asbestos claims entirely disappeared as former workers or their survivors continue filing claims either in civil courts, through workers’ comp systems, or in bankruptcy proceedings. Advertisements by attorneys seeking plaintiffs suffering from asbestos-related lung disease remain common on television and on the internet.
“We thought the issue of asbestos would have gone away 10 years ago, but there are just more and more,” said Paul D. Braun, managing director, casualty risk consulting at Aon Global Risk Consulting.
From about the 1930s through the 1960s, workers labored in textile mills and power plants where asbestos products were either manufactured or used in building construction products, said Jeffrey A. Kadis, a workers’ comp expert specializing in defending occupational disease and chemical exposure claims at Hedrick Gardner Kincheloe & Garofalo LLP in in Charlotte, North Carolina.
That created opportunities for claimant attorneys to generate mass numbers of claims with their volume peaking during the 1990s and early 2000s because of a decades-long latency period for asbestos exposure illnesses, Kadis said.
“We thought the issue of asbestos would have gone away 10 years ago, but there are just more and more,” —Paul Braun, managing director, casualty risk consulting, Aon Global Risk Consulting
While the number of claims peaked back then, his firm still sees one every two weeks or so, Kadis said.
“The volume has definitely decreased, but they have not gone away altogether by any means,” he added.
A lawsuit three former workers filed against BNSF Railway on June 3 in Portland, Oregon, provides an example of case characteristics observers say are common among recently filed claims.
The three say in their Federal Employers Liability Act (FELA) claim that they suffer from lung disease due to asbestos exposure that occurred while working for railroads beginning in the late 1950s and 1960s. Their employment continued until 2003 and 2004, said Paul S. Bovarnick, of counsel at Rose, Senders & Bovarnick in Portland.
FELA is a tort statute providing an exclusive remedy for railroad workers injured on the job.
“We have filed not only this case, but over the last two years about six or eight other [similar] cases,” Bovarnick said. “We file a new set of cases every 4 to 6 months.”
Successive railroad mergers or acquisitions occurred throughout the three workers’ employment and BNSF eventually became their final employer, Bovarnick said. Now the workers allege BNSF was negligent in failing to provide a safe workplace.
The case is similar to many other recent asbestos claims filed nationwide in that the claimants allege lung disease, sources said. Many of the recent claims allege exposure in the 1970s.
Additionally, it’s common for recent claims to allege exposures that occurred at companies that no longer exist, but whose assets and liabilities were passed along through successive mergers and acquisitions.
In some cases the existing employers did not know that they had acquired companies, or parts of companies, that had asbestos exposures, Braun said. The current company may not even possess employment records from companies they acquired after successive mergers dating back to the decades plaintiffs allege they were employed.
The factors make it difficult for companies to establish if any insurance policies in force at the time of the workers’ employment provide coverage, Braun said.
Workers’ comp policies commonly contain sunset clauses stating that for coverage to apply, claims must be filed within 36 months or so of an injured worker’s employment. General liability policies began excluding coverage for asbestos in the 1980s and also exclude coverage for employees, Braun said.
“That is the dilemma the clients are looking at right now,” he said.
Other coverages, such as old umbrella policies, if they can be recovered, may provide some insurance, Braun added.
As time marches on, however, observers say the claims are less of an issue in many current mergers and acquisitions, including the purchase of manufacturing operations.
Because asbestos has not been used in product manufacturing or factory construction in decades, the risk continues to dwindle while experts conducting due diligence for today’s acquisitions understand the risk better than in past years, said Henry Jennings, global practice leader for Lockton’s private equity and corporate acquisitions practice.
“My experience lately is that we are seeing much less of it than we did years ago,” Jennings said. “If we do see it, it is more than likely that the legal people at the firm being sold have their arms around it from the standpoint of whether insurance is involved.”
Treating the Whole Person
Recent research from Gallup and Healthways Inc. shows what claims payers already know: The percentage of obese Americans continues to increase. In their May 2015 report, Gallup and Healthways Inc. stated that the nation’s obesity rate rose again in 2014, reaching 27.7 percent, up from 27.1 percent in 2013.
Even more unsettling — and perhaps surprising to some — is that research indicates changes in diet and exercise are not enough to reverse the trend.
What’s needed, according to the studies, is a more holistic engagement that boosts a person’s sense of purpose and strengthens their community and social relationships; even their financial health.
Professionals that help injured workers address biopsychosocial issues say they agree with that assessment. They also say it is increasingly a factor in their work with employers and other workers’ compensation and disability claims payers.
Biopsychosocial issues refer to psychosocial factors impacting a person’s medical problems, said Michael Coupland, CEO and network medical director at Integrated Medical Case Solutions Group, which provides biopsychosocial assessments and interventions.
Most biopsychosocial approaches take into account that factors such as emotions, behaviors, social environments, and culture all impact human medical conditions and performance.
Services addressing biopsychosocial problems are being applied more often when medical treatment alone fails to mend injured workers. They can help with depression, pain medication misuse, and obesity ,which can delay or even thwart successful return to work.
About 75 percent of the workers’ comp and disability claimants referred to his group are obese or morbidly obese, IMCS’s Coupland said. They are referred by claims payers, treating physicians, self-insured employers and others.
“They are the people that tend to have psychosocial factors that are delaying their recovery,” Coupland said.
IMCS Group specialists offer their patients cognitive-behavioral techniques for taking control of their health and wellness, Coupland explained. The techniques include meditation, mindfulness and biofeedback.
“It makes sense that if you are having challenges, from psychosocial standpoint in life as a whole, that is certainly going to impact your well-being and potentially your body composition.” — Darrell Bruga, founder and CEO, LifeTEAM Health
Those practices can help, for example, with decreasing muscle discomfort so recovering workers are able to go for walks.
Darrell Bruga, founder and CEO, LifeTEAM Health, agrees with the Gallup and Healthways findings that factors such as social interactions, financial well-being and sense of purpose must be addressed.
Bruga said many of the injured and disabled workers his company sees are obese, although his organization does not directly treat obesity. LifeTEAM professionals provide services for reducing psychosocial and return to work obstacles.
Interventions that help people develop a sense of purpose, achieve financial well-being and develop community interactions “are exactly the sort of things we are focused on in helping people reengage,” Bruga said.
“It makes sense that if you are having challenges, from psychosocial standpoint in life as a whole, that is certainly going to impact your well-being and potentially your body composition,” he said.
But it’s important to recognize that returning to work is part of the solution — it can help meet the needs the researchers outline because work is social and it also improves peoples’ financial position, Bruga added.
IMCS Group’s Coupland agrees that helping people return to work and reclaim their sense of purpose is a key piece of the well-being issue that that the Gallup and Healthways researchers raise.
“We get so much of our purpose from work,” Coupland said.
Bruga will speak on mitigating psychosocial risk factors with biopsychosocial measures during the National Workers’ Compensation and Disability Conference® & Expo to be held at Mandalay Bay in Las Vegas November 11-13.
John T. Harbaugh, MD, occupational medicine physician director at Southern California Permanente, will join Bruga and share results from helping his organization’s injured employees overcome psychosocial risks with a biopsychosocial strategy.
Data Drives Down Skepticism
Growing acceptance of paying for biopsychosocial approaches to wellness is being helped along by a significant shift that occurred in 2009, the IMCS Group’s Coupland added.
Health providers in psychology gained the ability to provide health and behavior treatments under Current Procedural Terminology codes for physical medicine rather than having to provide them as treatments under psychiatric codes, he explained.
Now workers’ comp payers are much more accepting of the treatments, Coupland said.
Even so, some workers’ comp claims payers are skeptical about a concept calling for treating the “whole person” and are still reluctant to pay for providing injured workers with biopsychosocial treatment approaches.
Bur increasingly, sophisticated claims payers are funding such programs and their numbers will continue to rise, said Debra Levy, senior VP of workers’ comp product management and national workers’ comp practice leader for York Risk Services Group.
Payers funding those programs are doing so because their data shows a positive return on investment, Levy added.
“The earlier you can recognize those are factors and offer solutions or guided care … you see a positive impact as opposed to throwing away money,” she said.