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Freelance workers’ rights in jeopardy under new Biden labor rules
New worker classification could put millions out of work
Jun. 26, 2022 9:00 am
My surprise career as a journalist started in March of 2021, when I began a one-year editorial fellowship with this publication. My offer letter outlined that I would be not be a company employee but rather an independent contractor, a.k.a. “freelancer,” an arrangement I preferred. Ironically, the piece I’d submitted as part of my application for the position, published just the day before as a guest column, was about the threat that independent contractors face from the illusively-named Protecting the Right to Organize (PRO) Act.
The PRO Act is a proposed federal law which is best described as a giveaway to powerful labor unions that contribute millions to the Democratic Party to further their interests. It would undermine state right-to-work laws that protect workers who don’t want to join a union or be forced to pay so-called “fair share” fees. It would also obliterate a willing person’s right to work as an independent contractor.
Luckily, the PRO Act doesn’t have enough support to move forward in the U.S. Senate. But the fight for freelancers to retain their livelihoods continues, as the Biden Administration is apparently looking to implement part of the PRO Act using bureaucratic methods.
Early this month, the Department of Labor (DOL) announced that it is in the process of developing a rule to determine independent contractor status under the Fair Labor Standards Act (FLSA) to address what they claim is “misclassification” of employees as independent contractors. The “cornerstone” of that law, they claim, is “the Act’s broad definition of ‘employ.’”
Misclassification of employees as independent contractors can indeed happen. When it does, it can mean that a worker is denied appropriate pay and benefits. But when that freelancer status is not only voluntary but favored by both the worker and the company for the mutual benefit of all involved parties, it hardly makes sense to effectively prohibit that manner of employment by subjecting it to standards that are almost impossible to meet.
That’s exactly what many freelancers fear will happen if new DOL rules impose the stringent “ABC” test President Biden’s electoral campaign touted. Under the ABC test, a business must prove that the worker meets all of three separate criteria in order to qualify as an independent contractor:
•The worker is free from the employer's control or direction in performing the work
•The work takes place outside the usual course of the business of the company and off the site of the business
•The worker is engaged in an independent trade, occupation, profession, or business of the same nature as that involved in the work performed.
Meeting those standards is virtually impossible. Once reclassified, most independent contractors would either be forced into traditional employment under terms likely less favorable than freelancing or be out of that work altogether.
Such an impediment has already proven disastrous at the state level. In California, Assembly Bill 5 (AB5) touted protections for gig workers such as Uber, Lyft, and Doordash drivers. It contains the same ABC test Biden lauds. Almost immediately after it took effect in January of 2020, freelancers of countless professions—nurses, therapists, translators, writers, IT experts, business consultants, event planners, musicians, and many others—lost their ability to continue working.
Many of those workers had chosen freelancing because of circumstances that made regular full-time work untenable, such as chronic illness or family caregiver responsibilities. (Importantly, Californians who lost their work from the AB5 fallout had already turned to independent contracting well before onset of the COVID-19 pandemic, which has only amplified the need for those flexible work options.) Those workers stand to lose the most by losing their rights to work as independent contractors—ironically, in the name of allegedly protecting workers from being exploited by big corporations.
One misconception is that businesses who use contractors do so primarily so they can get away with not paying as much in wages or benefits and avoid paying worker’s compensation and unemployment benefits. But a survey of 1,178 HR professionals, of which 975 reported using “external workers,” showed that fewer than 20 percent indicated that their companies were hiring them to save money. Cost saving didn’t even rank in the top three most of the common reasons for using external workers.
Instead, over half of those companies who rely (in small part) on outside contractors cited the ability to quickly adjust their workforce based on the demands of their businesses. Nearly half also cited “access to specialized talent with specific skills or expertise.” In a survey for Upwork, an organization connecting companies with independent contractors, 53 percent of all freelancers provided skilled services such as computer programming, marketing, IT, and business consulting last year. They were also educated: 51 percent of “post-grad” workers became freelancers.
In a time when companies are desperate for reliable workers to meet the demands of their businesses, the pool of independent contractors is vast: 59 million Americans, more than one third of the workforce, performed some sort of freelance work in 2021. Even more are considering it—of the 6,000 workers surveyed by Upwork, “56 percent of non-freelancers say they are likely to freelance in the future.” It’s no surprise that the option seems so attractive, considering that 44 percent of freelancers surveyed said they made more money than at a regular job.
The Great Resignation has seen regular employees leave behind in droves what was once the gold standard of employment—regular hours, paid leave and group health coverage—in exchange for the greater reward of freedom, flexibility and the potential for better pay as a freelancer. As more and more workers opt to be their own bosses and choose their own work, project by project, it is imperative to the American economy that companies be able to hire those workers as contractors.
For me, freelancing as an opinion contributor meant not only a nice little paycheck and a use of my talents—it also opened a door to a brand new career that I never would have otherwise dared to consider. Millions of other talented and motivated individuals are ready to pursue their own opportunities. Will the Department of Labor wise up to the evolving nature of our workforce? Or will bad policy destroy the dreams of countless American professionals?
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