GIG WORKER CLASSIFICATION

OVERVIEW

  •  The rise of app-based platforms has fueled explosive growth in last-mile delivery, rideshare, and other forms of independent work. Today, an estimated 58 million Americans participate in the independent workforce, and last-mile delivery drivers are among its fastest-growing segments. These workers operate as independent contractors rather than traditional employees, a status that surveys show the large majority of them prefer: more than 75 percent of app-based earners say they want to remain independent contractors, and 90 percent cite flexibility as the reason why.

  • That model is now facing pressure from a new wave of municipal legislation. City councils in New York, Chicago, and elsewhere are considering measures that would require last-mile delivery companies to directly employ their drivers rather than contract with them, effectively reclassifying independent contractors as traditional employees. But this reclassification threatens to strip away the flexibility that drew most independent workers to the job in the first place, and a patchwork of differing city-by-city rules could create unworkable compliance burdens for a workforce that routinely crosses municipal lines.

  • The debate is also shaping a related but distinct policy conversation: how, if at all, independent workers should receive benefits and support without losing their contractor status. A growing number of states have begun testing “portable benefits” frameworks that allow companies to voluntarily contribute to a worker’s health, disability, or retirement accounts without those contributions being treated as evidence of an employment relationship. 

BACKGROUND

  • Efforts to reclassify independent contractors as employees are not new. California’s Assembly Bill 5 (AB5), enacted in 2019, was the most sweeping attempt to date, applying a strict “ABC test” that made it far more difficult for companies to classify workers as independent contractors.

  • Research examining AB5’s effects found a significant decline in overall self-employment in the state, without a corresponding increase in traditional employment.

  • That precedent has not stopped a new round of efforts at the local level. In New York City, Council Member Tiffany Cabán introduced the “Delivery Protection Act,” which would require large delivery companies, including Amazon, to directly employ drivers rather than route deliveries through third-party Delivery Service Partners (DSPs).

  • The bill defines “core delivery services” broadly and has drawn support from the Teamsters and the Democratic Socialists of America, who see it as a template that could extend well beyond the delivery sector. It currently has majority support on the City Council. Chicago is considering a nearly identical measure, also branded a “Delivery Protection Act” and backed by the Teamsters’ Amazon Division.

  • Supporters of these bills say the current subcontracting model allows large companies to avoid responsibility for wages, safety, and working conditions. Opponents – including many of the small businesses that operate as DSPs – warn that forcing direct employment would eliminate the flexible, entrepreneurial arrangements that let many independent drivers set their own hours, and could put subcontracting businesses and their drivers out of work entirely.

  • Separately, outdated interpretations of misclassification law have long discouraged platforms from offering independent workers even modest, non-cash support – such as fuel discounts, safety equipment, or tax-preparation resources – out of concern that doing so could be used as evidence of an employer-employee relationship in a misclassification claim.

 CURRENT POLITICAL ENVIRONMENT

  • The politics of gig worker classification break down differently depending on the level of government.

  • At the city level, reclassification efforts are being driven largely by progressive council members, labor unions such as the Teamsters, and allied groups like the Democratic Socialists of America, who view “core services” reclassification language as a template applicable well beyond delivery work. In New York City, the effort has the backing of Mayor Zohran Mamdani, giving it significant momentum.

  • At the federal level, the trend has moved in the opposite direction. In February 2026, the U.S. Department of Labor proposed rescinding the Biden administration’s 2024 worker-classification rule and reinstating a more contractor-friendly “economic reality” test, similar to the standard used during the first Trump administration.

  • At the state level, a distinct and largely bipartisan trend has emerged around portable benefits. Utah enacted the first voluntary portable benefits law in 2023, and Alabama, Tennessee, Georgia, and West Virginia have since enacted similar frameworks, with New Hampshire’s governor signing a comparable measure in 2026. These laws generally allow companies to voluntarily contribute to a worker’s benefits account without those contributions being used to determine the worker’s employment classification.

  • Several additional states introduced similar legislation in 2026, and West Virginia’s governor has named portable benefits a legislative priority for his administration. Unlike the reclassification debate, portable benefits legislation has drawn support from lawmakers across the political spectrum.

SUMMARY

  • Americans for a Modern Economy believes that policymakers can – and should – support independent workers without forcing them out of the flexible arrangements the large majority say they prefer. Local reclassification mandates like the Delivery Protection Act proposals in New York and Chicago risk repeating the outcomes seen under California’s AB5: fewer opportunities for the very workers the policies aim to help, along with a fragmented, city-by-city regulatory landscape that is difficult for a mobile, multi-jurisdictional workforce to navigate.

  • AME supports a different path: consistent, state-level policy that preserves independent contractor status while clearing the legal obstacles that currently discourage companies from offering practical business supports and portable benefit contributions. The growing, bipartisan momentum behind state portable benefits laws suggests this approach is both achievable and increasingly popular — and offers a model other states and policymakers should look to as the gig economy continues to grow.