Earlier this month, the Labor Department announced it would proceed with rewriting a popular Trump-era independent contractor rule.
Jessica Looman, acting DOL Wage and Hour Division Administrator, wrote in a June 3rd blog post, “The misclassification of employees as independent contractors is one of the most serious problems facing affected employees, employers and the U.S. economy.”
After the U.S. District Court for the Eastern District of Texas ruled the department violated the Administrative Procedure Act of 1946 for offering a 19-day comment period on the “delayed” IC rule, Looman claims the agency now wants to engage the American public on this issue and announced two forums:
The Department now plans to engage in rulemaking on determining employee or independent contractor status under the FLSA. We remain committed to ensuring that employees are recognized correctly when they are, in fact, employees so that they receive the protections the FLSA provides. At the same time, we recognize the important role legitimate independent contractors play in our economy. We need to hear from workers and employers as we develop our proposal. Therefore, we will hold public forums in June to hear diverse perspectives from those who may be affected by employee or independent contractor classification.
At a recent appearance before the House Committee on Education and Labor, Secretary Marty Walsh defended the Biden administration’s obtuse approach to worker misclassification.
“Nineteen million people don’t choose to be independent contractors all across the board,” Walsh said. “Some of those folks are being forced into those different jobs thinking that they were hired as employees. What we want to do is making sure that workers who do choose to work as independent contractors have the protections they have and workers who want to be employees should be treated as employees.”
Rep. Elise Stefanik responded, “If you truly wanted to address this misclassification, we should leave the Trump administration rule in effect as it provided clear rules for workers and employees on what constitutes an employer-employee relationship and when a worker is an independent contractor.”
As I noted at Townhall recently, the Trump-era rule clarifies a worker’s status under the Fair Labor Standards Act to not make workers default employees. Worker status, in turn, can be determined by an economic realities test using the following factors: “degree of control of work”; “the individual’s opportunity for profit or loss”; “the individual’s investment in facilities and equipment”; “the permanency of the relationship between the parties”; “the skill or expertise required by the individual; and “whether the work is part of an integrated unit of production.”
Much to the chagrin of Biden, Walsh, and Looman, public opinion is favoring independent contractor arrangements. I explored this in a January 2022 blog post:
Sixty-two percent of respondents to Pew’s survey described ride-sharing app workers as independent contractors, compared to 35 percent who said these drivers should be classified as employees. The partisan split on this question was stark. Center-left respondents agree with the latter, while center-right respondents agree with the former characterization.
With respect to gig worker self-perceptions, the Pew study similarly found that 65 percent see themselves as independent contractors compared to 28 percent who consider themselves employees.
Similarly, policymaking favoring unions (a shrinking workforce) over freelance workers would give the former undue influence in the economy.
With the Great Resignation and Great Reshuffle taking hold of the economy, full-time workers are voluntarily trading their 9-to-5 jobs for contract work that is more flexible and fulfilling–and, in many cases, higher paying.
In fact, economic forecasters predict the freelance workforce may exceed 91 million members by 2028.
The future is freelance, and rulemaking should reflect economic trends going in this direction—not work to undermine them.