Photo by US Department of Labor is licensed under CC BY 2.0: https://bit.ly/3Hoy70a
Americans for Tax Reform joined alongside 30 likeminded organizations in signing a coalition letter against a harmful Department of Labor (DOL) final rule, which radically alters how employment status is defined under the Fair Labor Standards Act (FLSA).
Read the full letter below or by clicking here.
Dear Members of Congress,
On January 10, 2024, President Biden’s Department of Labor (DOL) under Acting Secretary Julie Su published a final rule significantly amending how the DOL determines employment status under the Fair Labor Standards Act (FLSA). On behalf of the undersigned organizations and a 70 million strong freelancing workforce in America, we urge you to consider how this economically damaging rule, which demonstrates administrative overreach, will impact American workers.
Tens of millions of Americans earn income as self-employed workers across a broad spectrum of industries including transportation, construction, health care, education, entertainment, finance, legal work, housing, agriculture, and more. Additionally, many independent contractors start and run small businesses that employ tens of millions of additional workers that fuel the economy of countless American communities in all 50 states.
These self-employment pathways not only lead to increased income for many workers, but they also provide the additional flexibility needed to raise children as well as deal with personal and family health issues. Traditional employment often makes it prohibitively difficult to adequately address these competing priorities. Look no further than the 12 million women-owned businesses in the U.S. for victims, 90 percent of which are non-employer businesses. It’s no wonder a Bureau of Labor Statistics (BLS) survey showed that “fewer than 1 in 10 independent contractors would prefer a traditional work arrangement.”
The new Biden DOL rule will end many self-employment and small business careers by improperly classifying many independent contractors as employees against their will. Just as concerning, this rule contains new confusing and subjective criteria for determining employment status, which will have a chilling effect on businesses and individuals that will decline to form new productive relationships because they are unable to navigate regulatory requirements rife with gray areas. Many small businesses and even charities may struggle to keep operating, unable to use contractors for limited services anymore or to afford to hire traditional employees without stable, permanent roles for them.
Issues with the rule include:
● De-emphasizing a focus on the core factors of the “nature and degree of control over the work” and the “worker’s opportunity for profit and loss,” instead claiming to equally consider six factors, many of which have subjective definitions and emphasis points that have never previously been used.
● Emphasizing strong consideration of not just evidence of direct control but even reserved or theoretical control, imposing a chilling effect on businesses and workers who are fully committed to compliance but unable to navigate unpredictable DOL regulatory oversight.
● Diminishing the value of certain types of earnings, initiative, and investment when considering the independent status of a worker in order to give DOL greater ability to restrict contracting.
DOL argues that this new rule is “more consistent with judicial precedent and the Act’s text and purpose” and focuses on adding new criteria to existing “economic realities” test factors. Instead, the rule constitutes a shift towards more restrictive, confusing criteria with interpretations left to the whims of agency bureaucrats that undermine the right to earn a living as a self-employed worker.
It is well documented that President Biden and Acting Secretary Su are strong supporters of destructive “ABC tests” such as the one Acting Secretary Su helped implement in California while serving as the state’s Secretary of Labor. Recent research from the Mercatus Center now indicates that the Assembly Bill 5 law in California that instituted an ABC test is now associated with an over 10.5% drop in self-employment and an overall 4.4% drop in employment in affected industries, foreshadowing the type of harm this new rule may impose on employment across America.
Acting Secretary Su’s support of California’s law restricting independent contracting undoubtedly played a significant role in Congress choosing to reject her nomination to become Secretary of Labor. Congress can now reject her attempt to foist this regulation with a similar intent onto the American people.
In order to prevent the lost economic opportunity and flexibility American families enjoy from self-employment careers, the Congressional Review Act can stop the implementation of this very damaging rule. We hope that Congress will fight to protect independent contracting in America.
Sincerely,
Paul Teller – Executive Director, Advancing American Freedom
Rachel Oglesby – Director, Center for the American Worker, America First Policy Institute
Emily Paulsen – President, American Society of Journalists and Authors
Richard Manning – President, Americans for Limited Government, Americans for Limited Government Foundation
Austen Bannan – Employment Policy Fellow, Americans for Prosperity
Grover Norquist – President, Americans for Tax Reform
Tom Manzo – President, California Business and Industrial Alliance, Save Independent Work Coalition
Daniel Mitchell – President, Center for Freedom and Prosperity
Diana Petrak – Founder, Colorado Policy Pathways
Sean Higgins – Research Fellow, Competitive Enterprise Institute
Ildikó Santana – Freelance Translator, Cypress Language Services
Maxford Nelsen – Director of Research and Government Affairs, Freedom Foundation
Karen Anderson – Founder, Freelancers Against AB5
Ryan Walker – Executive Vice President, Heritage Action For America
Mario H. Lopez – President, Hispanic Leadership Fund
Mailee Smith – Senior Director of Labor Policy, Illinois Policy Institute
Carie Lukas – President, Independent Women’s Forum
Vincent Vernuccio – President, Institute for the American Worker
Andrew Langer – President, Institute for Liberty
Alfredo Ortiz – President & CEO, Job Creators Network
Jacob Huebert – President, Liberty Justice Center
Mark Janus – Senior Fellow, Liberty Justice Center
Isabel Soto – Policy Director, Libre Initiative
Steve Delie – Director of Labor Policy, Mackinac Center for Public Policy
Brandon Arnold – Executive Vice President, National Taxpayers Union
Mike Hruby – President, New Jobs America
Tom Hebert – Executive Director, Open Competition Center
Karen Kerrigan – President & CEO, Small Business & Entrepreneurship Council
Tracie Sharp – President & CEO, State Policy Network
Derrick Max – President and CEO, Thomas Jefferson Institute for Public Policy
Shannon Meade – Executive Director, Workplace Policy Institute