Biden’s Continued Attack on Independent Work

• 50 percent of Hispanic workers engage in independent work.
• The Department of Labor’s new independent contractor rule would make it much harder to be classified as an independent worker and would likely lead to many of these workers being reclassified as employees or lose their livelihoods entirely.
• Up to 26 percent of independent workers are Hispanic, and 14 percent of independent workers are Black.
• 80 percent of independent workers prefer their current arrangement to traditional employment
• 87 percent are happier working on their own.

(Isabel Soto – Policy Director) 36% of the U.S. workers are involved in the independent workforce. Independent workers are also referred to as gig workers, freelancers, independent contractors, and self-employed workers. This kind of work is done outside of a traditional employer-employee relationship. As a result, the hiring entity is not required to provide certain benefits, but the worker has far more control over how and when they work. Independent workers are represented across practically all industries in the economy and choose to engage in independent work in a variety of different ways. For some, being an independent contractor is their main or even sole source of income, for others it can be a hobby, or provide supplemental income on top of what they earn from a traditional job.

There are numerous benefits to independent work namely schedule flexibility and the freedom to, in many cases, have significant control over the prices for your own work or projects. Due to these benefits, there are certain groups that tend to make use of this important and dynamic type of work who otherwise may not be able to be in the labor market at all. Parents of young children for example may choose to stay at home instead of paying for childcare. Independent work allows them to work when they want while also being able to be caregivers. Individuals with disabilities also benefit significantly from a flexible work model. Further individuals from minority populations are also likely to use independent work to provide supplemental income with and estimated 40 percent of African American and 50 percent of Hispanic workers engage in independent work.

Based on this survey data and the latest Bureau of Labor Statistics data on Hispanic, Black and total employment, LIBRE analysis finds that 26 percent of all independent workers are Hispanic, and 14 percent of independent workers are Black. Other surveys and analysis have likely underestimated the size of the Hispanic independent workforce because surveys were conducted only in English. The data used to estimate the share of Hispanics in the independent workforce uses data form a survey that was done in both English and Spanish.

This system of work provides so many benefits to workers across the economy with a low barrier to entry, potential for growth, and supplemental income. Further, independent work often acts as a catalyst for entrepreneurship and can lead to hiring as opportunities for growth emerge. It would logically follow that workers should be allowed to make decisions for themselves, and external interest groups or government should not be making it harder for individuals who want to work to do so in the way that works for them.

Sadly, the Biden Administration has, at every turn, attempted to put limits on independent work through reclassification efforts. Despite an overwhelming number of independent workers, nearly 80 percent, stating they prefer their current arrangement of a traditional employee-employer arrangement, Biden’s effort to limit these work opportunities has not stopped. Not only is there a clear stated preference for this type of work from those involved, but further 87 percent of independent workers are happier working on their own and 80 percent state this type of work is better for their mental health. This administration has failed countless times to force reclassification through congressional means, so they have now turned to rule-making through the Department of Labor.

On January 10th, the Department of Labor published a final rule on independent contracting that is scheduled to go into effect on March 11th. In short, the rule, assuming it goes into effect would define the term “independent contractor” under the Fair Labor and Standards Act. This new independent contractor rule narrows the definition meaning that it would force the reclassification of some contractors to full employees. Being classified as an employee triggers coverage by wage-and-hour laws and an individual is then covered by the FLSA. Classification from contractor to employee would disrupt millions of lives by limiting how individuals do their work and further, it drives up costs on the employer side.

There are businesses whose model is largely built around flexibility that is a feature of independent work. With a sudden and rapid rise in costs that would come with compliance with the new rule, there would likely be layoffs across industries as employers of all sizes mitigate the new costs that were not present prior to the rule. The justification for the new rule is allegedly to protect workers. It is unclear who precisely is being protected since it has been made abundantly clear that independent workers do not want this and it actively hurts their ability to work and make a living,

One of the worst parts of this new rule is that reclassification has already been tried and it had disastrous effects. In California, Assembly Bill 5 (AB5) was passed which made it much harder to be classified as an independent contractor. What followed were mass layoffs, limits on what were once flexible schedules and regulations surround the amount of work individuals could do to continue being independent. New research found that not only did self-employment drop, but so did overall employment.

This new report quantified the employment losses in the wake of AB5 finding that self-employment dropped by 10.4 percent and overall employment fell by 4.4 percent.
Despite reclassification being a disaster on the state level, now the Biden Department of Labor is hoping to attempt a nationwide reclassification effort.

Fortunately, there are efforts to stop the Department of Labor rule change from taking effect. The founders of Fight for Freelancers are seeking an injunction to stop the rule from taking effect. The group, which is a coalition of over 2,500 independent workers has come together to protect their freedom and livelihoods from reckless government regulations. Senator Bill Cassidy M.D. (R-LA) is also fighting against the DOL rule change and plans to introduce and Congressional Review Act resolution that would repeal it. Additionally, Congressman Rick W. Allen (R-GA) and Senator Tim Scott (R-SC) introduced the Employee Rights Act which would protect worker flexibility and honor the preferences of independent workers to remain independent in addition to pushing back on other regulations that would ultimately harm workers as well as small businesses.

The Department of Labor rule is simply the latest in a long list of terrible ideas to drastically change the U.S. labor market and hand over more control to regulators. Rather than focus on where the labor market was 20 or 30 years ago, policies should be focused on where we can go in the future. Ensuring that legislative proposals focus on what workers actually need and are asking for ensures the success of those individuals, their families and the businesses they work with.

Due to the significant benefits that come from independent work including opening up the labor market to individuals who can’t engage in the traditional employment system, providing more freedom and flexibility, and being a dynamic part of the labor market, that workers want and enjoy, the LIBRE Initiative is strongly opposed to measures to reclassify independent contractors. The Department of Labor Rule infringes on individuals’ choices on how they want to work, limits flexibility, and increases barriers to entry. True worker empowerment is letting individuals choose how they want to work and provide for themselves and their families. Labor legislation should be focused on expanding opportunities for labor market engagement not limiting who should be working and how.

Isabel Soto – Policy Director, The LIBRE Initiative