With skyrocketing inflation outpacing wages and tens of millions of jobs remaining unfilled, Americans are still adjusting to disruptions of the last two years while fearing what the future holds as well.
Despite the public’s primary focus on finding solid economic footing in these turbulent times, the Biden administration has continued driving a broader agenda that runs counter to the needs of Americans, including threatening tens of millions of flexible self-employment careers that have helped many families navigate the challenges they face.
The administration’s approach has been framed as a “tricky dichotomy” of trying to “maintain independent contractor relationships for workers who enjoy that freedom” but “ensuring workers aren’t being exploited under that model.” However, there is more to independent contracting for the White House to consider than just applying a new regulation on happy vs. purportedly exploited workers.
But first, what is President Biden trying to do? In addition to continually promoting the PRO Act, a union priority bill that would institute a California-style ABC test under the National Labor Relations Board (NLRB), the Biden administration plans to overturn a Trump era rule that added clarity to the “economic realities” test used by Department of Labor (DOL) to administer the Fair Labor Standards Act (FLSA).
A federal court reinstated the Trump rule in March 2022 after it determined the Biden administration improperly rolled it back, but in June, DOL’s Wage and Hour Division announced plans to propose a new rule to tackle what Labor Secretary Marty Walsh has regularly described as widespread “misclassification.”
While the vast majority of independent contractors would disagree with the notion that they are being exploited — the Bureau of Labor Statistics (BLS) found that nearly 80 percent prefer their work arrangements and that fewer than 1 in 10 want to switch to a traditional work arrangement — the Biden administration is still ignoring an important piece to the conversation.
Government policies have imposed arbitrary barriers to self-employed workers having improved access to health and other benefits, which is one reason some call for converting IC workers to traditional employees in the first place.
Americans for Prosperity and other organizations recently urged President Joe Biden and Secretary Walsh to do just this — focus on expanding flexible employment opportunities, and champion legislation to end the government-imposed barriers that prevent independent contractors from greater access to voluntary benefits. The president and Congress could stop blocking client businesses from voluntarily providing benefits to independent contractors while also allowing contractors to open voluntary portable benefits/health savings accounts that bring more parity between the self-employment and employer/employee models.
Why is championing flexible work through reforms so important? Independent contractors make up a sizeable portion of the 59 million freelancers in the U.S. economy, employ tens of millions of additional workers under their contracts as small businesses, and are often the entrepreneurs that grow successful new businesses in communities.
These jobs spread across many industries and represent diverse people including working parents, those caring for disabled family members, and many who are disabled themselves, unable to meet the more rigid schedules and requirements of traditional employment.
Furthermore, the workforce continues to rapidly turn over as workers seek not only higher pay to battle inflation but increased flexibility. 20% of American workers changed careers between the start of the pandemic and last year, nearly half of workers are considering a career change, and over half of American workers that did change jobs in the past year entered entirely new occupations or fields.
In other words, President Biden should be focused on the rising desire of workers for flexibility, including controlling their hours, working remotely, and pursuing self-employment.
Some of this could be achieved by Congress passing the Employee Rights Act, which includes within it a pathway for businesses to provide independent contractors benefits and the Modern Worker Empowerment Act. This bill would create a uniform employment test between DOL and the IRS based on the IRS common law test.
Interestingly, there may be some momentum in the form of bipartisan legislation and union worker support for independent contractors that give President Biden and Secretary Walsh an opportunity to reconsider advancing an anti-self-employment rule as well.
On July 20, a bipartisan Worker Flexibility and Choice Act was introduced by Reps. Elise Stefanik (R-N.Y.), Henry Cuellar (D-Texas), and Michelle Steel (R-Calif.). This proposed legislation opens bipartisan conversation around the ability of independent contractors to retain independence while receiving health, retirement, and other benefits from businesses they provide services for and through.
To top it off, despite union leaders strongly supporting the AB5 law in California that instituted the aggressive ABC test undermining independent contracting in the state, some union members recently shared support for independent truckers protesting California Supreme Court proceedings that have put their livelihoods in jeopardy.
With some members of their own party and union workers willing to support self-employment on a wider scale, President Biden and Secretary Walsh have an opportunity to shift towards supporting flexible work policies to strengthen the U.S. workforce as well, putting aside misguided plans to jeopardize many careers at a particularly difficult time for families with a harmful new regulation.
Austen Bannan is a senior analyst in employment policy at Americans for Prosperity.