TWC passed new “gig economy” rule despite heavy public opposition

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Texas Workforce Commissioner Julian Alvarez III is that board’s appointee representing labor, not employers, as was stated in the original version of this story. The Texas Monitor regrets the error.

The three-member Texas Workforce Commission approved rules earlier this month to allow employers in the gig economy to skirt unemployment rules despite overwhelming opposition in public comments.

The sentiment reflected in those public comments, obtained by The Texas Monitor, was more than 3-1 against the rule.

Some foes of the new rule fear that its passage will give employers more room to wriggle out of paying unemployment benefits, while others contend it could allow employers to create web platforms under which all of their current hourly employees would be considered contract workers. The TWC denies the new rule would allow either of those to happen.

The commission’s rule-making authority allows it to pass such policies without a popular vote or legislative approval.

Taking the temperature of the public through written comments is required, however. That is done via a mandatory period during which the public can submit comments to the agency.

Members of the public sent in 211 comments, but that includes 133 comments from a mail-in campaign by the Action Network, a mobilization website for progressive public petitioning efforts. Those comments used identical text in offering a rote protest to the proposed rule change.

Even setting those aside, the 78 remaining comments skewed 52-16 against the proposed rule change. Most of those comments suggested that the rule is a favor to employers. (Read comments here.)

“The proposed rule of the Texas Workforce Commission regarding gig economy workers as independent contractors is an egregious handout to corporations and a violation of workers’ rights,” read a typical comment opposing the rule, from an oil worker for Baker Hughes in Houston. “Political appointees shouldn’t get to declare the gig economy a separate world in which workers take on all the risk and a business’s obligations to workers vanish,” he added.

A retired transportation analyst in Houston wrote, “This decision just plain wrong — who exactly is paying you guys off?”

Several comments asked that the decision be made by the elected members of the Texas Legislature rather than the appointed board, which has members appointed by the Gov. Abbott to represent the public, labor and employers.

“This regulatory rule is bypassing my state elected officials, [who] have the say in this matter,” wrote a San Antonio man. “I will contact my State elected officials” — in his case state Sen. Jose Menendez and state Rep. Ray Lopez; neither responded to an email from The Texas Monitor.

Others painted the proposed rule as a subversion of the typical employer-worker relationship.

Workers who are “directed on how to do a particular job, by their employers, are employees and are due all the benefits an employer should be offering,” read one comment.

Support for the measure came primarily from proprietors of gig economy companies, including Lyft.

Drivers for services like Uber and Lyft are already covered under a 2017 law that gives the state oversight of web-based driver services, which includes a requirement that both the driver and the company agree that the driver is an independent contractor.

The San Francisco-based company asked that the proposed rule include a sentence that defers to that law for regulation of drivers-for-hire.

Bill Smith, the CEO of Shipt, an online retail shopping and delivery service, also weighed in to support the rule change.

“Shipt and other companies in what is frequently called the ‘on demand’ economy have revolutionized how consumers obtain goods and services, and we have created new economic opportunities and flexible work options in the state that never existed before,” Smith wrote. “Our laws must be modernized to meet the needs of these new models.”

The letters and a review of the April 9 TWC meeting also exposed a rift between the contract worker community and organized labor.

“The gig economy is quietly undermining a century of worker protections … and has proven to be corrosive,” Gary Warren, political director of the Central South Carpenters Regional Council, told commissioners during the TWC meeting. “We want construction workers carved out of this. For anyone else, that’s their problem.”

His group represents carpenters in a five-state area including Texas.

The rule change was allegedly put together with heavy input from lobbyists for one of the nation’s top “gig economy” companies — that is, firms like Uber that operate through phone apps and the internet, with a workforce made up almost completely of independent contractors.

Emails obtained by the Workers Defense Project, a workers advocacy group, show that TWC Chair Ruth Hughs worked with lobbyists for Handy.com to make sure the company’s contract workers would not be eligible for unemployment benefits. Handy.com is a website that connects home-service workers with property owners.

In summarizing the comments for commissioners, TWC staff dismissed some comments, including the concern that workers who are currently considered staffers would become contractors.

“Whether the individual’s performance of the service has been and will continue to be free from control or direction [of employers] will be determined on a case-by-case basis by TWC based upon the facts of each marketplace contractor/platform working relationship,” the staff report said.

The summary, prepared in advance of the April 9 meeting, noted that “the legislature specifically delegated the authority to determine direction and control” of worker classification to TWC.

Before the vote, Commissioner Julian Alvarez III, appointed to represent labor, asked his colleagues to delay a decision to give them more time to consider the various arguments it had heard. His request was denied and the rule passed 2-1. Alvarez then asked that, if similar situations such as employer classification arise, more details be provided to him.

Alvarez did not respond to an email seeking comment for this story.

Despite the lopsided public comments opposed to the rule change, Hughs said, “We had a very thorough process of having the 30 days of comment and all of the responses we received to those public comments. And in that regard I’m very comfortable proceeding today.” She and Commissioner Robert Thomas, who called the comment period “democracy at its best,” voted to approve the rule.

A TWC spokeswoman said that the rule change is a clarification rather than a new rule.

“The rules adopted by the TWC commissioners … do not create any exemptions from the definition of employment,” Lisa Givens said in an email. ”They require that marketplace platforms must meet nine relevant conditions, in contract and in fact, before a marketplace contractor is not treated as being in employment for purposes of the Texas Unemployment Compensation Act.”

Steve Miller can be reached at [email protected].

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