Employers in Alabama would have the option to contribute to contract workers’ retirement, health care or other benefit funds under a new bill expected in the Legislature’s session that starts today.
A task force began last year discussing portable benefits for gig workers and were told about 79,000 Alabamians were employed as contract employees by app-based delivery and ride-sharing services. Nearly one in four residents have worked for them at some point. Contract employees do not receive benefits.
Unlike traditional retirement or health care benefits, portable benefits are not tied to a specific job. Instead, they are attached to workers who may work for multiple businesses as contract employees.
The task force studying this issue includes Sen. Arthur Orr, R-Decatur, and Rep. Neil Rafferty, D-Birmingham. They had said it may not have legislation until the 2026 session, but Orr on Monday said a similar 2023 law in Utah seems to be working well.
“That’s the model we’re looking to follow and their legislation has given other states confidence to move forward,” Orr told Alabama Daily News.
Like in Utah, lawmakers are navigating federal rules that say contract employees don’t have to be awarded the same benefits as traditional employees. A draft of the bill says portable benefit contributions will not change the contract worker’s employment job classification.
“There’s a serious need for us to address this shortfall in the current law,” Orr said. “It’s ultimately a federal problem, but there are, based on the Utah model, things that a state can do to help employees and employers gain a level of confidence in providing benefits for contract workers.”
Birmingham-based Shipt was the first company in Utah to start offering benefits to its shoppers and drivers last year and has been supportive of discussions here. In January, the ride-share app Lyft began piloting a portable benefit option, contributing 7% of an eligible driver’s quarterly earnings into accounts for them to pay for benefits like health, dental, and vision insurance, save for retirement, or cover paid time off.
Under the draft legislation still being finalized, companies wouldn’t be mandated to offer benefits that could include health, income replacement, life insurance or retirement benefits. Contractors would also opt in.
Contributions may be made using the funds of the hiring party or a percentage of funds withheld from compensation owed to an independent contractor. Companies could deduct contributions made from their own funds as a business expense on their state income tax return.
Orr first sponsored a portable benefits bill in 2018.
“It’s been a pleasure working with Rep. Rafferty on a bipartisan basis so we can help working Alabamians with this innovative legislation,” Orr said.