Workers unsure of W-2, 1099 classification distinctions

Dive Brief:

Many workers don't understand the distinction between independent contractors and employees, according to research from on-demand staffing technology platform Bluecrew. More than half (57%) of hourly workers surveyed said they either didn't know, or couldn't accurately identify, the benefits to which independent contractors are entitled.
Despite this confusion, 84% of the hourly workers surveyed said common worker protections and benefits — such as workers’ compensation, minimum wage, overtime, sick pay and health insurance — were either more important than flexibility or equally important. Additionally, 72% of hourly workers said they would rather be a W-2 employee than a 1099 contractor.
Among the salaried workers surveyed, 65% knew the difference between being a W-2 employee and a 1099 independent contractor, and 75% said they would prefer being an employee over being an independent contractor.

Dive Insight:

While many workers might prefer full-time W-2 status, the gig economy continues to flourish as employers implement agile talent strategies. According to recent research, temporary employment may grow to more than 3.2 million openings by 2025, an increase of nearly 254,000 over 2019 levels.

Lawmakers have responded with new measures, but workers may be unsure what such laws mean for them. The Bluecrew survey, for example, found that many hourly workers (71%) were unaware of new laws like California's AB-5 "that would ensure gig workers are treated as W-2 employees and so receive a comprehensive set of worker protections and access to benefits." And AB-5 is no guarantee, either. Many gig economy employers, including Uber and Lyft, are pushing back and seeking exemptions.

Employers that hire independent contractors must make sure those workers understand their classification status, as well as the terms of the work relationship. HR also must remember that worker preference cannot dictate Fair Labor Standards Act classification. Workers cannot decline "employee" status; instead, the statute, regulations and applicable case law determine which workers are employees entitled to minimum wage and overtime.