Americans for Tax Reform on Tuesday submitted comments to the Wage and Hour Division of the Department of Labor (DOL) in support of the rights and freedoms of independent contractors.
The comments expressed concern over the DOL’s decision to overturn the 2021 independent contracting rule and institute new, more restrictive regulations on what constitutes independent contractor designations. If implemented, the proposed rule has the potential to cause broad disruptions to the labor market and force Americans out of work.
The proposed rule would change the factors which are analyzed when determining whether a worker should legally be categorized as an independent contractor or as an employee, adding emphasis to more subjective factors such as whether work performed by an independent contractor is “central or important” to a business. It would also broaden employment determinations to apply in cases of mere theoretical control by a company, as the rule would “not [limit] control to control that is actually exerted.”
In effect, the DOL’s proposed changes would make it more difficult for workers to freely identify as independent contractors, instead forcing these workers to either be classified as employees or cease their work altogether.
These changes would prove highly unpopular among the vast majority of current independent contractors. As outlined in the comments:
According to Bureau of Labor Statistics data, 79 percent of independent contractors prefer their current work arrangement, compared to fewer than one in ten who would prefer more traditional work arrangements. Freelancers also reported higher overall job satisfaction, including in areas like work-life balance, than their non-freelancing counterparts.
Similar opinions were found among app-based ridesharing and delivery drivers in California amid the state’s 2020 fight over Proposition 22, which affirmed that such drivers should be treated as independent contractors rather than be forced into less flexible work arrangements. In a survey, 72 percent of the drivers supported California Proposition 22. Nine in ten drivers said they started driving so that they could have the flexibility of when and where to work, and 68 percent said they would have to stop their work if the state tried to force them into fixed employment arrangements.
Concerningly, the DOL’s proposed rule would have negative economic ramifications for American workers and small businesses alike, as the comments explain:
Small businesses would be the most hard-hit. While certain large companies may be able to weather the economic headwinds that new misclassifications of contractors as employees would bring, small businesses are much less able to absorb new labor costs. Many could be forced to shut down if they are forced to cease their collaborations with independent contractors as a result of the proposed rule.
Regardless of company size, however, layoffs would be inevitable. For example, one analysis of California’s attempt to reclassify app-based rideshare and delivery drivers as full-time employees estimated that such a regulatory change would lead to a 76 percent decrease in active drivers across the state.
The comments follow a letter earlier this year to U.S. Secretary of Labor Marty Walsh signed by Americans for Tax Reform alongside 40 other organizations, who argued that “[r]educing paths to self-employment will only reduce opportunity and growth in the 21st century.”
ATR’s comments to the Department of Labor similarly conclude:
As the country continues on its path out of the economic devastation of the COVID-19 pandemic, it is essential that worker freedoms and flexibility are protected and that American families are not barred from earning a living through their preferred form of employment or self-employment. With the vast majority of current independent contractors making clear that they would prefer to remain as independent contractors, the DOL should reject the proposed rule changes which would jeopardize the ability of countless workers to continue working for themselves.
Read ATR’s full comments on the proposed rule here.