Biden Administration Aims to Stifle Crucial Self-Employment

The Biden administration is at it again, doing the bidding of Big Labor by placing restrictions on independent contracting that will prevent self-employed professionals from pursuing their livelihoods and careers. Freelancers on social media are actively tweeting: #WhatTheHellDOL?

On October 11, 2022, Biden’s Department of Labor (DOL) announced plans to withdraw the Trump-era rule that determines who can be an independent contractor under the Fair Labor Standards Act. Instead, they want to replace this common-sense rule with a regulatory workaround that tightens the screws on the independent workforce.

Some of the new language harkens to California’s disastrous AB5 law, specifically whether the work performed is “central” to a company’s business. This wolf-in-sheep’s-clothing wording is similar to the infamous B-prong of California’s strict ABC worker classification test, which requires that the work performed be “outside the usual course” of the hiring entity’s business.

In its 184-page proposal, DOL laments the fact that it cannot impose California’s ABC test per statute outright, but they do everything short of imposing the test, regardless. AB5’s highly restrictive B-prong has put hundreds of thousands of career professionals in California out of business permanently, and continues to wreak havoc in the Golden State. 

While attempting to spin the new rule as something that won’t negatively impact legitimate businesspeople, Biden’s DOL reveals its true colors by asserting that having an LLC or being incorporated is irrelevant when determining independent contractor status. Additionally, DOL’s obsession with so-called “permanent” contracting arrangements all but eliminates having a long-term client even for six months—the very business relationships independent professionals earn via dependability, talent, and quality of work.

Before bringing California’s chaos to the entire nation, Biden’s DOL clearly did not examine the cautionary tale of AB5, which has harmed far more people than it’s helped and continues to hurt hard-working Californians, including 70,000 independent owner-operator truckers now under its purview.

Even before AB5 went into effect in January 2020, desperate stories of lost livelihoods came pouring in from across the political spectrum and from all incomes, demographics, and professions. Members of the ad hoc, all-volunteer group, Freelancers Against AB5, have since identified more than 600 categories of professions impacted negatively in some way by this onerous law. Hundreds of stories of devastation are documented in the group and elsewhere—stories that will be replicated across the nation if Biden’s DOL has its way.

Some of the most heartbreaking stories come from the most marginalized communities. The freelance transcriptionist profession in California, for example, is virtually extinct because of AB5, hurting mostly women and seniors who dominate that field. Freelance sign-language interpreters report that AB5 has reduced access to essential services for the deaf and hard of hearing. People with disabilities or chronic illnesses are also affected, unable to enter the traditional workplace rather than being self-employed and working from home. Because of ageism, seniors now struggle to find work after losing their once-thriving self-employment opportunities to AB5. Also impacted are family caregivers who rely on home-based careers that allow them to stay at home and earn a living while also caring for a loved one.

AB5 is particularly harmful to the non-profit arts sector in California. Opera companies, performing arts groups, small-and mid-sized theaters, dance studios, children’s theaters, and afterschool programs struggle to stay afloat or have closed their doors altogether because of AB5. The cost of putting everyone on payroll can increase the budget of a single production by 30% to 40%. Other sectors hard hit by AB5 include independent filmmaking, the spa & wellness community, and independent healthcare professionals.

The adverse effects of AB5 aren’t just about freelancers, however. California’s small businesses, which comprise 99.8% of all businesses in the state, incur massive fines and penalties for alleged misclassification violations that can put them out of business for contracting a videographer, music teacher, consultant, or IT specialist, to name a few. Single-person businesses and mom-and-pop shops are the frequent targets of California’s Employment Development Department’s aggressive and costly worker classification audits — everyone from florists and music-store owners to architectural designers, videography platforms, tutoring businesses, and event planners.

With no end in sight to inflation and rising gas prices, Americans now more than ever rely on income-generating options, side gigs, and entrepreneurial opportunities. What Americans don’t need is the government clamping down on small businesses and careers, depriving the average person freedom of choice to be their own boss. The Trump-era rule for defining an independent contractor under the Fair Labor Standards Act should remain in place and continue to provide practical guidelines so that independent professionals can not only survive, but thrive.