Not So Free-lance: Fed Rule Takes Effect Today

Are you a freelancer or a gig worker or an independent contractor now?

You might not be tomorrow.

Today, a new Department of Labor –  under the leadership of Acting Secretary Julie Su – rule governing how a freelancer is defined went into effect, jeopardizing the livelihoods of millions of American workers.

The new rule will make it easier for labor department functionaries, if asked, to classify freelance or gig or contract workers as full time employees. And employees, unlike contract workers, can be unionized, making this whole scheme a payoff to big labor (which then contributes to Democratic Party causes and candidates.)

Well, Joe Biden did say he is the most pro-union president ever.  That’s at least one thing he may not be lying about.

For her part, Su – known in California for her enforcement of the very similar anti-freelance worker AB 5 and for losing at least $32 billion to fraudsters when she ran the state unemployment agency –  claims the new rule will ensure all workers are paid and treated fairly.

But the new rule does not take into account the fact that most freelancers specifically choose to be freelancers to be able to set their own schedule and pick and choose for whom and on what they will work.

Nor does it take into account the fact that many companies hire contract workers to do tasks they need done but don’t really support the need for a full-time employee.

In other words, the new rule damages both workers and businesses while benefiting only union coffers.

In fact, workers across the country have already been notified that their contracts will terminate today.

“Now that the new DOL rule is in effect, businesses across the country will be examining their contracting relationships to determine if they comply. Because the rule is obtuse, arbitrary and capricious, risk-averse businesses and corporations will likely err on the side of caution and eliminate their independent contractors altogether to avoid the massive fines and penalties,” said Karen Anderson, founder of Freelancers Against AB 5 and Visiting Fellow with the Independent Women’s Forum.  “This is the chilling effect that could impact more than 60 million independent professionals across a vast range of professions, just like what is still happening with AB 5 in California.”

The rule itself is truly byzantine and inherently – most likely purposefully – lends itself to being read however the labor department bureaucrat wants to read it.

In other words, the standards set up an “eye of the beholder” situation and the labor cubiciloids and rafts of judges and lawyers will be the beholders.

Here – in a nutshell from the Labor Department – is the new test to be used to determine if someone should be classified as an employee rather than a contract worker:

The rule addresses six factors that guide the analysis of a worker’s relationship with an employer, including any opportunity for profit or loss a worker might have; the financial stake and nature of any resources a worker has invested in the work; the degree of permanence of the work relationship; the degree of control an employer has over the person’s work; whether the work the person does is essential to the employer’s business; and a factor regarding the worker’s skill and initiative.

How to balance these standards, i.e. which to note as more important and impactful when making a classification decision, is left deliberately obscure.

There have already been four lawsuits filed across the country to try to stop the rule.  One, filed by the Louisiana Motor Transport Association, the Liberty Justice Center and a local trucking company, could possibly generate a rather more immediate action to at least temporarily stop enforcement, as the plaintiffs have asked the federal judge to issue a temporary restraining order.

The judge has yet to issue a ruling on the order.

“Independent contractors are an integral part of the transportation industry, specifically trucking. Without independent contractors hauling products across the United States, it would completely break an already fragile supply chain,” Renee Amar, LMTA executive director.  “We sincerely hope that the courts hear our case and understand that this is a complete overreach of the federal government. The relationship that trucking companies have with independent contractors is a trusted model that protects everyone.”

Rep. Kevin Kiley (R-Rocklin) sent a letter today to Su demanding the rule implementation be put on hold. Along with Sen. Bill Cassidy (R-LA), Kiley has introduced a bill in Congress to eliminate the rule entirely.

“A decision to plow ahead with the rule before the courts can finish their review exacerbates confusion and disruption,” Kiley wrote. “You can end all of that by simply pausing the rule until the Courts complete their work. I urge you to take this simple and prudent step to protect American jobs.”

For his part, Cassidy announced that more than 70 national business groups have signed on to support the legislation to kill the rule.

“Independent contractors, or freelancers, make their own hours to fit their schedule and decide where and how they want to work. Incidentally, they are shielded from forced or coerced unionization that would strip that flexibility away,” said Cassidy. “This new regulation jeopardizes the livelihood of 27 million workers who want the flexibility to make their own hours and make a living without being pressured into joining a union.”

The groups that have endorsed the Kiley/Cassidy effort represent truckers, writers, builders, distributors, educators, electricians, warehouse workers, restaurant workers, and corner “mom and pop” shops.

Sadly, if you happen to be an independent worker in California who somehow avoided the wrath of AB 5, you may be getting some bad news…soon.