DOL Clarifies That Gig Workers Can Qualify for COVID-19 Unemployment Benefits When Their Work Dries Up

The Department of Labor has clarified that gig workers qualify as “unemployed” under the Pandemic Unemployment Assistance (PUA) Program when they lose a significant amount of business because of COVID-19. That means gig workers, such as rideshare drivers, can qualify for benefits when there are too few customers looking for rides.

The PUA is one of several efforts Congress made to expand unemployment benefits in the recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act. The program offers benefits to workers who are ineligible under another benefit program and cannot work because of COVID-19. Though the CARES Act does not mention gig workers by name, the PUA was widely thought to cover them, and DOL guidance has reinforced that interpretation.

The new letter confirms the Department’s position on gig workers and the PUA. Issued on April 17, 2020 and signed by Secretary of Labor Eugene Scalia, the letter states that gig workers can qualify for PUA benefits when they become unemployed, partially unemployed, or unavailable for work “as a direct result” of COVID-19. It also states that they qualify as unemployed when they experience a “significant diminution in work.”

Scalia wrote the letter in response to an inquiry from 34 Democratic senators, including Sen. Chuck Schumer (D-NY) and Sen. Ron Wyden (D-WA). The senators wrote Scalia on April 13 asking him to clarify the Department’s recent PUA guidance. In particular, they noted that Unemployment Insurance Program Letter (UIPL) no. 16-20 stated that gig workers could be eligible for PUA benefits, but did not say the workers would qualify when “their services dry up as a direct result of COVID-19.” The senators asked Scalia to say explicitly that rideshare drivers can qualify when “there are too few customers seeking rides.”

In his response, Scalia reiterated the UIPL’s interpretation. He wrote that gig workers might not normally qualify for PUA benefits when their work dries up. That is because the workers’ “place of employment” has not “closed”; many such workers have no place of employment. Even so, Scalia wrote, he was exercising his discretion under the CARES Act to create an additional way for gig workers to qualify for benefits. And that additional way did not preclude others. For example, a gig worker might also qualify for benefits if a state or municipal order restricting travel made it impractical to continue operations.

Scalia also used his response to clarify a few other points. Most notably, he addressed whether caregivers can qualify for benefits in the summer months when schools are normally closed. The CARES Act allows people to apply for benefits when they are caring for a child whose school or normal place of care is closed because of COVID-19.  In UILP 16-20, the Department stated that a school is not “closed” in the summer because of COVID-19, so a caregiver cannot use the school’s closure to qualify for benefits. Scalia explained, however, that the caregiver might still qualify. For example, the caregiver might normally rely on a summer camp to care for the child. If the camp closes because of COVID-19, the caregiver may still apply for PUA benefits.

Scalia also reiterated that a person need not have their employment completely terminated to qualify for certain benefits. Under the CARES Act, a person may be considered unemployed, partially unemployed, or unavailable for work when forced to take unpaid leave. So, for example, a temporarily furloughed worker can still qualify.

Scalia did not, however, address what is emerging as the most contentious issue around the PUA: how receiving benefits under that program affects a workers’ employment status. The Department’s prior guidance assumes that gig workers are independent contractors and are thus ineligible for normal unemployment benefits. States, on the other hand, have not made their positions clear. For example, California has recognized that the PUA covers “independent contractors,” and that “[f]ederal guidelines include gig workers.” So despite the state’s recent legislation aimed at converting gig workers into employees, California should process their applications under PUA on the basis that independent contractor are not eligible for regular unemployment because they are not employees.

The Department has issued guidance about the CARES Act’s unemployment expansions weekly, if not daily. Littler Workplace Policy Institute (WPI) will continue monitoring events and updating our clients on key developments. Employers with questions about the new unemployment benefits or any other part of the CARES Act should consult with experienced counsel.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.