Late last month, President Biden issued a memorandum freezing all previous administration rulemaking efforts. This, unfortunately, included the Department of Labor’s (DOL) much-lauded worker classification rule, which sought to clarify who is an independent contractor or an employee under federal labor law. The White House is now in the position to make substantial regulatory changes on this front that could leave many independent contractors and aspiring entrepreneurs fearful of losing their livelihoods.
When Boston Mayor Marty Walsh is confirmed as DOL secretary, he and Biden will have a crucial decision on their hands: They can maintain the current labor policies that protect workers’ freedom and grow the economy or institute a bevy of new partisan restrictions that presume everyone wants to be an employee. It’s a choice between economic strength and political division — one that will set the tone for the administration moving forward.
Walsh should choose worker freedom. With the economy in its current state, the DOL is in no position to cut jobs or force workers into a classification status that could hurt their ability to earn a living.
Given Biden’s previous statements on the issue, it is likely that the new administration will utilize the DOL’s authority to impose federal regulations restricting independent contractor work. Indeed, a federally mandated ABC test would define these contractors practically out of existence by forcing them to identify as employees. This distinction might sound like semantics, but it’s very important. Just look at California’s A.B. 5, a bill that voters rejected through Prop 22 after seeing its devastating effects throughout the state.
Across the United States, between 10.5 to 15 million Americans – nearly 10 percent of the workforce – are independent contractors. Different from traditional employees, these workers are their own bosses. They set their own hours, determine their own working standards and conditions, and remain free to quit and resume work whenever they choose. For millions of Americans this work arrangement is essential. It couples earning potential with freedom and flexibility unrivaled by traditional employment.
Unfortunately, many legislators mistakenly believe that contractor work is somehow inferior to employee status as they seek to regulate it out of existence. California’s A.B. 5, which utilized the ABC test, established such rigid regulations on worker classification that workers in many industries – doctors, realtors and even actors – voiced their strong preference to keeping the flexibility to maintain their own schedules. Regardless of political affiliation, forcing all workers into a one-size-fits-all employee box threatens every sector of the economy.
These legislators apparently fail to realize that, whether it’s contracting full-time or part-time, independent work provides a vital, co-equal alternative to life as an employee. But labor regulations from the new administration would directly threaten this principle. If implemented, new DOL labor restrictions could price millions out of the job market through costly rules, preventing millions of Americans from earning a living in their chosen field. Amid the pandemic and America’s current economic challenges, that is simply unacceptable.
Through Marty Walsh and the Department of Labor, President Biden has the power to undo the progress that independent contractors and gig workers have made, progress that has served as an engine for economic growth over the past decade. But that doesn’t mean he should. Restrictions like a federal ABC test might satisfy the administration’s political allies, but it will only hurt everyday Americans. Biden should seriously consider the impacts any similar regulation will have on the economy.
Outside of partisan political considerations, there seems to be no real reason to institute further regulations on worker classification. Doing so would create more confusion, fear and economic turmoil at a time when we can least afford it. Conversely, rejecting the prospect of additional regulation helps to safeguard the livelihoods of some 15 million Americans and aids economic recovery, factors the Biden administration would be wise to consider.
Gerard Scimeca is an attorney and co-founder of CASE, Consumer Action for a Strong Economy, a free-market consumer advocacy organization.