A proposed federal bill addressing the classification of app-based workers could have implications for workers’ compensation insurance, an area where payroll is a major factor in premium calculations.
The Empowering App-Based Workers Act, introduced by Democratic Sens. Brian Schatz of Hawaii, Christopher Murphy of Connecticut, and Tammy Baldwin of Wisconsin, alleges that companies such as Uber and DoorDash misclassify workers as independent contractors. This practice, the bill says, can reduce payroll expenses by up to 30%. While the legislation focuses on transparency in pricing and pay equity for workers, the classification issue intersects with insurance coverage and premium setting.
According to The Hartford, payroll, along with worker classification codes and experience rating, is a key element in determining workers’ compensation premiums. Misclassification can result in employees being excluded from benefits, including workers’ compensation coverage. This can lead to gaps in protection for workers and potential disputes over liability in the event of an injury.
The National Council on Compensation Insurance (NCCI), which provides workers’ compensation data and analysis in many US states, reported that between 2022 and 2024, “drivers, chauffeurs, messengers and their helpers” was the most frequently reclassified employee governing code.
NCCI conducted inspections in each state it serves to ensure classification accuracy. In 2024, more than 80% of policies with the 7380 code underwent changes, and over half were reassigned to mercantile classification codes, reflecting shifts in business operations, according to Best Wire. In some cases, the driving or delivery code remained but was no longer the governing classification.
Reclassification affects premium calculations, as different codes carry different risk profiles and rates. The other top reclassified codes during this period included warehousing, clerical work, convenience store employees, and sales staff.
If the proposed legislation leads to changes in worker classification practices, it could impact workers’ compensation insurance markets by increasing covered payrolls, shifting classification patterns, and altering premium volumes across multiple industries.
