Independent workers deserve some security without being forced into a one-size-fits-all mold.
S enator Bill Cassidy (R., La.) has introduced legislation that could reshape how millions of independent workers access benefits. His proposal follows a white paper released by the Senate Health, Education, Labor, and Pensions Committee, of which he is the chairman. Alongside recent bipartisan support for similar concepts, the proposal suggests that a rare consensus is starting to form over how employment benefits should be delivered in the modern economy.
About one-third of American workers now earn income from a source other than a traditional nine-to-five job, whether this is their primary occupation or a side hustle. Many work as freelance writers, Uber drivers, consultants, or tradespeople. Nearly all are effectively blocked from accessing common workplace benefits, such as a retirement contribution or a health stipend.
The reason isn’t economic — it’s a regulatory relic. Federal agencies such as the Department of Labor and the Internal Revenue Service have long warned that if a hiring party offers such benefits to, say, a contractor, it could trigger the reclassification of that worker as a full-fledged employee. That shift could saddle the company with liability for back benefits, taxes, and penalties. Once reclassification happens, the company can’t continue treating that worker as a contractor, even if on any commonsense reading of the legislation that’s what he or she was and the worker preferred that status. Faced with that risk, most businesses avoid offering any benefits whatsoever, even when they want to.
The situation is especially frustrating because Congress never intended for benefits to determine a worker’s classification. Neither the foundational Fair Labor Standards Act of 1938 nor the Internal Revenue Code says anything of the sort.
Nor was this system designed with today’s flexible workplace in mind. It was shaped in the 1940s, when World War II–era wage controls led employers to offer health insurance and other perks to attract talent. Benefits became tethered to jobs not by thoughtful design but by historical accident.
The legal and historical disconnect is finally drawing attention from both sides of the aisle. Democrats such as Senator Mark Warner (D., Va.) and Representative Suzan DelBene (D., Wash.) have been among the first advocates for extending benefits to independent workers. The center-left Brookings Institution has also supported portable benefit models. Bipartisan momentum is also evident at the state level: In Maryland and Pennsylvania, for example, Democratic governors have approved pilot portable benefits programs.
Critics claim that portable benefits encourage employers to mislabel workers as independent contractors. Available evidence doesn’t back this up. In Utah, where a portable benefits policy took effect in 2023, traditional W-2 employment and self-employment continued to grow at similar rates as before. The policy merely allowed independent workers to access benefits. Even in California and Massachusetts — which have the country’s strictest misclassification laws, in the name of worker protection — the presence of benefits isn’t part of the classification test. That should reassure skeptics.
There is another obvious reason why portable benefits are gaining traction: Early responses to the challenges posed by the gig economy’s growth have led to disappointing results.
In California, lawmakers implemented an “ABC test,” which presumes that workers are employees unless they meet a strict legal threshold for independent self-employment. It backfired. Overall employment declined by 4.4 percent on average in affected occupations, with no corresponding increase in W-2 jobs. The law has since been partially rolled back, and more than 100 occupations (e.g., musician, translator, editor) are now exempt from it. A broader analysis by my research team confirms this trend: In states that adopt ABC tests, traditional W-2 employment declines by an astounding 4.8 percent. Self-employment drops even further, by 6.5 percent.
The real issue is that most independent workers don’t want to be reclassified as employees. They’re asking for a system that reflects how they actually work — one that offers support without forcing them into a one-size-fits-all model.
According to the Bureau of Labor Statistics, more than 80 percent of self-employed workers prefer their current arrangements. The same share say they want access to portable benefits. These are parents who are balancing caregiving and careers, retirees who are staying active, and professionals who are building flexible businesses on their own terms. Only 8 percent of independent workers said they would rather have a traditional job.
It’s time for Congress to step in and modernize the system. A well-designed portable benefits program wouldn’t solve every challenge facing the gig economy, but it would allow workers who aren’t in traditional jobs to gain some security without losing their independence. It would be a modest but meaningful step toward supporting the modern worker.