A recent regulatory change by the Biden administration is so poorly designed, there’s no telling exactly how many workers will be hurt.
A recent regulatory change by the Biden administration is so poorly designed, there’s no telling exactly how many workers will be hurt.
O ver the past four years, I’ve spoken with workers around the country who depend on independent contracting. Shelby Givan told me she became a freelance online educator so she could continue teaching while caring for her infant son. Karen Anderson built a 25-year career as a writer, editor, and photographer, taking jobs she liked instead of working for a firm. Kim Kavin did the same thing, choosing independent writing after a ten-year career in the struggling yet demanding news-and-magazine business.
From actors and designers to truckers and construction workers, I’ve heard the same thing over and over. Independent contracting gives workers the flexibility to pursue their passions, either full-time or on the side. Some use this model to provide for themselves and their families. Others just want to earn some extra cash. Regardless, they choose this path because it works for their unique life situation.
But now Shelby, Karen, Kim, and as many as 73 million Americans who are independent contractors could lose that freedom. So may every American who might have pursued this path in the future.
On January 10, President Biden’s Labor Department issued a new rule that will gut independent contracting nationwide. While the department and much of the media are framing the rule as a win for workers, it’s anything but. The Biden administration, which claims the rule will make it easier for workers to get employment benefits, overtime pay, and minimum wage, is really looking out for the interests of labor unions, which have struggled to organize independent contractors and find it much easier to go after traditional employees. There’s nothing pro-worker about stifling workers in favor of special interests.
The true pro-worker approach is the 2021 regulation that the Biden administration has now overturned. In its last days, the Trump administration provided much-needed clarity and simplicity on the definition of independent contracting. It essentially said that if workers control their own work and can profit from their own entrepreneurial initiative, they’re independent contractors. This easy-to-understand definition made it easy for workers to try new jobs or put more cash in their pockets during the Covid-19 pandemic, while letting businesses innovate and provide new services to customers.
The clarity and simplicity are now gone — and jobs will go with them. While the Biden rule keeps the Trump definition, it lowers the emphasis on entrepreneurial opportunity and makes it equal with five other tests to determine whether a worker is an independent contractor. They range from how “permanent” a position is to the “nature and degree of control” that workers maintain over their work. These questions are complicated, requiring the help of lawyers and human-resources professionals to answer. That’s a costly undertaking for independent contractors, especially those with a side hustle, who may not have the resources to figure out where they fit in the new economic order.
The result will be an immediate and enormous chilling of independent contracting. The families that pay educators such as Shelby Givan and the companies that contract Karen Anderson and Kim Kavin can no longer be sure they’re following federal rules. Many will stop using independent contractors, instead moving workers to a traditional (and far less flexible) full- or part-time role. Others will cut back, recognizing that without independent contracting, their business models don’t make sense. And many will go to court to figure out what, exactly, the rule means for them.
Yet when one contractor or company gets an answer, others will still be in the dark. The Biden rule is so convoluted that workers in seemingly similar situations will be classified differently, with some still deemed independent contractors and others forced into traditional employment. Far from establishing a workable standard, this rule requires further clarification — in many cases, on a worker-by-worker basis.
Amid the confusion, workers will sit back without clear guidance while companies hold back out of fear of liability. In other words, the Biden administration is undermining the certainty that fosters the opportunity and entrepreneurialism that lifts up workers.
The new rule is so poorly designed, there’s no telling exactly how many workers will be hurt. But the damage will be more widespread than the Biden administration cares to admit. Many enterprising Americans who want to make more money will find it much harder. Many moms who want to schedule their work around their young children will find they can’t. Many dads who became truckers — in an industry that has used independent contracting since the dawn of interstate trucking — will find their careers thrown into chaos. And on and on the list of victims grows.
In the Biden administration, it’s acceptable to sacrifice workers if it strengthens labor unions. In the short run, workers should hope that Congress passes Senator Bill Cassidy’s Congressional Review Act bill — which he announced on January 9 — to block this rule. But long term, workers need the Employee Rights Act, which would restore a simple, clear, and unalterable definition of independent contracting. Until that happens, people like Shelby, Karen, and Kim will suffer the loss of the work they love — and the freedom they need.