Proposed Law Says Offering Benefits to Gig Workers Won't Make Them Employees: The Portable Benefits Loophole

The “Unlocking Benefits for Independent Workers Act” takes aim at one of the biggest sticking points in the gig economy: how to classify workers. Specifically, Section 2 of this bill creates a new rule for how federal agencies—like the IRS or the Department of Labor—must determine if an independent contractor is actually an employee.

The Safe Harbor for Benefits

Right now, if a company offers an independent contractor things like health insurance contributions, a 401(k), or other perks typically reserved for W-2 employees, that act can be used as evidence that the worker is, in fact, an employee. This bill changes that entirely. It mandates that when determining a worker’s status for federal tax or labor law purposes, the government must ignore any benefits offered by the company. This includes "portable benefits"—those the worker keeps even if they leave the company—or "standard employee perks," and any contributions made toward them (SEC. 2).

Think of it this way: If your side hustle as a freelance designer starts offering you a health savings account and a portable retirement plan, under current rules, that might be a sign the company is treating you like an employee and should be classifying you as such. Under this proposed law, offering those exact same benefits is now off the table as evidence. The company gets a "safe harbor" to offer benefits without the risk of triggering full employer responsibilities.

The Trade-Off: Benefits vs. Protections

For independent workers, this creates a classic trade-off. On one hand, it’s a good thing. Many independent contractors—from delivery drivers to software consultants—lack access to basic benefits like retirement savings or affordable group health coverage. This bill could encourage companies to offer these packages, making gig work more stable and attractive. For a busy parent juggling two contract jobs, getting a portable 401(k) is a huge win.

On the other hand, the core issue is that employee classification isn't just about benefits; it's about fundamental protections. Being classified as an employee (W-2) means you are guaranteed minimum wage, overtime pay, unemployment insurance, and protection under federal anti-discrimination laws. Being a contractor (1099) means you get none of those things. By removing the offering of benefits as a factor in classification, this bill could allow companies to maintain a contractor relationship—and avoid payroll taxes and labor law compliance—even if the actual working relationship looks exactly like full-time employment.

The Real-World Impact

This bill essentially gives companies a green light to design benefit packages specifically to keep their workers as independent contractors. Imagine a construction company that relies heavily on contractors. They could start offering a robust, portable health plan. While the workers get a great benefit, they remain 1099 contractors, meaning the company doesn't have to pay into Social Security or Medicare on their behalf, nor do they have to pay unemployment insurance or guarantee minimum wage. This creates a powerful incentive for companies to push the contractor model even further, potentially leaving more workers without the traditional safety nets that come with W-2 status.

Crucially, the bill doesn't clearly define what constitutes a "Standard Employee Perk," which leaves a lot of room for interpretation by companies and federal agencies. While the intent might be to promote portable benefits, the practical effect could be cementing the independent contractor status for millions of workers who might otherwise qualify for the full protections of employment law.