Imperiling Worker Freedom at the Department of Labor

D r. David Weil, the former Obama administration Department of Labor Wage and Hour Division administrator, is vying for his old job yet again. Unfortunately, his selection would imperil small-business creation and freelancing in the U.S. 

The Wage and Hour Division administrator is tasked with enforcing federal minimum-wage, overtime, and family-leave laws under the Fair Labor Standards Act (FLSA). 

After failing to confirm him last summer, the White House renominated Weil on January 4 — a move that has drawn the ire of Republican lawmakers and business leaders. Such opposition today turns on his left-wing positions, his lack of private-sector experience, and his anti-business record between 2014 and 2017. Yet it’s also worth noting that moderate Democratic senator Joe Manchin (W.Va.) has reservations about him, too.

Among the scores of bad policies that Weil would try to enact, perhaps the worst are the rule changes that would reclassify independent contractors as employees. 

In July 2015, Weil issued a memo known as an Administrator’s Interpretation (AI), falsely stating that worker misclassification is common in the workplace. The AI claimed that “most workers are employees under the FLSA’s broad definitions” of employment.

If confirmed again, Weil would likely adopt an ABC test — a metric used by states to determine a worker’s status — on a national scale. This would create a presumption that all workers are employees. His aim, allegedly, would be to prevent worker “misclassification,” thereby undermining the IRS-20 factor and revised Trump-era “economic realities” tests used for determining worker status. 

The adoption of an ABC test has already proved disastrous at the state level. California’s Assembly Bill 5 upended worker freedom by reclassifying all independent workers as employees — with no exceptions. Due to a widespread backlash from workers, lawmakers, and business leaders, however, the state’s Democratic governor Gavin Newsom signed AB 2257 into law to mitigate the damage. Alas, the bill was unavailing. Section 2 of the law stipulated that a worker is an employee unless these three conditions are met: 

(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.

(B) The person performs work that is outside the usual course of the hiring entity’s business.

(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

After going into effect January 1, 2020, the law displaced many Golden State workers from the workplace, forcing them to lose contracts and profitable gigs.

If confirmed again, Weil would also adopt the ABC test contained in the Protecting the Right to Organize (PRO) Act — a federal companion of AB5 aimed at overhauling labor law. Should parts of the PRO Act be adopted by Congress or implemented via regulatory fiat, it would cover “over 13 million workers who produce over $1.6 trillion in economic output, about 8.5 percent of gross domestic product.” In turn, that would undermine the burgeoning freelance economy that comprises 36 percent of the current U.S. workforce. 

Aside from tanking the gig economy, Weil would also seek to undermine franchise businesses further by expanding the definition of a “joint-employer” under the FLSA to include operations who have indirect control of their employees. He is expected to rely on his 2016 AI on joint-employers for guidance, making franchise companies liable for the actions of individual franchisee employees. 

The effects of his 2016 rule change had devastating effects on franchises. Between 2016 and 2018, these businesses paid $33.3 billion a year in costs, lost 376,000 jobs, and witnessed a 93 percent increase in joint-employer lawsuits filed against them. 

But wait, there’s more: In 2016, Weil promulgated an expansion of DOL’s white-collar overtime rule that extended mandatory pay to 4.2 million workers. The regulation doubled the salary threshold for exempt status from $23,660 to $47,476 annually. In August 2017, a U.S. district court in Texas struck down the rule after determining that the Labor Department had “overstepped its rulemaking authority.”

If this overtime rule were to be adopted today, the Small Business & Entrepreneurial Council has warned, such a revision would “harm small businesses as our economy works to recover from the COVID-19 pandemic.” 

With Americans weighing freelancing options, Weil’s extreme positions stand in stark contrast to economic realities: The U.S. workforce is moving away from traditional employer–employee arrangements and toward a more-flexible freelance economy.

The DOL reports that 500,000 workers became independent contractors since the start of the pandemic. The number of unincorporated self-employed individuals now sits at 9.44 million — up 6 percent since the Great Recession began in 2008. 

The timing couldn’t be more perfect either: The monumental spike of workers looking for a career change in 2021 — what’s been referred to as the “Great Resignation” — has resulted in an estimated 10 million workers trading their current jobs for remote freelancer ones. 

According to the Bureau of Labor Statistics, the unionized workforce stands at 10.8 percent of the total U.S. workforce. Compare that with the 36 percent of workers — or 59 million and growing — who engage in some variation of freelancing. 

As a full-time freelancer, I don’t want to be liberated from my independent-contractor status under Dr. David Weil’s stated goals. The future is freelance. Mr. Weil’s policies simply don’t belong at DOL.