Freelancers Shouldn’t Be Regulated Out Of Existence

Despite Americans ditching traditional jobs for flexible work arrangements, millions of freelancers — including independent contractors — are at risk of being displaced from the workforce if regulators succeed in reclassifying workers as employees.

The 3-2 Democrat-led National Labor Relations Board (NLRB), the federal agency tasked with remedying “unfair labor practices” committed by private-sector employees and unions, wants to rework the current independent contractor standard framework by exchanging the common-law test for an ABC test. The established test is used by the Internal Revenue Service (IRS) to assess the level of control and independence a worker has over their work, while an ABC test mandates workers meet three criteria to avoid being classified as employees.

If the NLRB succeeds in retooling laws pertaining to worker status, freelancers risk being regulated out of existence.

First, the NLRB is limited in its power to redefine the independent contractor standard, affirmed in SuperShuttle DFW Inc. (2019), for determining a worker’s status. It has no authority over independent contractors, as they fall under the purview of the Fair Labor Standards Act and not the National Labor Relations Act.

Therefore, it cannot regulate all workers as employees under an ABC test, the likely replacement to the current common-law test.

The SuperShuttle DFW Inc. decision ruled a worker’s status should be viewed through the “prism of entrepreneurial opportunity” under a traditional common-law agency test — allowing for greater latitude to not be classified as an employee. This ruling found the traditional common-law agency test, not an ABC test, should apply here.

The board’s majority agrees with the Biden administration’s contention that there’s rampant misclassification in the workplace. But their assertion is unfounded. In response, several amicus briefs from freelancers, congressional Republicans and advocacy groups were filed in support of maintaining existing rules.

Second, reworking the “traditional” common-law test for an ABC test is unlikely to pass legal muster either.

In their amicus brief to the NLRB, the ad-hoc coalition Fight for Freelancers cautioned the board against using regulatory workarounds like the ABC test, which is included in the stalled Protecting the Right to Organize (PRO) Act. In their words, replacing the existing worker test “would be unlikely to survive judicial review by the U.S. Supreme Court.”

In FedEx Home Delivery v. NLRB (2009), the DC Circuit Court determined “the Board has no authority whatsoever over independent contractors.” The Obama NLRB failed to adhere to the 2009 decision and was later rebuked again. In 2017, the Court of Appeals concluded in FedEx II “the indicia of independent contractor status ‘clearly outweighed’ the factors that would support employee status.”

Legal experts have similarly warned the NLRB that challenges to these decisions will have a difficult time surviving appellate review.

Moreover, there’s a disconnect between regulators’ and lawmakers’ perceptions of worker misclassification and reality. The truth is freelancers don’t want to be liberated from independent contracting and saved by labor unions. In fact, most flexible workers reject these assertions as misinformation.

According to Pew Research Center’s “The State of Gig Work 2021” survey, a majority of Americans view gig workers as independent contractors. Moreover, a majority of gig workers surveyed by Pew viewed themselves as independent contractors — with 65% self-identifying this way, and 28% self-identifying as employees.

Flexible workers are largely “independent by choice.” They also overwhelmingly report better overall mental health.

If the NLRB ultimately decides to repeal SuperShuttle DFW Inc., it risks undermining an economy trending increasingly toward freelance and non-unionized labor.

The U.S. workforce is enthusiastically considering freelance jobs while the unionized workforce, despite fawning media coverage and a Big Labor boost, is unsurprisingly shrinking. In 2021, the former stayed constant at 36%, or 59 million participants. Alternatively, the union workforce shrunk from 10.8% in 2020 to 10.3% of the workforce (or 14 million participants) in 2021.

In wake of the Great Resignation (now evolving into The Great Reshuffle), 10 million workers are contemplating entering the freelance economy and rejecting unionized work. Of all economic sectors affected by the pandemic, self-employed workers grew by 500,000 members since the pandemic began.

As a full-time freelancer, my independent contractor status awards me freedom and flexibility unseen in 9-to-5 jobs. I have no desire to be liberated from my current work arrangement.

The NLRB risks displacing millions of workers like me from fulfilling, prosperous, growing careers. Erasing the livelihoods of legitimate workers to appease Big Labor special interests will undermine entrepreneurship going forward.