Senior Vice President, Employment Policy Division, U.S. Chamber of Commerce
April 21, 2023
On April 19, the House Education and Labor’s subcommittee on Workforce Protections held a hearing titled: “Examining Biden’s War on Independent Contractors.” The hearing focused on the harmful economic impact of California’s AB-5 law and the U.S. Department of Labor’s (DOL) pending rule defining independent contractors (IC) under the Fair Labor Standards Act (FLSA).
Witnesses at the hearing testified about how AB-5 had cost California workers jobs and income, bred endless confusion, and led to litigation. They also noted that DOL’s pending regulation would impose a vague and open-ended IC test that in some ways mirrors AB-5.
As this blog has noted in the past, AB-5 imposed a strict version of the so-called “ABC” test. Under AB-5, a worker has to demonstrate that they meet three specific factors or lose their independent contractor status. The bill was targeted at the “gig” economy, but as its supporters soon found it was a rather blunt instrument. As witnesses at the hearing highlighted, entire categories of independent workers found their livelihoods taken away, forcing the legislature to pass more than 100 exemptions to the law. Those exemptions themselves are now the subject of litigation in California related to whether they constitute a violation of the Constitution’s equal protection clause. AB-5 also resulted in the successful passage of Prop 22, a ballot initiative that exempted gig companies from the law so long as they provided certain benefits to workers. That initiative is also being litigated. Suffice to say, AB-5 has resulted in considerable chaos and uncertainty in the Golden State.
As to DOL’s pending rule, witnesses discussed how it is vague, unclear, and would allow DOL enforcers considerable leeway as to how the FLSA should be enforced — the opposite of what a rulemaking should seek to achieve. And while the rule states that DOL can’t impose the ABC test via rulemaking, the U.S. Chamber has pointed out that it would effectively impose part B of the ABC test, which is the most problematic element of the test. Not only that, but the PRO Act, which every Democrat on the Subcommittee supports, includes a word-for-word copy of California’s ABC test.
A key element of what supporters of AB-5 and the DOL rule miss is that there is a difference between deliberate misclassification of workers, which is already illegal, and a reasonable IC test that allows legitimate businesses, including those in the gig economy, to function and individuals to seek independent work. There is no question that deliberate misclassification occurs and DOL and other agencies have tools at their disposal to prosecute such illegal behavior. There is no need for laws like AB-5, which was meant to increase the number of “employees” subject to unionization. In fact, the chief author of AB-5 subsequently left the legislature to work for the California Labor Federation. Nor is there a need for DOL to revisit the prior administration’s IC test under the FLSA, which has been the law for two years now and, as a plethora of DOL press releases on misclassification cases show, is working.
Independent workers form a critical and growing portion of America’s labor force. If today’s hearing demonstrated anything, it is that the government should allow these workers to flourish and avoid the mistakes of California.
About the authors
Spencer oversees the Chamber’s work on immigration, retirement security, traditional labor relations, human trafficking, wage hour and worker safety issues, EEOC matters, and state labor and employment law.