Data & Research April 28, 2021

Gig Economy Expected to Expand Post-Pandemic

In some ways, the gig economy was flourishing prior to the pandemic. Studies suggest the growth is likely to continue, based on a variety of related factors.

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After a year of dealing with the pandemic, many Americans are still searching for jobs to replace those lost during 2020. On the other hand, many workers who have kept their jobs are searching for flexibility in their careers. Sources say both groups are likely to consider entering the gig economy.

A study by the job search and hiring support provider Monster found that due to the coronavirus pandemic, 92% of respondents believe now is a “good time” to search for work in the gig economy. Among those, 57% said they would take some form gig work while in between other jobs, 52% noted they would like long-term contracts with flexible hours and 39% would like short-term contract or temp work.

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“Over the course of the pandemic, you’ve had a lot of people enter this economy because their full-time jobs went away or they have children they needed to take care of at home, so there are more people entering the gig sector,” says Sally Culley, a partner at Rumberger, Kirk & Caldwell who has experience defending employment-related claims.

Prior to the global emergence of COVID-19, some 44 million U.S. workers—or 28.2% of the workforce—were self-employed at some point in 2019, according to research by Gallup. A different 2019 MetLife study had found that 85% of gig workers had said they would continue working in this fashion in the next five years. Today, Gallup estimates the number of gig workers has risen to 36% of the U.S. workforce, or about 59 million Americans.

The prevalence of gig workers also depends on geographic regions and job sectors. A study by the Aspen Institute found gig workers are most likely to reside in mountain and Pacific states, with the lowest concentration living in Northeast and Upper Midwest states.

Culley notes that more gig workers are in the western regions of the United States, and nationally there are more gig employees in urban areas, ostensibly due to a greater number of opportunities. An overrepresentation of the gig workforce resides in California, particularly in major cities such as Los Angeles and San Francisco, she says.

Specific sectors of the workforce are also seeing an influx of gig workers, particularly the information technology (IT) and health care spaces.

A ProUnlimited study found IT analysts increased their representation in the gig economy by 43% in 2020, while IT/tech project managers rose by 23%. Clinical pharmacists rose by 18%, data engineers by 31%, marketing managers by 18% and designers by 9%.

“One of the things that the pandemic has done is force more flexibility on workers and companies,” Culley adds. “Many people have had to find jobs that are more flexible, and I think employers are really going to have to think about what this means for the long term. Many employees will find that they want to maintain a more flexible schedule.”

Compliance April 28, 2021

No Fiduciary Breach Found Against Plan Sponsor, Provider in Benefits Estimate Suit

However, the 9th Circuit contemplated whether an online request is considered a 'written request' under ERISA, and attorneys say the ruling has broad implications.

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The 9th U.S. Circuit Court of Appeals has handed down a decision in a case that employee benefits attorneys are saying has wider implications for retirement plan sponsors and providers in an increasingly digital environment.

According to the opinion, Northrop Grumman delegated administration of its defined benefit (DB) plan to an administrative committee, which in turn contracted with Hewitt Associates, now known as Alight Solutions, to provide outside administrative services for the plan. One of Hewitt’s responsibilities was to generate statements for plan participants showing what their monthly pension benefit would be when they retired, using participant-entered assumptions.

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The plaintiffs in the case requested these statements in the years leading up to their retirement using an online platform provided by Hewitt, and Hewitt mailed the statements to them on Northrop letterhead. After the plaintiffs retired and began collecting benefits in the amount the statements predicted they would, Northrop sent them notices that the statements generated by the online platform had been incorrect.

The errors in the calculation were discovered in 2016, during a transition to a new recordkeeper. In December 2016, one plaintiff was informed that his monthly retirement benefits would only be $807.89 per month rather than $2,000. In February 2017, the other plaintiff was informed that her monthly retirement benefits would be $823.93 per month rather than $1,600, and that she was required to repay more than $35,000 of the benefit she had already received.

The plaintiffs filed separate lawsuits which were combined into one. They alleged that Hewitt, the committee and Northrop had breached their fiduciary duties under the Employee Retirement Income Security Act (ERISA) and that the committee had failed to provide ERISA-required benefit information.

On appeal from the U.S. District Court for the Central District of California, the 9th Circuit agreed with the District Court that the calculation of benefits pursuant to a formula is not a fiduciary function. “We hold that plaintiffs have not alleged that Hewitt was performing a fiduciary function in miscalculating retirement benefits. As a result, Northrop and the committee did not breach a fiduciary duty by failing to ensure that Hewitt correctly calculated plaintiffs’ benefits,” the appellate court opinion states.

The 9th Circuit affirmed the District Court’s dismissal of the plaintiffs’ fiduciary duty claims against Northrop, the committee and Hewitt. “Calculation of pension benefits is a ministerial function that does not have a fiduciary duty attached to it,” the appellate panel said. “Even if Hewitt were a functional fiduciary with respect to some of its actions, it would not have been acting as a fiduciary when performing calculations according to the plan formula.”

Regarding the allegation that the committee had failed to provide ERISA-required benefit information, the District Court found that the plaintiffs did not adequately plead that they submitted “written” requests for pension benefit statements as required to state a claim for violation of ERISA. Although the 9th Circuit held that use of an online platform to request a pension benefit statement can satisfy the “written” request requirement, it upheld the District Court’s dismissal because the complaint did not allege that the online platform request was “written.”

Noting that no circuit has addressed whether a pension benefit estimate request via an online portal is sufficient to constitute a “written request,” the 9th Circuit said the District Court was correct to the extent that the bare allegation that the plaintiffs used an online platform to request a pension benefit estimate does not satisfy the “written request” requirement. However, it also concluded that “the statute does not limit adequate requests to only those written by hand on a piece of paper and conveyed in the postal system. In other words, an adequate electronic writing suffices.”

In an alternative to their ERISA claims, the plaintiffs asserted state-law professional negligence and negligent misrepresentation claims against Hewitt. The appellate court agreed with the District Court’s holding that plaintiffs’ state-law professional negligence and negligent misrepresentation claims were not pre-empted by ERISA because they did not have a “reference to or connection with” an ERISA plan. It said “the state-law negligent misrepresentation claim relates only to the relationship between plaintiffs and Hewitt.”

This would allow the state-law claims to move forward. However, the appellate court noted that the defendants’ briefs include attacks on the merits of the state-law claims, which the District Court did not address, so it remanded the claims back to the District Court for consideration.

In an article, Jackson Lewis attorneys said: “This case has important practical implications for plan fiduciaries and plan recordkeepers and their relationship to each other. These concepts are not limited to pension plans. Electronic systems, portals and online tools are now the primary way employee benefits are offered and administered and need to be closely managed for compliance with the requirements of ERISA and the plan.”

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