A harmful new rule from the Department of Labor that targets independent workers across the country went into effect last month.
Sen. Bill Cassidy, R-Louisiana, and Rep. Kevin Kiley, R-California, introduced a joint resolution aimed at blocking the damaging action being taken by the DOL. The rule makes it more difficult for a business to utilize independent workers. The check on agency power—which stems from the Congressional Review Act—is a welcomed legislative maneuver. Since the oversight tool’s inception, it has overturned nearly two-dozen rules handed down by the executive branch, including around environmental standards, labor issues, and education policies. Now, lawmakers have the opportunity to do it again. The White House’s policy represents a blow to the modern economy that needs to be corrected.The new policy will have a severe chilling effect on the U.S. economy, jeopardizing the employment autonomy of millions of Americans. More specifically, at risk is the ease to which businesses are able to engage the services of freelance professionals. It’s a dynamic market that includes translators, tutors, financial advisors, logistics professionals, healthcare providers, and other independent business owners.Unlike the static workplaces of the 20th century, freelancing provides Americans huge latitude when it comes to when, where, and how much to work. The arrangement is mutually beneficial to businesses—which are able to adapt quickly to shifting market demands—and workers who are empowered to choose their projects and manage their own schedules. It’s an ecosystem of opportunity that was encouraged by a Trump-era DOL standard that the Biden administration’s policy now voids. Under the previous rule, Americans who own a business or are able to contract with competing firms have the opportunity to continue thriving as independent workers. Sounds reasonable.California has already experimented with going in a similar direction that the Biden administration is now pointing the entire country in—and it should serve as a cautionary tale. Under Assembly Bill 5, the state is forcing businesses to reclassify many independent workers as W-2 employees on payroll.The implications of this shift are profound, not only for the individual workers, who may lose valued freedom and flexibility, but also for the broader economy. Industries reliant on the agility and cost-effectiveness of contract work arrangements face significant increases in operational costs. It could result in a kneecapped workforce and higher prices that have an outsized impact on small businesses and start-ups—stifling innovation and economic growth.A California-based tutoring company provides one anecdotal example of the consequences. The company has already let go independent workers in the Golden State and—in anticipation of the nationwide DOL rule—has announced terminations in Massachusetts and New Jersey. It’s the proverbial canary in the coal mine.
If Congress doesn’t act, the DOL’s rule risks replicating California’s dysfunction on a national scale. One estimate predicts the independent workers impacted by this rule could face more than $30 billion in lost income. That tracks with a recent Mercatus Center study on the impact of AB 5 in California. It found that after the law was implemented, self-employment decreased by more than 10 percent on average for affected occupations. Overall employment decreased by more than four percent.
Federal lawmakers have an opportunity to safeguard the flexibility and independence that is enjoyed by millions of Americans. Not only will the resolution, if passed, keep the workforce aligned with a 21st century economy, but it will help to preserve the entrepreneurial spirit that drives innovation and a high standard of living.
Congress has the responsibility to keep the Biden administration in check.
Tom Manzo is the founder of the California Business and Industrial Alliance (CABIA). Karen Anderson is the founder of Freelancers Against AB5.
