Experts told the Daily Caller News Foundation that the Biden administration's new labor rules are likely to increase costs for employers and limit Americans' freedom to choose when and where they work.
Under a new rule that goes into effect on March 11, the Department of Labor will reclassify many workers previously classified as independent contractors as company employees under the Fair Labor Standards Act of 1938 (FLSA), thereby making them This will give them the right to receive benefits such as overtime pay. salary and minimum wage, according to To the D.O.L. According to experts who spoke to DCNF, the rule will severely impede the flexibility afforded to many freelance jobs, leaving many current employees completely unemployed as regulators crack down on the gig economy. It is said that there is a possibility. (Related: Biden administration launches investigation into Boeing following incident onboard Alaska flight)
“As a result, regulators will be given new powers to micromanage companies that rely on contract labor and workers who choose to become ‘independent contractors,’ the latter simply as ‘freelancers. 'It's just a fancy word for “,'' labor policy expert Sean Higgins told DCNF at the Institute for Competitive Enterprise. “This gives regulators the power to say that a freelancer is not actually a freelancer and can only be employed as a full-time employee. Many people will not be able to get a job at all because they have a business model with no full-time employees. ”
According to the DOL, the FLSA strives to ensure that working conditions “do not adversely affect the maintenance of a minimum standard of living necessary for the health, efficiency, and general well-being of workers.” Federal law requires employees to be paid minimum wage for all hours worked and 1.5 times wages for hours worked in excess of 40 hours per week, but independent contractors are not required to do so.
Under the new rules, workers will be examined to determine if they are “economically dependent” on their employer to determine if they are an employee. This means that workers who are dependent on work with their employer but take advantage of the flexibility of freelancing will be forced to determine whether they are “economically dependent” on their employer. become. According to the DOL, if you are not fired, you will be brought back as an employee. The new guidelines depart from standards established in January 2021 under the Trump administration, considering five key factors for determining employment status, the most important of which is labor control. There are two factors: level and workers' profit and loss opportunities.
Proponents of this rule believe that this change will: Reduce Abusive practices by companies that take advantage of freelance labor and do not pay workers for all hours worked or pay them less than the minimum wage. Democratic Massachusetts Sen. Elizabeth Warren criticized popular companies like Uber, Lyft, and Amazon, which currently offer people the opportunity to work whenever they're available, including transporting goods and sharing rides. are doing., And you get paid based on your work, rather than a fixed rate.
“In some cases, unscrupulous employers abuse the independent contractor designation as a means to avoid compliance with traditional employee employment rules and regulations,” Higgins told DCNF. “So some of the more egregious examples may be reduced.”
It is estimated that it costs 30% more to retain employees compared to an independent contractor model due to the benefits that need to be given to employees. according to to Reuters. Roughly 64 million people said they had done some type of freelance work in the past 12 months ending in December, or about 40% of the total U.S. workforce.
“If former freelancers are declared employees, they will lose the flexibility they once had to work when they wanted, for as long as they wanted,” Higgins told DCNF. “In many cases, it does not make economic sense for an employer to hire someone who does not work a week as a traditional employee. At the cost of that, traditional employees incur overtime pay, etc. This is because employers want to hire workers in the first place. It assumes that the worker wants a full-time job; one or the other is not necessarily the case.”
Misclassification can result in employees being stripped of protections and benefits, such as minimum wage and overtime pay. Our new rules address how to analyze employee/independent contractor status under the FLSA. https://t.co/4iPR74UjbX pic.twitter.com/DswGeMskcl
— U.S. Department of Labor (@USDOL) January 9, 2024
California previously attempted to implement a similar rule in 2019 under Julie Su, California's former labor secretary and current acting U.S. Department of Labor secretary. As a result of this rule, many California businesses have had to cut jobs previously held by independent contractors.
Republican California Rep. Kevin Kiley: “We've seen policies like this played out before.'' Said He said in a joint release Tuesday with North Carolina Representative Virginia Foxx, who chairs the House Education and Labor Committee. “As California Secretary of Labor, Julie Su was the architect and chief enforcer of AB 5, which wiped out countless independent contractors. Ms. Su brought that same radical and destructive ideology to the national level. Plain and simple, this rule constitutes a war on the independent contractor model, giving working Americans the flexibility to make a living on their terms, free from the burden of the Biden administration and its anti-worker policies. should have.”
Voters rejected California's rule change in a referendum known as Proposition 22, with 58% voting to remove the rule and 42% voting to keep it. A California judge had rejected the referendum, saying it violated the state legislature's authority to enact workers' compensation laws, but that ruling was overturned by an appeals court in March.
“Of the millions of freelancers in the United States, more than half are women,” Patrice Onwuka, director of the Center for Economic Opportunity at the Independent Women's Forum, told DCNF. “They overwhelmingly choose independent contracting over employment, seeking the flexibility to balance work with important priorities such as raising children and caring for an elderly or ill spouse. is.”
More Americans have taken up freelance work over the past few years, with 4 million more Americans expected to have jobs in 2023 compared to 2022. according to I completed a survey on the freelance platform Upwork. People who completed freelance work contributed about $1.27 trillion to the U.S. economy, compared to his $715 billion in 2014.
“Older Americans who find it difficult to obtain employment because of their age, as well as people with health problems or disabilities, will all be affected by losing independent contractor status,” Onwuka told DCNF. Deaf,” he said. “A significant proportion of freelancers (46%) say their unique circumstances prevent them from working in a traditional job.”
In recent months, workers have increasingly relied on part-time work to make ends meet, with the United States recently losing about 1.5 million full-time workers. Conversely, the number of part-time jobs increased by 762,000 in December compared to the previous month, and the number of people with multiple jobs increased by 222,000 over the same period.
“It's probably going to be a drag on the economy,” Higgins told DCNF. “Freelancers will lose their jobs because clients will fear that hiring them will get them into trouble with regulators. They will simply go out of business because they rely on contract labor as an economic model. There will be businesses. A lot of people are going to lose their side jobs.”
The DOL did not immediately respond to a request for comment from DCNF.
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