Like Dante’s Inferno, Biden’s new anti-independent contractor rules – a mind-numbing total of 339 pages – plunge millions of independent professionals into a regulatory hell where the fate of countless livelihoods and careers are at stake.
Published by DOL on January 10, 2024, the final rule is inspired by California’s infamous Assembly Bill 5 (AB 5). The final rule’s six factors (plus an open-ended, mysterious seventh factor) will determine whether a worker is an employee or independent contractor under the Fair Labor Standards Act. When this rule goes into effect this March, California’s petri dish of bad ideas will continue to metastasize across the country.
In an ominous sign of things to come, and on the same day as the final rule’s publication, California-based tuition company Cambly fired all of its independent contractors in Massachusetts and New Jersey, adding to the casualty count of contractors it had already fired. Was let go. Because of AB 5 in California. The company cited “recent regulatory developments, effective March 11, 2024,” which, not coincidentally, is the start date of the final rule.
Filled with contradictory interpretive “guidance” that runs to more pages than “Harry Potter,” the Final Rule provides an uninterrupted opportunity for a regulator or judge to do the bidding of Big Labor, aka the ghostwriter of the Final Rule Is. Fearing for their careers, a group of freelance writers recently filed a lawsuit against the DOL and its new rule.
The timing of the new regulation coincides with the re-nomination of Acting Labor Secretary Julie Su to head the DOL. As the former California Secretary of Labor, Su supported and implemented disaster-prone AB 5 before her current tenure in the Biden administration.
During his unsuccessful Senate confirmation hearing on April 20, 2023, Su made great efforts to distance himself from the hot potato of AB 5 and its harsh ABC test — and with good reason considering the hundreds of thousands of independent careers that would be destroyed. California since the enactment of AB 5 in 2020. Empirical data from a new study from the Mercat Center shows that AB 5 caused significant declines in self-employment and overall employment in California – which is not an encouraging endorsement for replicating California’s failed policy nationwide. .
Not surprisingly, Su and her department colleagues insist that the final rule does not duplicate AB 5’s ABC test. But that’s like a chef claiming that he didn’t add a cup of salt to the sauce, but then sprinkled an equal amount throughout the dish. Before serving it.
For example, the DOL’s Factor #5 states that the work being performed cannot be an integral part of the hiring entity’s business otherwise the independent contractor is an employee. This is virtually identical to the problematic B prong of AB 5’s ABC test, which states that the independent contractor’s work must be outside the normal course of the hiring entity’s business, otherwise your W-2!
Anticipating the inevitable outcry from Californians who have seen the film before, the DOL acknowledged that there is “ideological overlap” between Factor #5 and B Prong, claiming that there is no guesswork as to what they actually mean. Not included. But as the old saying goes: one’s six, the other’s half a dozen.
Here’s one of the many considerations underlying the DOL rule: “If an employee uses specialized skills, it may indicate independent contractor status.” Yet in the very next sentence: “Where a worker brings special skills to the work relationship, this does not in itself indicate independent contractor status.” what to say?
The final rule is replete with these types of “one side-this, the other side-that” scenarios that give mid-level bureaucrats considerable leeway to find in favor of employee status rather than independent contractor status when implementing them. Regulations from the district-office chambers of the Wage and Hour Division.
Additionally, according to the DOL, “economic dependence is the ultimate test” in determining an employee’s status. It goes without saying that in today’s challenging economy, most self-employed individuals depend on every penny of their clients, no matter how much they earn. How the DOL defines “dependence” is anyone’s guess, given the byzantine language of the regulation that ultimately tips the scales against independent contracting.
Just as has happened with AB 5 in California, the chilling effect alone will cause many risk-averse businesses to throw caution to the wind and abandon their independent contractor relationships altogether. Freelancers in a variety of businesses will find themselves without work, like lost souls trapped in Dante’s frozen lake and its legislative counterpart, California’s hellish AB5.