On Friday, the Biden Department of Labor announced their plans to kick off a new rulemaking process for independent contractors. In June, the DOL will host public forums for employers and workers to weigh in on new rules. The voices and rights of independent contractors ought not be neglected in the Biden Administration’s rule development.
Independent contractors should be concerned with the Biden Administration’s hostile posture towards freelance work. The administration has worked on withdrawing the Trump Independent Contractor Rule since the day of President Biden’s inauguration. The Trump Independent Contractor Rule created an “economic reality” test to determine whether the individual in question works for themselves or their employer. The test looks at two “core factors” to determine the individual’s status: 1) “the nature and degree of control that the individual has over the work itself” and 2) “the opportunity for profit or loss based on the individual’s investment or initiative.” This test clarified the definition of an independent contractor and .
The Biden Administration, however, was determined to get rid of it despite any of its benefits. This led to a hasty, half-fast process in which they implemented the Delay and Withdrawal Rules in an “arbitrary and capricious” manner in violation of the Administrative Procedures Act, or the APA. They also rushed the period for notice-and-comment that is required under the APA for the Delay Rule. The only reason why the Trump Independent Contractor Rule remains in effect is due to the Texas federal court nullifying the Biden DOL’s actions in Coalition for Workforce Innovation v. Walsh.
These frantic actions to reverse the Trump Rule indicate that the Biden Administration will attempt to use its executive powers to employ a model akin to the ABC Test that has been used with great controversy in California. The Beacon Hill Institute, in partnership with ATR and the Tholos Foundation, conducted a study this year showing that the ABC Test would break President Biden’s pledge to refrain from raising taxes on Americans making more than $400,000. The study estimates that 56 percent of the independent contractors likely to be reclassified as W-2 employees would end up paying more in taxes. 96 percent of the reclassified would make less than $400,000, a clear violation of Biden’s tax pledge. Especially at this time of great economic uncertainty, it is imperative that the Biden Administration remains true to its pledge and does not raise taxes on the middle class.
President Biden is shaping labor policy in a way that will harm American independent contractors. Any rules the DOL promulgates should preserve the freedom and flexibility to work as an independent contractor.