[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]




                        
                        EXAMINING BIDEN'S WAR ON
                        INDEPENDENT CONTRACTORS

=======================================================================

                                HEARING

                               Before The

                 SUBCOMMITTEE ON WORKFORCE PROTECTIONS

                                 of the

                COMMITTEE ON EDUCATION AND THE WORKFORCE
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               ----------                              



             HEARING HELD IN WASHINGTON, DC, APRIL 19, 2023

                               ----------                              

                            Serial No. 118-6

                               ----------                              

  Printed for the use of the Committee on Education and the Workforce
  
  
  [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

  


        Available via: edworkforce.house.gov or www.govinfo.gov
        
        
        
        
        
                               ______
	
	             U.S. GOVERNMENT PUBLISHING OFFICE 
 51-523                       WASHINGTON : 2024
        
        
        
        
        
        
        
        
        
        
        
            EXAMINING BIDEN'S WAR ON INDEPENDENT CONTRACTORS


                                 ______

 
                        EXAMINING BIDEN'S WAR ON
                        INDEPENDENT CONTRACTORS

=======================================================================

                                HEARING

                               Before The

                 SUBCOMMITTEE ON WORKFORCE PROTECTIONS

                                 of the

                COMMITTEE ON EDUCATION AND THE WORKFORCE
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________



             HEARING HELD IN WASHINGTON, DC, APRIL 19, 2023

                               __________

                            Serial No. 118-6

                               __________

  Printed for the use of the Committee on Education and the Workforce


        Available via: edworkforce.house.gov or www.govinfo.gov
                COMMITTEE ON EDUCATION AND THE WORKFORCE

               VIRGINIA FOXX, North Carolina, Chairwoman

JOE WILSON, South Carolina           ROBERT C. ``BOBBY'' SCOTT, 
GLENN THOMPSON, Pennsylvania             Virginia,
TIM WALBERG, Michigan                  Ranking Member
GLENN GROTHMAN, Wisconsin            RAUL M. GRIJALVA, Arizona
ELISE M. STEFANIK, New York          JOE COURTNEY, Connecticut
RICK W. ALLEN, Georgia               GREGORIO KILILI CAMACHO SABLAN,
JIM BANKS, Indiana                     Northern Mariana Islands
JAMES COMER, Kentucky                FREDERICA S. WILSON, Florida
LLOYD SMUCKER, Pennsylvania          SUZANNE BONAMICI, Oregon
BURGESS OWENS, Utah                  MARK TAKANO, California
BOB GOOD, Virginia                   ALMA S. ADAMS, North Carolina
LISA McCLAIN, Michigan               MARK DeSAULNIER, California
MARY MILLER, Illinois                DONALD NORCROSS, New Jersey
MICHELLE STEEL, California           PRAMILA JAYAPAL, Washington
RON ESTES, Kansas                    SUSAN WILD, Pennsylvania
JULIA LETLOW, Louisiana              LUCY McBATH, Georgia
KEVIN KILEY, California              JAHANA HAYES, Connecticut
AARON BEAN, Florida                  ILHAN OMAR, Minnesota
ERIC BURLISON, Missouri              HALEY M. STEVENS, Michigan
NATHANIEL MORAN, Texas               TERESA LEGER FERNANDEZ, New Mexico
JOHN JAMES, Michigan                 FRANK J. MRVAN, Indiana
LORI CHAVEZ-DeREMER, Oregon          JAMAAL BOWMAN, New York
BRANDON WILLIAMS, New York
ERIN HOUCHIN, Indiana
                       Cyrus Artz, Staff Director
              Veronique Pluviose, Minority Staff Director
                                 ------                                

                 SUBCOMMITTEE ON WORKFORCE PROTECTIONS

                   KEVIN KILEY, California, Chairman

GLENN GROTHMAN, Wisconsin            ALMA ADAMS, North Carolina,
ELISE M. STEFANIK, New York            Ranking Member
JAMES COMER, Kentucky                ILHAN OMAR, Minnesota
MARY MILLER, Illinois                HALEY M. STEVENS, Michigan
ERIC BURLISON, Missouri              MARK TAKANO, California

                         C  O  N  T  E  N  T  S

                              ----------                              
                                                                   Page

Hearing held on April 19, 2023...................................     1

                           OPENING STATEMENTS

    Kiley, Hon. Kevin, Chairman, Subcommittee on Workforce 
      Protections................................................     1
        Prepared statement of....................................     4
    Adams, Hon. Alma, Ranking Member, Subcommittee Workforce 
      Protections................................................     6
        Prepared statement of....................................     7

                               WITNESSES

    Anderson, Karen, Founder, Freelancers Against AB 5...........     9
        Prepared statement of....................................    11
    McCutchen, Tammy, Senior Affiliate, Resolution Economics.....    19
        Prepared statement of....................................    21
    Long, David, Chief Executive Officer, National Electrical 
      Contractors Association....................................    40
        Prepared statement of....................................    42
    Palagashvili, Liya, Senior Research Fellow, Mercatus Center 
      at George Mason University.................................    50
        Prepared statement of....................................    52
    Padin, Laura, Director of Work Structures, National 
      Employment Law Project.....................................    65
        Prepared statement of....................................    67
    Kavin, Kim, Freelance Writer and Editor......................    78
        Prepared statement of....................................    80

                         ADDITIONAL SUBMISSIONS

    Chairman Kiley:
        Statement dated April 19, 2023, from the Coalition for 
          Workforce Innovation...................................   157
        Letter dated April 19, 2023, from the Direct Selling 
          Association............................................   161
        Statement dated April 19, 2023, from the Financial 
          Services Institute.....................................   164
        Letter dated April 19, 2023, from Flex...................   193
        Submitted Fact Sheet from Flex...........................   196
        Submitted Flex Comments..................................   198
        Testimony dated April 19, 2023, from The Intermodal 
          Association of North America...........................   237
        Letter dated December 13, 2022, from Leading Financial 
          Services Trade Associations............................   241
        Letter dated April 17, 2023, from Modern Economy Project.   243
        Letter dated December 13, 2023, from Modern Economy 
          Project................................................   244
        Letter dated December 13, 2022, National Association of 
          Home Builders..........................................   255
        Letter dated April 18, 2023, National Association of Home 
          Builders...............................................   263
        Letter dated December 5, 2022, from National Association 
          of Insurance and Financial Advisors....................   265
        Letter dated December 13, 2022, National Association of 
          Insurance and Financial Advisors.......................   269
        Statement dated April 19, 2023, from National Association 
          of Small Trucking Companies............................   274
        Letter dated April 17, 2023, from National Retail 
          Federation.............................................   277
        Statement dated April 18, 2023, from The Transportation 
          Alliance...............................................   279
        Letter dated April 18, 2023, from Truckers Integral to 
          Our Economy............................................   281
        Research Brief by MBO Partners, State of Independence in 
          America................................................   284
    Ranking Member Adams:
        Letter dated March 23, 2023, from the Construction 
          Employers of America...................................   100
    Norcross, Hon. Donald, a Representative in Congress from the 
      State of New Jersey:
        Letter dated April 18, 2023 from Sheet Metal and Air 
          Conditioning Contractors...............................   137
        Testimony dated April 19, 2023 from Sheet Metal and Air 
          Conditioning Contractors...............................   138
        Letter dated April 18, 2023 from The Association of Union 
          Constructors...........................................   153
    Takano, Hon. Mark, a Representative in Congress from the 
      State of California:
        Tweet on AB 5 dated April 12, 2023, from Rep. Kevin Kiley   107
        Letter dated February 17, 2023, to President Biden.......   109
        Statement dated March 9, 2023, from Los Angeles Chamber 
          of Commerce............................................   115
        Letter dated March 7, 2023, from National Electrical 
          Contractors Association................................   118
        Letter dated April 18, 2023, from National Employment Law 
          Project................................................   120

                        QUESTIONS FOR THE RECORD

    Response to question submitted for the record by:
        Laura Padin..............................................   316


                        EXAMINING BIDEN'S WAR ON



                        INDEPENDENT CONTRACTORS

                              ----------                              


                       Wednesday, April 19, 2023

                  House of Representatives,
             Subcommittee on Workforce Protections,
                  Committee on Education and the Workforce,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:16 a.m., in 
Room 2175, Rayburn House Office Building, Washington, DC, Hon. 
Kevin Kiley [Chairman of the Subcommittee] presiding.
    Present: Representatives Kiley, Grothman, Miller, Burlison, 
Adams, Omar, Stevens, Takano, Scott, and Norcross.
    Staff present: Cyrus Artz, Staff Director; Mindy Barry, 
General Counsel; Jackson Berryman, Speechwriter; Michael Davis, 
Legislative Assistant; Christina Delmont-Small, Investigator; 
Cate Dillon, Director of Operations; Daniel Fuenzalida, Staff 
Assistant; Trey Kovacs, Professional Staff Member; Andrew Kuzy, 
Press Assistant; Marek Laco, Professional Staff Member; John 
Martin, Deputy Director of Workplace Policy/Counsel; Hannah 
Matesic, Director of Member Services and Coalitions; Kelly 
Tyroler, Professional Staff Member; Veronique Pluviose, 
Minority Staff Director; Banyon Vassar, Minority IT 
Administrator; Stephanie Lalle, Minority Communications 
Director; Kota Mizutani, Minority Deputy Communication 
Director; Ilana Brunner, Minority General Counsel; Kevin 
McDermott Minority Director of Labor Policy; Robert Shull, 
Minority Labor Policy Staff; Jessica Schieder, Minority 
Economic Policy Advisor; Kyle deCant, Minority Labor Policy 
Counsel; and Dhrtvan Sherman, Minority Staff Assistant.
    Chairman Kiley. The Subcommittee on Workforce Protections 
will come to order. I note that a quorum is present. Without 
objection, the Chair is authorized to call a recess at any 
time. The Subcommittee is meeting today to hear testimony on 
Examining Biden's War on Independent Contractors.
    Good morning everyone, and welcome to today's hearing. 
Today's hearing is about the right to earn a living. The right 
to practice your profession and pursue your calling. To be a 
maker, a builder, a creator. To take your God given talents, 
nurture them with heart and soul, and offer them to the world.
    In a free society, few rights are more fundamental or more 
essential for a dynamic and prosperous economy. At this moment, 
that right is in peril. The current administration has launched 
a multi-pronged assault on the right to earn a living in 
America. It is a concerted strategy designed to limit or 
eliminate the gig economy, freelancing, independent 
contracting, self-employment, alternate work arrangements that 
entire careers are based on, and entire industries have been 
built around.
    The livelihoods of millions of Americans are at risk. 
Today, we will examine the devastating consequences of this 
anti-worker agenda. Those consequences are not a matter of 
speculation. They are already an established reality. A bitter, 
unfair, unnecessary reality for many residents of my own State.
    You see, in California, the war on independent contractors 
has been underway for years. The Biden administration is simply 
following the model of Governor Gavin Newsom and the California 
legislature. At this point, the administration's governing 
motto might as well be as California goes, so goes the Nation.
    Now I should say as a Californian that we used to look upon 
that expression with pride. Over decades, the Golden State 
forged an identity of historic significance and was at the 
leading edge of social, political and technological progress. 
Ronald Reagan, in his inaugural address as Governor, said 
California should never take second place.
    We were the State where anyone could get ahead. Now, sadly, 
we have become the State many cannot wait to leave behind. We 
do lead the Nation but in all the wrong ways. Poverty, 
inequality, taxes, regulations, income stagnation and yes, 
departures.
    In 2022, for the third straight year, California ranked 
first among the 50 states in U-Haul rentals. In its current 
condition, California is the last place that should be a bell 
weather for political change in America. That is exactly how 
President Biden seems to see it as his administration attempts 
to nationalize California's most damaging policies, exporting 
our state's failures to every State in the union.
    In nationalizing the war on workers, Biden has opened three 
distinct fronts. The first is the PRO Act, which passed the 
House in the last Congress and has been reintroduced this year 
by the Ranking Member of this committee. This legislation takes 
a specific California law, known as AB 5, and makes it into 
Federal policy. President Biden is supporting the PRO Act, and 
when running for President, he voiced support for California's 
AB 5 and cited it as his model, even after the law received 
bipartisan condemnation of a kind without precedent in recent 
history.
    For example, Governor Newsom's own former Deputy Chief of 
Staff, Yashar Ali, called AB 5 one of the most destructive 
pieces of legislation in the last 20 years, adding that it is 
truly horrific how many people are negatively affected by it. 
Former State Assembly Speaker, San Francisco Mayor, Willie 
Brown, said the law made him want to ``picket'' against the 
``bastards at the capitol,'' and the special interests that 
took advantage of them.
    Andrew Cuomo rejected a similar law in New York, saying he 
did not want to ``make the same mistake as California.'' The 
Daily Co's likewise warned other states to not make the same 
mistake California's Gavin Newsome did, with the site's founder 
calling the law disastrous and asinine and its supporters 
shameful.
    The head of the California NAACP assailed AB 5 as a 
terrible law, and a gut punch to our community. The CEO of the 
Black Chamber of Commerce called it a catastrophe, responsible 
for enabling, defending and propagating systemic racism. 200 
Ph.D. economists, including a Nobel Laureate, reported the law 
as doing substantial and avoidable harm to the very people who 
now have the fewest resources, and the worst alternatives 
available to them. One commentator called it the most malicious 
and harmful law ever passed in California.
    AB 5 rendered countless independent professionals unable to 
earn a living in our State. Writers, interpreters, court 
reporters, musicians, language pathologists, photographers, 
forensic nurses, and people in literally hundreds of other 
industries were told they were no longer allowed to practice 
their profession and serve their clients as they have been 
doing their whole careers.
    Instead, their only option was to find a single hiring 
entity to monopolize their services and make them a W-2 
employee. For many, that was simply not possible. I have 
compiled their stories in this book. Personal testimonials of 
Californians who lost their livelihoods after AB 5 was passed.
    Turning AB 5 into national policy would multiply these 
losses. The Chamber of Progress published an economic analysis, 
which shows that implementing AB 5's rigid ABC test as a 
national rule would cost the full-time or part-time jobs of 
between 3.2 and 3.8 million independent contractors, equivalent 
to roughly half the jobs lost in the Great Recession.
    Even where it is possible to convert independent 
contractors into employees by legal command, it is not what 
they want. 79 percent of independent contractors prefer their 
current worker status. It lets them set their own schedules and 
be their own boss. Only 10 percent say they would prefer a 
traditional job.
    The people most devastated by AB 5 are the most vulnerable, 
seniors, caregivers, students, single mothers, people with 
disabilities or health issues, or mental health needs who rely 
on independent contracting to balance work with their personal 
life circumstances.
    AB 5 has not only been rejected by the very people it is 
supposedly meant to help, it has also been rejected by 
California voters, and by the courts. In 2020, voters 
overwhelmingly passed a proposition overturning the law for 
app-based drivers. The Ninth Circuit recently held that AB 5 
may violate the equal protection clause of the U.S. 
Constitution, as over 100 professions have now been exempted 
from the law, while hundreds of others remain ensnared by it, 
with no rational basis for who is allowed to work, and who is 
not.
    Fortunately, the PRO Act, the national legislation inspired 
by AB 5, has not become law. The Biden administration has now 
opened another front on the war on independent contractors to 
achieve the same goal. A proposed rule of the Department of 
Labor would implement the core elements of AB 5 without so much 
as a vote of Congress.
    In other words, in a matter of months, the Biden 
administration is planning to nationalize AB 5 all on its own. 
To aggressively enforce the new regime, Biden has selected a 
new Secretary of Labor. This is the final front. The nomination 
of AB 5's architect and lead enforcer, former California Labor 
Secretary, Julie Su to the highest labor position in America. 
It is a direct and literal transfer of California's failures to 
Washington.
    Tellingly, with Su's confirmation for U.S. Secretary of 
Labor now faltering, her backers are making a last-ditch 
attempt to save her nomination by absurdly trying to 
disassociate her from AB 5. None other than the author of AB 5, 
a major Su backer who now leads the California Labor 
Federation, just told the L.A. Times that Su was not involved 
with the bill at all.
    Su, in her own words, described in detail her plans for 
enforcing AB 5 as California Labor Secretary. We will be doing 
investigations and audits, she said, threatening fines and 
penalties, to those who want to comply with the need to 
reclassify can do so, and those who do not will understand 
that's not the kind of economy we want in California.
    Not the kind of economy we want in California. That is what 
she said. Julie Su did not want an economy in California where 
you can pursue your calling, support your family on your own 
terms, and thrive. She does not want this for America either. 
That is why Joe Biden has selected her for Labor Secretary, to 
wage his war on independent contractors.
    Our committee has a very different vision for the American 
workforce. We believe in promoting work and supporting workers. 
We believe independent contractors are critical to the 21st 
Century economy. We will protect the freedom of Americans to 
earn a living as they choose, and we will fight every effort to 
take that right away.
    With that, I look forward to the hearing today and yield to 
the Ranking Member.
    [The statement of Chairman Kiley follows:]

  Statement of Hon. Kevin Kiley, Chairman, Subcommittee on Workforce 
                              Protections

    Today's hearing is about the Right to Earn a Living: the right to 
practice your profession and pursue your calling; to be a maker, a 
builder, a creator; to take your God-given talents, nurture them with 
heart and soul, and offer them to the world.
    In a free society, few rights are more fundamental--or more 
essential to a dynamic and prosperous economy.
    At this moment, that right is in peril. The current Administration 
has launched a multi-pronged assault on the right to earn a living in 
America. It is a concerted strategy designed to limit or eliminate the 
gig economy, freelancing, independent contracting, self-employment--
alternate work arrangements that entire careers are based on, and 
entire industries have been built around.
    The livelihoods of millions of Americans are at risk. Today, we 
will examine the devastating consequences of this anti-worker agenda.
    Those consequences are not a matter of speculation. They are 
already an established reality--a bitter, unfair, unnecessary reality--
for many residents of my own state.You see, in California, the war on 
independent workers has been underway for years.
    The Biden Administration is simply following the model of Governor 
Gavin Newsom and the California Legislature. At this point, the 
Administration's governing motto might as well be: As California goes, 
so goes the nation.
    I should say, as a Californian, that we used to look upon that 
expression with pride. Over decades, the Golden State forged an 
identity of historic significance and was at the leading edge of 
social, political, and technological progress. Ronald Reagan, in his 
Inaugural Address as Governor, said California should never take second 
place. We were the state where anyone could get ahead.
    Now, sadly, we have become the state many cannot wait to leave 
behind. We do lead the nation--but in all the wrong ways: poverty, 
inequality, taxes, regulations, income stagnation, and yes, departures. 
In 2022, for the third straight year, California ranked first among the 
fifty states in U-Haul rentals.
    In its current condition, California is the last place that should 
be a bellwether for political change in America. That is exactly how 
President Biden seems to see it, as his Administration attempts to 
nationalize California's most damaging policies, exporting our state's 
failures to every state in the union.
    In nationalizing the war on workers, Biden has opened three 
distinct fronts. The first is the PRO Act, which passed the House in 
the last Congress and has been reintroduced this year by the Ranking 
Member of this Committee. This legislation takes a specific California 
law known as AB 5 and makes it into federal policy.
    President Biden is supporting the PRO Act, and when running for 
President, he voiced support for California's AB 5--even after the law 
received bipartisan condemnation of a kind without precedent in recent 
history:
     For example, Governor Newsom's own former deputy chief of staff 
Yoshar Ali called AB 5 ``one of the most destructive pieces of 
legislation in the past 20 years,'' adding, ``It is truly horrific how 
many people are negatively impacted by it.''
     Former State Assembly Speaker and San Francisco Mayor Willie 
Brown said the law made him want to ``picket'' against the ``bastards'' 
at the Capitol and the special interests that ``took advantage'' of 
them.
     Andrew Cuomo rejected a similar law in New York, saying he didn 
not want to ``make the same mistake" as California.
     The Daily Kos likewise warned other states, ``Don't make the 
mistake California's Gavin Newsom did,'' with the site's founder 
calling the law ``disastrous'' and ``asinine'' and its supporters 
``shameful.''
     The head of the California NAACP assailed AB 5 as a ``terrible 
law'' and a ``gut punch to our community.''
     The CEO of the Black Chamber of Commerce called it a 
``catastrophe'' responsible for ``enabling, defending, and propagating 
systemic racism.''
     Two hundred Ph.D. economists, including a Nobel Laureate, 
reported the law is ``doing substantial, and avoidable, harm to the 
very people who now have the fewest resources and the worst 
alternatives available to them.''
     One commentator called it ``the most malicious and harmful law 
ever passedin California.''
    With a single stroke of Newsom's pen in 2019, AB 5 rendered 
countless independent professionals unable to earn a living in our 
state. Writers, interpreters, court reporters, musicians, language 
pathologists, photographers, forensic nurses, and people in literally 
hundreds of other industries were told they were no longer allowed to 
practice their profession and serve their clients as they had been 
doing their whole careers; instead, their only option was to find a 
single hiring entity to monopolize their services and make them a W-2 
employee. For many, that was simply not possible.
    I have compiled their stories in this book--personal testimonials 
of Californians who lost their livelihoods after AB 5 was passed.
    Turning AB 5 into national policy would multiply these losses. The 
Chamber of Progress published an economic analysis which shows that 
implementing AB 5's rigid ``ABC Test'' as a national rule would cost 
the full-time or part-time jobs of between3.2 and 3.8 million 
independent contractors--equivalent to roughly half the jobs lost in 
the Great Recession.
    Even where it is possible to convert independent contractors into 
employees by legal command, it is not what they want. Seventy-nine 
percent of independent contractors prefer their current worker status. 
It lets them set their own schedules and be their own boss. Only 10 
percent say they had prefered a traditional job.
    The people most devastated by AB 5 are the most vulnerable: 
seniors, caregivers, students, single mothers, people with disabilities 
or health issues or mental health needs--who rely on independent 
contracting to balance work with their personal life circumstances.
    AB 5 has not only been rejected by the very people it is supposedly 
meant to help, but also by California voters and by the courts. In 
2020, voters overwhelmingly passed a proposition overturning the law 
for app-based drivers. The Ninth Circuit recently held that AB 5 may 
violate the Equal Protection Cause of the U.S. Constitution, as over 
100 professions have now been exempted from the law while hundreds of 
others remain ensnared by it, with no rational basis for who is allowed 
to work and who is not.
    Fortunately, the PRO Act, the national legislation inspired by AB 
5, has not become law. The Biden Administration has now opened another 
front in the war on independent contractors to achieve the same goal. A 
proposed rule at the Department of Labor would implement the core 
elements of AB 5 without so much as a vote of Congress. In other words, 
in a matter of months the Biden Administration is planning to 
nationalize AB 5 all on its own.
    To aggressively enforce the new regime, Biden has selected a new 
Secretary of Labor. This is the final front: the nomination of AB 5's 
architect and lead enforcer, former California Labor Secretary Julie 
Su, to the highest Labor position in America. It is a direct and 
literal transfer of California failures to Washington.
    Tellingly, with Su's confirmation for U.S. Secretary of Labor now 
faltering, her backers are making a last-ditch attempt to save her 
nomination by absurdly trying to dissociate her from AB 5. None other 
than the author of AB 5, a major Su backer who now leads the California 
Labor Federation, just told the LA Times that Su ``was not involved 
with the bill at all.''
    Su, in her own words, described in detail her plans for enforcing 
AB 5 as California Labor Secretary: ``We will be doing investigations 
and audits,'' she said, threatening fines and penalties, ``so that 
those who want to comply with the need to reclassify can do so and 
those who do not will understand that is not the kind of economy we 
want in California.''
    Not the kind of economy we want in California: Julie Su did not 
want an economy in California where you can pursue your calling, 
support your family on your own terms, and thrive. She does not want 
this for America, either. That is why Joe Biden has selected her for 
Labor Secretary: to wage his war on independent contractors.
    Our committee has a very different vision for the American 
workforce. We believe in promoting work and supporting workers. We 
believe independent contractors are critical to the 21st century 
economy. We will protect the freedom of Americans to earn a living as 
they choose and will fight every effort to take that right away.
                                 ______
                                 
    Ms. Adams. Thank you, Chairman Kiley, and good morning. I 
want to thank our witnesses first of all for being here for our 
first Workforce Protections Subcommittee hearing this Congress. 
One of the Subcommittee's most important responsibilities is to 
protect workers by ensuring relevant Federal laws are followed.
    Chairman Kiley, I hope we can work together in good faith 
to fulfill this responsibility. Under Federal law, employees 
have a wide range of basic workforce protections, including 
minimum wage, overtime, collective bargaining, and health and 
safety protections.
    When workers who should be employees under the law are 
instead misclassified as independent contractors, they lose out 
on these protections. This can mean a significant loss of 
income and benefits. For example, the typical misclassified 
construction worker loses up to $16,000.00 per year.
    It is not just workers who are harmed by misclassification. 
For decades, unscrupulous employers have used misclassification 
as a strategy to cut down on labor costs and both exploit 
insufficient penalties and the limited capacity of underfunded 
enforcement agencies.
    In fact, as many as 30 percent of employers are currently 
misclassifying their employees. As Mr. Long of the National 
Electrical Contractors Association noted in his written 
testimony, low-road employers who misclassify workers gain an 
unfair competitive disadvantage.
    They have no incentive to invest in training their 
workforce to be safer and more efficient. They create hazardous 
situations on the jobsites. Finally, worker misclassification 
harms our economy by depriving our government of billions of 
dollars in badly needed tax revenue that could be spent on 
improving our communities.
    The reality is that the misclassification of workers as 
independent contractors is a pervasive problem for workers, for 
law abiding businesses, for taxpayers, and our economy. This is 
why the Biden administration has proposed a responsible rule to 
fix this problem. Committee Democrats strongly support this 
proposed rule.
    Let me be clear, the proposed rule is not California's 
State law entitled AB 5, which adapts what is known as the ABC 
test. The Biden administration clearly noted that it is, and I 
quote, ``legally constrained from adopting the ABC test, and 
could only implement it if the Supreme Court revisits its 
precedent, or if Congress passes legislation to amend the Fair 
Labor Standards Act, or the FLSA.''
    That should be the end of the story, but Republicans appear 
intent on kicking up as much dust as they can in trying their 
hardest to undermine Acting Secretary Su's nomination to be 
Secretary of Labor. Republicans are putting politics over the 
people.
    My Republican colleagues may also wish to turn back the 
clock to when the previous administration moved to make it 
easier for employers to misclassify workers. This would have 
been an upending of the long-standing standard for determining 
whether someone is an employee, or an independent contractor.
    According to the Economic Policy Institute, it would have 
cost workers nearly 4 billion dollars each year in lost wages. 
The Biden administration was right to rescind this proposal, 
and to push to restore the full standard for determining 
workers status as employees or independent contractors.
    In doing so, the Biden/Harris administration, and 
congressional Democrats are standing with those cooks and 
dishwashers, and home healthcare workers, the electricians, the 
carpenters, and many others who are being denied minimum wage 
and overtime protections because their employers wrongly 
classified them as independent contractors and not as 
employees.
    We are standing with high-road employers who play by the 
rules and deserve a level playing field when competing for 
work. It is very clear that committee Republicans are standing 
for something else, and they want this hearing to be about one 
person, Acting Secretary Su.
    Committee Democrats remain focused on all American workers 
and ensuring that they are not wrongly denied protections 
guaranteed under the law. I hope that my colleagues will put 
politics aside, and take concrete steps to protect workers, and 
to help our workers succeed.
    I want to thank our witnesses again for the testimony that 
they are going to give, and Mr. Chairman, I yield back.
    [The statement of Ranking Member Adams follows:]

Statement of Hon. Alma Adams, Ranking Member, Subcommittee on Workforce 
                              Protections

    Thank you, Chairman Kiley, and good morning. I want to thank our 
witnesses, first of all, for being with us for our first Workforce 
Protections Subcommittee hearing this Congress.
    One of the Subcommittee's most important responsibilities is to 
protect workers by ensuring relevant federal laws are followed. 
Chairman Kiley, I hope we can work together in good faith to fulfill 
this responsibility.
    Under federal law, employees have a wide range of basic workforce 
protections, including minimum wage, overtime, collective bargaining, 
and health and safety protections. When workers, who should be 
employees under the law, are instead misclassified as independent 
contractors, they lose out on these protections. This can mean a 
significant loss of income and benefits. For example, the typical 
misclassified construction worker loses up to $16,000 per year.
    It is not just workers who are harmed by misclassification.
    For decades, unscrupulous employers have used misclassification as 
a strategy to cut down on labor costs and exploit both insufficient 
penalties and the limited capacity of underfunded enforcement agencies. 
In fact, as many as 30 percent of employers are currently 
misclassifying their employees.
    As Mr. Long of the National Electrical Contractors Association 
noted in his written testimony, low-road employers who misclassify 
workers gain an unfair competitive disadvantage; they have no incentive 
to invest in training their workforce to be safer and more efficient; 
and they create hazardous situations on the job sites.
    Finally, worker misclassification harms our economy by depriving 
our government of billions of dollars in badly needed tax revenue that 
could be spent on improving our communities.
    The reality is that the misclassification of workers as independent 
contractors is a pervasive problem for workers, law-abiding businesses, 
taxpayers, and our economy.
    This is why the Biden administration has proposed a responsible 
rule to fix this problem. Committee Democrats strongly support this 
proposed rule.
    Let me be clear, the proposed rule is not California's state law, 
entitled AB-5, which adopts what is known as the ABC test.
    The Biden administration clearly noted that it is--quote--``legally 
constrained from adopting the ABC test'' and could only implement it if 
``the Supreme Court revisits its precedent or if Congress passes 
legislation to amend the Fair Labor Standards Act, or the F-L-S-A.''
    That should be the end of the story--but Republicans appear intent 
on kicking up as much dust as they can and trying their hardest to 
undermine Acting Secretary Su's nomination to be Secretary of Labor. 
Again, Republicans are putting politics over the people.
    My Republican colleagues may also wish to turn back the clock to 
when the previous administration moved to make it easier for employers 
to misclassify workers.
    This would have upended the long-standing standard for determining 
whether someone is an employee or an independent contractor. According 
to the Economic Policy Institute, it would have cost workers nearly $4 
billion each year in lost wages.
    The Biden administration was right to rescind this proposal and 
push to restore the prior standard for determining workers' status as 
employees or independent contractors. In doing so, the Biden-Harris 
administration and Congressional Democrats are standing with those 
cooks, dishwashers, home health care workers, electricians, carpenters, 
and many others who are being denied minimum wage and overtime 
protections because their employers wrongly classified them as 
independent contractors and not as employees.
    We are standing with high-road employers who play by the rules and 
deserve a level playing field when competing for work.
    It is very clear that Committee Republicans are standing for 
something else, and they want this hearing to be about one person: 
Acting Secretary Su.
    Committee Democrats remain focused on all American workers and 
ensuring that they are not wrongly denied protections guaranteed under 
law.
    I hope my colleagues will put politics aside and take concrete 
steps to protect workers and help our workers succeed.
    I want to thank our witnesses for the testimony they are going to 
give, and I yield back.
                                 ______
                                 
    Chairman Kiley. Thank you, Ms. Adams. Pursuant to Committee 
Rule 8(c), all members who wish to insert written statements 
into the record may do so by submitting them to the committee 
clerk electronically, in Microsoft Word format by 5 p.m., after 
14 days from the date of this hearing, which is May 4, 2023.
    Without objection, the hearing record will remain open for 
14 days after the date of this hearing to allow such statements 
and other extraneous material referenced during the hearing to 
be submitted for the official hearing record.
    I will now turn to the introduction of our distinguished 
witnesses. The first witness is Karen Anderson, who is the 
Founder of Freelancers Against AB 5, an ad hoc, all volunteer 
group with 18,500 members, comprised of independent 
contractors, small business owners, non-profits and others, 
representing 600 categories of professions and sectors.
    She is a third generation Southern Californian, with a 25-
year career as a freelance writer, managing editor, and 
photographer.
    The second witness is Tammy McCutchen, who is a Senior 
Affiliate with Resolution Economics, and who previously has 
served as the administrator of the wage and hour division at 
the Department of Labor.
    The third witness is David Long, who is the Chief Executive 
Officer of the National Electrical Contractors Association, and 
previously served as President of Miller Electric Company where 
he first started as a construction wireman.
    The fourth witness is Liya Palagashvili, who is a Senior 
Research Fellow at the Mercatus Center at George Mason 
University and is a research Fellow at the Classical Liberal 
Institute at New York University Law.
    The fifth witness is Laura Padin, who is Director of Work 
Structures at the National Employment Law Project, where her 
work focuses on workplace standard, economic security, and 
temporary and gig economy workers.
    The sixth witness is Kim Kavin, who is the co-Founder for 
Fight for Freelancers USA and is a freelance editor and writer. 
We thank all the witnesses for being here today, and I look 
forward to your testimony.
    Pursuant to Committee Rule 8(d) and Committee practice, I 
ask that you each limit your oral presentations to a 5-minute 
summary of your written statement.
    I also would like to remind the witnesses to be aware of 
their responsibility to provide accurate information to the 
Subcommittee. I will first recognize Ms. Anderson.

  THE STATEMENT OF MS. KAREN ANDERSON, FOUNDER OF FREELANCERS 
                          AGAINST AB 5

    Ms. Anderson. Good morning. Thank you Chairman Kiley, 
Ranking Member Adams, and distinguished members for having me 
here today. After AB 5 was signed into law in September 2019, I 
knew it was an existential threat to my career. Soon 
thereafter, I launched the public Facebook group called 
Freelancers Against AB 5, so that I could connect with other 
people to find out how AB 5 was affecting everyone, be it nurse 
practitioners, videographers, golf caddies, or whoever else 
might see my page and want to share their experiences.
    Little did I know, I would have a front-row seat to 
hundreds and hundreds of negative stories pouring in from all 
income levels, demographics, political affiliations, and the 
vast swath of professions, trades, non-profits and sectors, as 
well as small business owners being put out of business for 
alleged misclassification violations, be it music store owners, 
audio tech installers, videography platforms or architectural 
designers. Even before the law went into effect in January 
2020, I heard from hundreds of individuals who had lost their 
careers overnight, after being given notice by their clients 
that they could no longer legally utilize independent 
contractors from California.
    I received stories about children's theaters closing, local 
bar bands unable to perform, interpreters sidelined by the law, 
and court reporters suddenly without assignments, to name a 
few. Entire sectors that have been negatively impacted by AB 5 
include small and regional theaters, indie film makers, the spa 
and wellness community, wedding planners, non-profit arts 
groups, and the freelance transcription profession, which is 
now all but extinct in California due to AB 5.
    Speech language pathologists had to abandon their elderly 
patients who they were teaching how to learn how to swallow 
after recovering from a stroke. The sign language interpreters 
told me they could not provide ADA mandated services to the 
deaf and hard of hearing after AB 5 was passed.
    Seniors who had thrived with their self-employment 
opportunities were suddenly unemployable due to ageism in the 
workplace. Forensic nurses told me that AB 5 is detrimental to 
rape victims, especially at rural hospital where without 
forensic nurses to perform forensic, evidentiary medical exams, 
victims of sexual assault are subject to long wait times or 
substandard exams by untrained medical personnel.
    All told within my group have identified more than 600 
categories of professions impacted in some way by AB 5 and its 
ABC test. Despite the so-called exemptions for certain 
professions added in September 2020, the law continues to wreak 
havoc on legitimate independent contractors, entrepreneurs and 
small business owners.
    Many exemptions come with caveats and fine print that make 
them nearly impossible to take advantage of. The law also 
creates a chilling effect in which businesses do not want to 
utilize independent contractors from California at all, even if 
there is a pathway to an exemption, because there are so many 
potential landmines.
    Authored by former Assembly Woman Lorena Gonzales, who now 
leads California Labor Federation, AB 5 represents a scorched 
earth approach to policymaking. Recently, on March 17, 2023, 
the 9th Circuit Court of Appeals validated what we have known 
all along about the arbitrary exemptions process that picks 
winners or losers with no rhyme or reason.
    The decision was in response to a lawsuit from 2019, filed 
by rideshare and delivery drivers against AB 5, called Olsen 
versus California. The case was dismissed in February 2020, 
before even being heard. The 9th Circuit decision last month, a 
three-judge panel, rebuked Lorena Gonzales for her blatant 
animus not based in reason against the Plaintiff and for 
engaging in back room dealing.
    The court stated that the counsel for the State, during 
oral arguments, was unable to articulate any conceivable 
rational for the exemptions of AB 5 as amended, and the court 
stated it is plausible that AB 5 violates the equal protection 
clause as alleged by the Plaintiffs, and that the bill borders 
on corruption, ``pure spite, and naked favoritism.'' The case 
is being sent back to the lower court for review.
    It is not speculation in California what can happen with a 
law like AB 5 and the ABC test. We are literally the canaries 
in a coal mine. On behalf of the independent professionals in 
California, I ask that the cautionary tale of AB 5 and the ABC 
test be a warning to the Nation, so that these types of 
destructive policies do not spread nationwide. Thank you.
    [The prepared statement of Karen Anderson follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
    
    Chairman Kiley. Thank you for your testimony, Ms. Anderson. 
I will next recognize Ms. McCutchen.

  STATEMENT OF TAMMY MCCUTCHEN, SENIOR AFFILIATE, RESOLUTION 
                           ECONOMICS

    Ms. McCutchen. Thank you, Chairman Kiley and Ranking Member 
Adams, and members of the committee. Thank you for inviting me 
to speak to you today. This is an important topic for me 
personally, not only as a former wage and hour administrator 
but as a gig worker myself, and for my brother who drives for 
Uber Eats and Grubhub.
    The independent workforce is growing, and it is here to 
stay. Almost 65 million Americans take part in the independent 
workforce. Most because they want to, not because they must. 
Half are women, half are under the age of 42. 25 percent are 
minorities.
    Most are happier, healthier, more secure, and more 
optimistic about the future than traditional employees. The 
independent workforce is the right choice for many workers. Too 
many regulators want to take that choice off the table for 
most, or even all the workers, by expanding the definition of 
employee and restricting the independent contractor standards.
    There is a war on independent contracting. Why? Many have 
the misperception that independent workers are exploited 
because they are not eligible for overtime, do not have access 
to employer provided healthcare, and are not covered by other 
employment protections.
    Of course, this assumes that 65 million workers (or a large 
part of them) are unaware that they are not protected by 
employment laws or somehow have been coerced into working 
independently. Even with the tradeoffs, choosing the freedom 
and flexibility of independent work over being controlled by an 
employer is a rational choice.
    Now the war is fueled by the chaos of legal standards for 
determining who is an employee, and who is an independent 
contractor. In my written testimony, I have provided an 
overview of Federal and State laws. I cannot summarize the 
legal morass in 5 minutes, perhaps not even in 5 hours.
    Short version, it is a mess. Theoretically, most Federal 
statutes define the term employee using a common law test, but 
they are all different. The IRS used a 20-factor test, although 
they have now grouped those factors under three main 
categories. The EEOC has a 16-factor test, and the NLRB has a 
ten-factor test. Now the Supreme Court says that the DOL must 
use an economic reality test under the FLSA.
    How is that defined? Well, more multi-factor balancing 
tests of course. The courts and the DOL have all used different 
factors at different times. Five factors, six factors, seven 
factors, and even similar factors are not quite the same from 
court to court. Different courts balance the factors 
differently. That is just the Federal Government. By my last 
count, there are no less than 100 State statutes regulating 
independent contractors under six different types of employment 
and tax laws.
    Within a single State, as under Federal law, one person can 
be an employee under the wage and hour laws but an independent 
contractor under the tax laws. Now this chaos opens the door to 
abuse. Regulators can choose at will from a menu of different 
factors and facts to reach whatever result they want.
    There is no predictability, and that is what businesses 
fear. Alas, the DOL's proposed changes to its independent 
contractor regulation would just increase the chaos. Prior to 
2021, DOL had no regulations, only a few scattered opinion 
letters and fact sheets. The 2021 regulations established two 
core factors for the economic reality test; who controls the 
work, and whether the worker had an opportunity for profit or a 
loss.
    If those factors pointed in different directions, then an 
additional three factors could be considered. Still complex but 
an improvement. Theoretically, these regulations are enforced 
now because the Biden administration's attempt to withdraw them 
was found to be illegal. Despite this, the DOL does not seem to 
be following them.
    The DOL has proposed to replace the 2021 regulations with 
another six-factor test but also adds these six factors are not 
exhaustive, additional factors may be relevant, and the weight 
to give each factor depend on the particular circumstances in 
the case.
    In other words, as proposed, the DOL can consider any fact 
it wants or refuse to consider any fact it wants. The Biden 
administration, with no notice and no rule changes, could 
implement California AB 5, the unpassed PRO Act, or use a Ouija 
Board to determine who is an employee, and who is an 
independent contractor.
    The definition of an employee needs to be the same under 
every Federal statute, and in fact State law. We need one clear 
and simple rule. Thank you.
    [The Statement of Tammy McCutchen follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    Chairman Kiley. Thank you, Ms. McCutchen. Our next witness 
is Mr. Long.

STATEMENT OF MR. DAVID LONG, CHIEF EXECUTIVE OFFICER, NATIONAL 
               ELECTRICAL CONTRACTORS ASSOCIATION

    Mr. Long. Good morning, Chairman Kiley, and Ranking member 
Adams and the members of the Subcommittee. My name is David 
Long. I am the Chief Executive Officer of the National 
Electrical Contractors Association. The National Electrical 
Contractors Association is a leading voice in a half a trillion 
dollar electrical contracting industry in America.
    It brings power, light, communications, and technology for 
critical facilities and homes across America. In NECA, we 
collectively represent over 4,000 electrical contracting firms 
across America. We spend millions of dollars on training, 
healthcare, insurance, and retirement funds for our critical 
workers.
    We thank you for holding this hearing, allowing us the 
opportunity to explain that the threat of worker 
misclassification and the confusion around this process poses 
the ability of law abiding, entrepreneur employers in the 
construction industry to compete, innovate, create jobs for the 
critical infrastructure of America.
    In the construction industry, misclassification is a choice 
to disregard the legal responsibilities of being an employer or 
an employee. It provides a competitive advantage by failing to 
ensure the financial obligations are met, that responsible 
businesses do every day.
    This effect is not just on NECA contractors, but thousands 
and thousands of small construction businesses who abide by the 
law, and try to compete into a free market economy, in which 
they embrace labor abiding advantages, or such as the 
following.
    Construction contractor industry members pursue their work 
through the cost competitive bidding process every day. Minimum 
wage, overtime, FICA taxes, unemployment insurance, workers 
compensation, liability insurance to the customer. These 
misclassification schemes these contractors are allowed to 
submit lowers bids, because they do not have to worry about the 
list that I just mentioned above.
    The burden will ultimately fall upon the taxpayer, or the 
customer, or even the individual to make up the difference. 
Cost to the taxpayers, the U.S. Government study over 20 years 
ago, found that misclassified workers resulted in a loss of 
overall unemployment insurance revenue of over 200 million 
dollars annually, as well as unpaid Federal Government.
    There was more than 2.75 billion dollars of unpaid social 
security, unemployment insurance, and income taxes. In fact, in 
the State of D.C., in the city of D.C. alone, construction 
companies who elect to go with independent contracting can 
receive an advantage of between 16 and 40 percent on 
competitive engagement in various areas.
    The State of Ohio Attorney General estimated that 
misclassification worker is at least a 20 to 30 percent 
competitive cost advantage against responsible entrepreneur, 
small business construction companies.
    The Department of Labor and their attorney counterparts put 
a press release of the good work that they are doing but, 
however, it is very clear that competitive advantage to 1099 
workers compared to entrepreneurs who are trying to build 
businesses in our communities is at a complete disadvantage 
because of these breaks that they are allowed.
    Conclusion from our viewpoint. Responsible contractors want 
an open and fair marketplace. We have done it for decades and 
centuries. On projects where fellow competitors are playing on 
an uneven playing field, but trying to compete with folks who 
can absolutely cut their bid on bid day by 40 percent is a race 
to the bottom.
    Let me reconfirm, this is a major impact to our small 
contractor entrepreneurs across America in the construction 
industry, and it eventually will affect the contractor worker 
in every community. Thank you for holding this hearing. I hope 
that it will result in some concrete proposals.
    I am anxious to address the rampant use of the 
misclassification of the worker. Thank you.
    [The prepared statement of David Long follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    
    Chairman Kylie. Thank you, Mr. Long. Our next witness is 
Ms. Palagashvili.

  STATEMENT OF DR. LIYA PALAGASHVILI, SENIOR RESEARCH FELLOW, 
           MERCATUS CENTER AT GEORGE MASON UNIVERSITY

    Ms. Palagashvili. Good morning, Chairman Kiley, Ranking 
Member Adams, and members of the Subcommittee Workforce 
Protections. It is an honor to testify before you. My name is 
Liya Palagashvili, and I am an Economist at the Mercatus Center 
at George Mason University.
    My research focus is on the independent workforce and the 
evolving nature of work. Today, my testimony focuses on the 
Department of Labor's proposed rule that impacts about 60 
million independent workers nationwide. I would like to present 
three considerations in evaluating the proposed restrictions.
    One, the diverse and growing workforce. Two, the expected 
job losses from the DOL's rule. Three, the adverse impact on 
women. One out of every 3 Americans work outside of traditional 
employment today, either for their primary or secondary sources 
of income.
    These independent workers span across industries, skills 
and educational attainment. For example, they can be musicians, 
ride sharing and delivery drivers, software developers, graphic 
designers, landscapers, Instagram influencers, and self-
employed online merchants.
    According to IRS tax data professional, scientific and 
technical services make up the largest share of independent 
contractors and have seen the fastest growth in independent 
contractors since 2001. While Uber, Lyft, and Door Dash are 
ubiquitous in our everyday lives, according to the tax data, 
these workers amount to fewer than 10 percent of the overall 
independent contractor workforce.
    Beyond that, the tax data shows that at base workers are 
primarily supplemental earners who have full-time jobs 
elsewhere. One part of the DOL's proposed independent 
contractor rule adds new considerations that significantly 
limit the circumstances under which a worker can be legally 
classified as an independent contractor.
    The DOL is doing this in the hopes that organizations will 
hire workers as employees instead. Now at first glance, it 
seems like a win for those who might be reclassified as 
employees and receive benefits. However, that is unlikely to be 
the case for the majority of workers. That is because it is 
impossible for every single, independent work opportunity to 
turn into a full-time employment offer.
    A recent example to demonstrate this point is when 
California passed AB 5, which is a similar law that restricts 
independent work opportunities, and supporters applauded it as 
a win for workers, but some of those same supporters changed 
their minds later when news outlets like the New York Times and 
the L.A. Times highlighted how difficulty in compliance, 
complexity, and confusion with the law had led to job losses, 
especially among freelance musicians, truck drivers, and 
writers.
    For many organizations like newspapers, theaters, music 
venues, and small businesses, it was now all of a sudden to 
work, and it was all of a sudden illegal to work with their 
freelancers. Those freelancers lost their jobs. Following this 
backlash, California later exempted these professions and many 
others from AB 5.
    I would like to emphasize here that jobs were saved in 
California where more than 100 professions and industries were 
exempted from AB 5, but the DOL's rule cannot exempt any 
professions or industries, which means that its rule will have 
far more significant and wide-reaching consequences across our 
economy and all our jobs.
    These job losses are especially problematic as the Fed 
announced last week that a recession is expected in the coming 
months. Several decades of economics research shows that 
workers turned to independent work after they have faced a loss 
of income or unemployment.
    Recent reports using IRS tax data also found that 
independent work opportunities are critical for financially 
strained workers when they face economic hardship. At a time 
when employment opportunities are likely to become scarcer, it 
is unwise for the DOL to also limit independent work 
opportunities.
    Eliminating independent work will mean that workers will be 
unemployed for longer periods, thereby risking a far more 
severe recession. Perhaps the most unfortunate consequences of 
the DOL's rule is how it will adversely impact women.
    Across a nationwide survey, women who are primary 
caregivers have indicated that they engage in independent work 
because they require flexible work arrangements. Indeed, one 
survey found that a quarter of women left their employment job 
to take on independent work because they wanted flexibility, or 
needed more time to care for a child, parent, or other 
relative.
    Restricting independent work opportunities and 
reclassifying them into traditional employment would 
disadvantage many women who turned specifically to independent 
work for the flexibility that they need in their work 
schedules.
    There are far better ways to address the challenges of 
independent work without DOL regulations making women their 
collateral damage. Thank you. I welcome your questions.
    [The Statement of Lila Palagashvili follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    
    Chairman Kiley. Thank you for your testimony. Our next 
witness is Ms. Padin.

  STATEMENT OF MS. LAURA PADIN, DIRECTOR OF WORK STRUCTURES, 
                NATIONAL EMPLOYMENT LAW PROJECT


    Ms. Padin. Chair Kiley, Ranking Member Adams, and members 
of the Subcommittee, thank you for this opportunity to testify 
today. My name is Laura Padin, and I am the Director of Work 
Structures at the National Employment Law Project, a non-profit 
organization that promotes policies and programs that create 
good jobs and strengthen upward mobility.
    True independent contractors are people who are in business 
for themselves. They determine what goods or services to sell 
and at what prices, make capital investments to grow their 
business, and build a customer base. At NELP, we support 
policies that ensure these small business owners are treated 
fairly.
    What we take issue with is when corporations mislabel the 
workers powering their businesses as independent contractors, 
or gig workers, or freelancers, even though these workers are 
not in business for themselves. Employers that engage in these 
sham practices depress wages and working conditions, and shed 
responsibility for their workers, while maintaining control 
over key decisions, such as where, how, and for how much money 
workers perform their jobs.
    Congress passed our bedrock labor and employment laws, 
because it recognized there is a profound imbalance of power in 
most employment relationships, and that absent government 
regulation, employers can force substandard working conditions 
on their workers under threat of poverty and loss of 
livelihood.
    As you know, because independent contractors are in 
business for themselves, they are not covered by our labor and 
employment protections, like the right to minimum wage and 
overtime, and the right to our harassment and discrimination 
free workplace. They do not have access to employment based 
social insurance programs like unemployment insurance and 
workers' comp.
    In addition to losing out on these rights and benefits, a 
majority of so-called independent contractors earn little 
money. I say so-called, because by and large, those in lower 
earning professions like janitors, nail salon workers, delivery 
workers, and home care workers are not actually running their 
own businesses, but rather accepting working conditions imposed 
on them by the businesses misclassifying them.
    A growing body of research, which I cite in my written 
testimony, also shows that middle and low-earning independent 
contractors are making less money than employees in the same 
industries. Several studies have also found that app-based 
drivers and delivery workers are making just at, or under the 
minimum wage for the localities where they live.
    It is important to emphasize that these jobs are dangerous 
and difficult. Car and bike accidents are really common for 
folks doing this work. They have no workers compensation, no 
paid time off, no employer provided health insurance if they 
get sick or injured on the job. No unemployment insurance if 
they lose work.
    For many independent contractors, their poverty level 
incomes and lack of benefits and protections mean that their 
lives, and the lives of their families are incredibly 
precarious. They live paycheck to paycheck, one accident or 
illness away from financial disaster, and without the means to 
ever take a break from work or retire.
    Misclassification is especially prevalent in labor 
intensive, low wage sectors, where employers can gain a 
competitive advantage by driving down payroll costs. People of 
color and women are overrepresented in many of these sectors, 
shunted into jobs that are insecure, underpaid, and have no 
workplace protections or benefits.
    When regulators do not crack down on employers that 
misclassify their workers, and when policymakers interpret 
independent contractor to encompass low-wage, precarious 
occupations, where people of color and other vulnerable 
populations are overrepresented, we at NELP worry that we are 
recreating racist carve outs from our laws, and allowing the 
creation of a second tier class of workers who are 
predominantly people of color and women making poverty wages 
and excluded from basic employment rights and protections.
    I want to briefly raise four other issues. First, 
misclassification is hurting businesses that play by the rules. 
Employers who misclassify their workers pocket between 20 to 40 
percent of payroll costs. Businesses that are doing the right 
thing, and classifying their workers as employees, are at an 
unfair disadvantage.
    Second, misclassification is hurting Federal and State 
government coffers with billions in unpaid taxes and 
contributions to social insurance programs. Third, the issue of 
scheduling flexibility is a red herring. Employees can enjoy 
scheduling flexibility, and they need not trade bedrock labor 
protections to get it.
    Many employees, including shift workers, are now getting 
the scheduling flexibility they need, including choosing their 
hours, working shorter schedules, and signing up for shifts on 
apps. Last, I want to address something Ms. McCutchen said. She 
said the DOL could unilaterally impose any test it wants for 
determining who is an independent contractor, and who is an 
employee, including the ABC test if it wants. That is simply 
untrue.
    The test the DOL uses must be based on Supreme Court 
precedent, and indeed the six-factor test the DOL has proposed 
is based on Supreme Court and Circuit Court precedent. Thank 
you.
    [The prepared statement of Laura Padin follows:]
   [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    
    Chairman Kiley. Thank you very much. Our final witness is 
Ms. Kavin.

    STATEMENT OF MS. KIM KAVIN, FREELANCE WRITER AND EDITOR

    Ms. Kavin. Thank you, Chairman Kiley and Ranking Member 
Adams, for the opportunity to address the committee today. I am 
a 50-year-old freelance writer and editor for New Jersey. After 
10 years as a staff editor for newspapers and magazines, I 
decided to freelance.
    I have been successful and happy in this career for 20 
years. Being an independent contractor is my chosen way of 
working, as it is for tens of millions of Americans. A few 
years ago, I could not have even told you who all my elected 
officials were, but then in 2019, California passed Assembly 
Bill 5.
    That law snowballed into a shocking series of events that 
included me testifying here today. California's law used 
language called the ABC test to strictly redefine who can and 
cannot earn income as an independent contractor. This ABC test 
is quite frankly, impossible for many legitimate independent 
contractors to pass.
    Freelancers in California immediately began losing their 
income and their careers, and yet almost overnight my own State 
of New Jersey tried to fast track a copycat of the California 
bill. Several of us freelance writers created Fight for 
Freelancers, to protect our careers. We blanketed the media 
with op eds and interviews, and in a matter of weeks our group 
swelled to thousands of members from many professions.
    We then packed our State House to standing room only 
capacity, and we testified for more than 4 hours until law 
makers understood that our careers as legitimate independent 
contractors need protection. Thankfully, the New Jersey bill 
died.
    Then Members of Congress ignored the chaos on the West 
Coast and the outcry on the East Coast and began work to 
advance this same ABC test nationwide, with the Protecting the 
Right to Organize Act. At that point, every independent 
contractor in America, tens of millions of us, had our 
livelihoods in the crosshairs.
    It has been more than 3 years now since California's law 
went into effect, and the lesson could not be clearer. Attempts 
to restrict the choice of self-employment do not create lots of 
new jobs. When you rewrite the rules to misclassify legitimate 
independent contractors, you destroy our income and careers.
    I am here today to ask for your help in stopping these 
attacks on Americans like me. We are grateful that a few Senate 
Democrats joined with Republicans in the last term and refused 
to pass the PRO Act, but we remain deeply concerned that the 
same ABC test language remains in that bill now.
    We are also disturbed by recent actions at the U.S. Labor 
Department, which is rewriting its independent contractor 
standard in a way that will misclassify legitimate independent 
contractors. The current nominee to lead that department, Julie 
Su, supported and enforced the California law. It is remarkable 
to me that such a freelance busting idealogue would even be 
considered for the Nation's top workforce protection job.
    In the face of all these threats to our livelihoods, our 
grass roots, the nonpartisan Fight for Freelancers Coalition 
only keeps growing. We are now a national force. Our recent 
amicus briefs, including one that we wrote for the U.S. Supreme 
Court, were cosigned on behalf of hundreds of thousands of 
Americans.
    Make no mistake about who we are. Our members have voted 
for everybody from Bernie Sanders to Donald Trump. All our co-
Founders and about 80 percent of our members are women. Our 
members include senior citizens, generation Z, people of color, 
people with disabilities, union supporters, and just about 
every other demographic you can imagine.
    All of us are united on this issue. American citizens have 
had the right to hang out a shingle and go into business for 
ourselves since the day this Nation was founded. It is a right 
that a third of the workforce, including me, exercises every 
day. Please fight for freelancers and protect our right to 
choose self-employment.
    I see that I have 30 seconds left. I would like to speak 
directly to you, Ranking Member Adams. You said something that 
was correct in your opening statement. You said 
misclassification harms our economy. I agree with you ma'am. I 
hope we can have a conversation today about just how much harm 
it is going to do our economy if you misclassify tens of 
millions of Americans like me. Thank you.
    [The prepared statement of Kim Kavin follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    
    Chairman Kiley. Thank you, Ms. Kavin. Under Committee Rule 
9, we will now question witnesses under the 5-minute rule 
starting with Mr. Grothman.
    Mr. Grothman. Thank you. It is great being at this 
Subcommittee today. We have two American flags in the room. I 
always kind of liked to look at the American flag. You know, to 
me it signifies freedom. I would like to apologize to Ms. 
Kavin, we are so close here to taking away your freedom to make 
a living the way you want to make a living.
    It is too bad, there are so many arrogant people who think 
they know better how you should live your life than you want to 
live your life, and it is just so unamerican that it is 
sickening to me, but they are in positions of power, so we have 
got to look out.
    Was it Ronald Reagan who said freedom is only one 
generation from extinction? That is what we have here in these 
people. Okay. Now I would like--we are going to give it a go 
here, we think she is so wonderful, we are going to try to 
pronounce her name. Ms. Palagashvili. The Department of Labor 
only acknowledges one category of costs, what it calls one-time 
regulatory familiarization rules in its independent contractor 
proposed rule.
    Labor also implausibly asserts that the proposed rule is 
not expected to impose costs after the first year. Department 
of Labor is suggesting that somehow reclassifying a large 
number of workers who choose and prefer to be independent 
contractors would only impose costs in the first year of the 
rule.
    Do you find labor's cost assessment of its rule to be 
realistic?
    Ms. Palagashvili. Thank you for your question. It is a 
great question. The Department of labor did not provide a 
reason for its determination of the cost and benefits of this 
rule, and as you have stated, they provided only one cost of 
the rule, but they miss a very, very, very important cost.
    They actually implicitly assumed in their analysis that 100 
percent of impacted jobs, contracting jobs, would automatically 
turn into employment jobs, and that is really unrealistic, and 
it is not grounded in any economics research. The economic 
research that we do have show that jobs will actually be lost.
    We also have anecdotal evidence from California's AB 5, but 
one study did a simulation that said this type of rule would be 
equivalent to losing 58 percent of these earning opportunities 
to 87 percent of earning opportunities. Now, this is a pretty 
important aspect the Department of Labor missed, and it does 
not allow them to do a proper cost/benefit analysis of the 
rule.
    They were able to treat everything as mere transfers, and 
there was no real cost analysis in this rule.
    Mr. Grothman. Okay. The California experiment with the ABC 
worker classification test has shown it is economically 
disruptive. Do you know percentage wise? Can you take a wild 
stab, or somebody else up here, on the number of people? This 
is the way they currently earn their money, or as a practical 
matter, it is not really their job, it is their business, kind 
of a hybrid of a job or a business, self-employed people?
    How many are going to, in essence, have to lose their 
income?
    Ms. Palagashvili. Could you clarify your question? How many 
in California lost their income?
    Mr. Grothman. If you are an independent contractor, you 
know you are getting, I guess, a 1099, right? Percentage wise, 
some people will wind up being traditional employees. A lot of 
people, this new way of classifying people, or forbidding 
people to be classified as independent contractors means they 
will, in essence, be out of work.
    Can anybody take a guess how many people will wind up, in 
essence, losing their income stream because of this high-handed 
proposal?
    Ms. Palagashvili. There is not a great economic research 
study on this. There is a simulation that was done, and as I 
mentioned, it is about 58 percent to 87 percent of job losses 
with this, and so essentially, what is happening is that a 
majority of these workers from this estimate will neither 
become employees, nor be able to work in their independent 
contracting roles because you make that role illegal.
    Mr. Grothman. We take a wild stab. We can say two-thirds of 
the people who are currently independent contractors are going 
to be out of work, and some are forced to become employees, 
which they do not want to, which is a punishment in its own 
right, but 65 percent are going to have to find something else 
to do, huh?
    Ms. Palagashvili. That is an estimate that we do have. It 
is not the best, but it is one of the only ones that we do have 
that show that. By the way, I just want to highlight again that 
there are hundreds of news stories about AB 5 job losses. It 
was not one, two, or three, it was hundreds.
    Mr. Grothman. I think a lot of women, and this was kind of 
mentioned by one of the other witnesses, but a lot of women, 
kind of because of their position, would rather have the 
flexibility that a independent contractor role has. Would you 
say this role disproportionately punishes women?
    Ms. Palagashvili. I have written about how this rule does 
disproportionately impact women, and that is because for a lot 
of--the majority of women who choose independent work, we see 
this across surveys, they say they voluntarily leave employment 
to go into independent work opportunities.
    This is especially true for women who are primary 
caregivers in their homes. From that, in that regard, yes, this 
rule will disproportionately harm women who are primary 
caregivers.
    Chairman Kiley. Thank you. The gentleman's time has 
expired. I will now recognize the Ranking Member Ms. Adams.
    Ms. Adams. Thank you, Mr. Chair. Thanks to our witnesses 
again for joining us this morning. I request unanimous consent 
to enter into the record a letter from the Construction 
Employers of America, expressing support for the proposed rule 
on independent contractors.
    Chairman Kiley. Without objection.

    [The information of Ms. Adams follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    Ms. Adams. Thank you. I am addressing my questions to Ms. 
Padin. We hear a lot of mentions of flexibility when it comes 
to employee misclassification. Employers claim that in being 
classified as employees, workers will not have access to 
flexible work conditions. As a mother and a grandmother, I am 
sensitive to the fact that our workers need flexibility to care 
for loved ones, be it a child who has not yet started school, 
or someone who has fallen ill, or even to care for themselves.
    I want to ask a few questions to ensure that we have the 
facts here. Ms. Padin first, does employee status necessarily 
mean that workers cannot enjoy flexibility?
    Ms. Padin. No, it does not.
    Ms. Adams. Mr. Long, do you agree? Is that a yes?
    Mr. Long. Yes.
    Ms. Adams. Thank you. Thank you, Ms. Padin, for confirming 
that there are opportunities whereby employees can be properly 
classified and access a flexible career choice. As a follow up 
to that point, I am interested in having a robust conversation 
with my colleagues on both sides of the aisle about how we can 
cultivate and nurture a workforce that protects and benefits 
all workers.
    Ms. Padin, if our colleagues on the other side of the aisle 
are fully interested in helping America's workers enjoy more 
flexibility, what are some policies that we could adopt that 
would give employees more flexibility in their day to day 
lives?
    Ms. Padin. Thank you, Representative Adams. I would say 
there is the Schedules at Work Act, Federal legislation that 
would ensure that workers have the right to request scheduling 
changes, and it would also include anti-retaliation protections 
for making such requests for flexibility, and schedules in 
pay--ensure schedules in pay that are stable and predictable.
    There is also the Healthy Families Act, legislation that 
would establish a Federal guarantee of 1 hour of earned sick 
time for every 30 hours worked. I think it is really important 
to note that true flexibility has to include financial 
stability. It has to include the ability to take paid time off, 
to have some compensation.
    For so many workers, they are balancing their income 
against every hour they are earning, right? They either work, 
or they do not get paid, so really these two pieces of 
legislation would do that.
    Ms. Adams. Great. Thank you. You know, I have been a long-
time supporter of many of the measures that you mentioned and 
look forward to continuing conversations with my colleagues 
throughout the 118th Congress on these important issues, but 
Ms. Padin, the Economic Policy Institute estimates that 
housekeeping cleaners lose about more than $5,000.00 a year in 
home health and personal care aides lose about $6,000.00 per 
year when they are misclassified.
    They lose access to legal protections, unemployment 
insurance, worker's compensation, and so for these workers, and 
many others, the way they are classified is not something 
within their control, is it?
    Ms. Padin. That is correct. It is not in their control.
    Ms. Adams. Okay. If the balance of power to make that 
determination lies with their employers. Is that correct?
    Ms. Padin. With their employers, yes. That is correct.
    Ms. Adams. Well thank you very much for your responses. 
Thank you very much, and Mr. Chairman I yield back.
    Chairman Kiley. I now recognize Ms. Miller.
    Ms. Miller. Thank you. The independent contracting model 
benefits workers and job creators. Independent contractors have 
advantages over traditional employees. They have the 
flexibility to choose their own hours, projects and clients, 
giving them the freedom to control their own careers and work-
life balances.
    It is no wonder that 80 percent of self-employed 
independent contractors prefer their current status. This is 
why President Biden's attack on them is so egregious. We need 
independent contractors, especially in the trucking industry, 
where they are so vital to our national supply chain.
    Again, I want to thank the committee for holding this 
hearing, and I yield my remaining time to Chair Kiley.
    Chairman Kiley. Thank you, Ms. Miller. Ms. Anderson, you 
have worked with many, many freelancers, independent 
contractors, entrepreneurs in California who have been 
negatively impacted by AB 5, which President Biden has cited as 
his model for labor relations in the United States.
    I believe AB 5 has now created over 100 different 
exemptions of one kind or another. Is that correct?
    Ms. Anderson. It is debatable whether all of those 
exemptions are actually--can practically be taken advantage of, 
but technically yes, 100.
    Chairman Kiley. In practice, the way this worked was you 
had after the law was signed, you had all of these massive job 
losses that were occurring, and so it set off this lobbying 
frenzy where industries tried to get themselves out of the law. 
You know, as chaotic as that process was, as was noted in the 
testimony, it did end up saving some jobs at least.
    Ms. Kavin, does the Department of Labor rule that is being 
proposed have any of those exemptions?
    Ms. Kavin. No, sir. Nor does the PRO Act.
    Chairman Kiley. In other words, even those industries that 
were spared by AB 5 would be ensnared by the PRO Act, or the 
Department of Labor rule?
    Ms. Kavin. That is the goal of the way these regulations 
are being written, their purpose is to then capture as many 
legitimate independent contractors as they can, simply to force 
us out of work.
    Chairman Kiley. As I mentioned at the outset, you know, 
because we have the AB 5 experience, it is not like we need to 
sit here and hypothesize about what the impact of these new 
legal standards being proposed are going to be. I thought I 
would give you an opportunity, Ms. Anderson, if you had a few 
stories you would like to share of independent contractors who 
have lost their livelihoods in California?
    Ms. Anderson. Yes. Thank you so much for allowing me to 
share some of these stories. Nancy Hall is a licensed 
pharmacist in her 60's, and she has a doctorate degree. Her 
long-time freelance career of performing compliance inspections 
of pharmacies up and down the State was destroyed overnight by 
AB 5.
    Now this is somebody that, you know, why is it that 
licensed psychologists have an exemption, but a licensed 
pharmacist does not? We have an independent filmmaker, 
Margarita Reyes. She faces restrictions with hosting youth 
mentoring programs in marginalized communities.
    We have lots of stories of people that have had to flee the 
State because of life-threatening situations. One gal, she was 
a freelance bookkeeper, and she had to flee the State with her 
autistic son, and her very ill husband who had stage four colon 
cancer when she lost her freelance bookkeeping career 
overnight, that solely supported her family.
    Gale Gordon is a--she founded a non-profit opera company in 
honor of her mother who was a Holocaust survivor, and her opera 
company presented music by Jewish composers suppressed by the 
Nazi's. Well, she got audited. She passed her audit. I do not 
know how, but she had to shutter her opera because it is not 
possible for these performing arts companies to operate under 
AB 5.
    They were--a lot of the theaters, and children's theaters, 
and small performing arts groups, they were closing their doors 
long before the COVID shutdowns happened. We have an RN, Laurie 
Blanc. She's a nurse educator, and she's legally disabled with 
35 benign bone tumors on her body. She lost her career to AB 5 
because nurse educators are not exempt, but yet doctors are.
    We have a gal named Judith Flexhela, who shared with our 
group that AB 5 has killed the concert dance scene in Los 
Angeles. A lot of what we are hearing from these performing 
arts communities is that they could survive COVID eventually, 
but they cannot survive AB 5. They cannot afford to convert 
every single person into an employee because it is going to 
raise the cost of a single production by almost up to 40 to 50 
percent.
    Chairman Kiley. Thank you, Ms. Anderson. Those are such 
heartbreaking and compelling stories. I hope we can return to 
some more of them later in the hearing, and we know that there 
would be millions more like this if these new proposals went 
into effect. I will now recognize Mr. Takano.
    Mr. Takano. Thank you, Mr. Chairman. I think it is 
important to begin by stressing the Workforce Protections 
Subcommittee does not have jurisdiction over State laws, such 
as AB 5, or cabinet nominations such as Acting Secretary Su's. 
I find it perplexing, but not surprising by the Committee 
Republicans' very first Workforce Protections Subcommittee 
hearing that's conveniently scheduled to take place just 1 day 
before the Senate confirmation hearing of Ms. Julie Su.
    I was proud to lead 14 of my other House Democratic 
colleagues in a letter supporting her for the top position at 
DOL back in 2020, and in my mind there is no one more qualified 
for the position than Ms. Su. As we have seen, this committee 
under Republican control is far more focused on gearing 
attention toward stopping one woman from getting a job, instead 
of helping all Americans receive the wages that they have 
earned.
    The Chairman of this very Subcommittee has gone so far as 
to send out this Tweet claiming that Ms. Su was the architect 
of legislation, of AB 5, and I would like to ask unanimous 
consent to include a copy of this tweet in the official record.
    Chairman Kiley. Without objection.
    [The letter of Mr. Takano follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    
    Mr. Takano. As someone who has the honor of representing 
California here in Congress, and someone who knows Julie Su, 
and strongly supports her confirmation as Secretary of Labor, I 
want to set the record straight on a couple of things. First, 
my question is for Ms. Padin. Does the proposed rule from the 
Biden administration on misclassification adopt the ABC test?
    Ms. Padin. It does not.
    Mr. Takano. In fact, the proposed rule even says, does it 
not, on page 62,230 of the Federal Register Notice that ``the 
Department continues to believe that legal limitations prevent 
the Department from adopting'' the ABC test. Is that right?
    Ms. Padin. That is correct.
    Mr. Takano. A final rule must in accordance with the 
Administrative Procedure Act, be a logical outgrowth of what 
was put out in the proposed rule. Is that correct?
    Ms. Padin. That is correct.
    Mr. Takano. We are not going to see DOL using the ABC test 
for Fair Labor Standards Act cases are we?
    Ms. Padin. That is correct.
    Mr. Takano. This is a misleading--the committee is--the 
Republicans are pursuing a misleading conflation of issues here 
are they not?
    Ms. Padin. That is correct. The DOL rule is a six-factor 
test. It is not the ABC test.
    Mr. Takano. The DOL rule is a six-factor test, not the ABC 
test.
    Ms. Padin. Correct.
    Mr. Takano. It seems to me, you know, there is a lot of 
conflation obfuscating the real issue here, what the 
administration is attempting to do. Do you wish to respond?
    Ms. Padin. Yes. I agree with you. This DOL rule adopts six 
factors that get at the kind of central issue of whether a 
worker is in business for themselves, or in the business of 
someone else. Six common sense factors that are based on 
Supreme Court precedent. It does not use the ABC test.
    Mr. Takano. In my time remaining, I would like to speak 
directly about Ms. Su, who is the daughter of immigrants. Her 
mother came to the United States on a cargo ship because she 
could not afford a passenger ticket. She has spent her whole 
career fighting to improve the lives of working people, and I 
believe she represents the best of America.
    That is why in February the congressional Asian Pacific 
American Caucus sent a letter to President Biden, urging him to 
nominate Julie Su as Labor Secretary. I ask unanimous consent 
to enter that letter into the record Mr. Chairman.
    Chairman Kiley. Without objection.
    [The letter of Mr. Takano follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    Mr. Takano. Since the President nominated Ms. Su, a diverse 
coalition of folks have come forward to endorse her. For 
instance, the Los Angeles Area Chamber of Commerce has voiced 
support for Ms. Su's nomination as Labor Secretary, and I ask 
unanimous consent to enter their statement into the record, Mr. 
Chairman.
    Chairman Kiley. Without objection.
    [The letter of Mr. Takano follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    
    Mr. Takano. This question I have is for Mr. Long. Mr. Long, 
I understand that the National Electrical Contractors 
Association endorsed Julie Su. Is that correct?
    Mr. Long. That is correct.
    Mr. Takano. Did your organization send a letter in support 
of her nomination?
    Mr. Long. Yes.
    Mr. Takano. Mr. Chairman, I ask unanimous consent to enter 
into the record the National Electrical Contractors Association 
letter in support of Ms. Julie Su into the record.
    Mr. Kiley. Without objection.
    [The letter of Mr. Takano follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    
    Mr. Takano. Ms. Padin, I understand that the National 
Employment Law Project endorsed Julie Su as well. Is that 
correct?
    Ms. Padin. That is correct.
    Mr. Takano. I wish Mr. Chairman to ask unanimous consent to 
enter into the record the National Employment Law Project 
letter.
    Chairman Kiley. Without objection.
    [The letter of Mr. Takano follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    
    Mr. Takano. Committee Republicans are wrong about the 
Biden/Harris administration's rule, and they are wrong about 
Julie Su. They are unfairly smearing her in this committee. I 
am proud to support both the rule, and Acting Secretary Julie 
Su's nomination, and I yield back my time.
    Chairman Kiley. I will now recognize the Chair of the 
Education and Workforce Committee, Dr. Virginia Foxx.
    Mrs. Foxx. Thank you, Chairman Kiley. I appreciate it, and 
I thank our witnesses for being here today. Ms. McCutchen, a 
Federal district court overturned the Biden Department of 
Labor's first attempt to withdraw the Trump administration's 
independent contractor rule, and therefore the Trump DOL's 
independent contractor rule is still in effect.
    In spite of this, are you aware of any instances where DOL 
has ignored the independent contractor rule that is still on 
the books and determined the worker's classification using a 
different test than what the law required?
    Ms. McCutchen. Yes. Two things. One, you cannot find those 
regulations anywhere on the DOL's website. Their 
misclassification page instead links to fact sheet 13, which 
lists the six factors that have not been the law for over 2 
years. They are misleading the public about what the actual law 
is.
    Second, I actually represent a nurse registry business in 
Florida in a current DOL investigation. We had a closing 
conference not a month ago, and in that closing conference, 
despite the fact that the Trump regulations are in effect, the 
solicitor and the investigator again went through the six 
factors and did not at all apply or attempt to apply the 2021 
regulations.
    Mrs. Foxx. That is a very serious situation, and I intend 
to followup on it. Ms. Kavin, you have spent the last few years 
volunteering your time to advocate against restrictive worker 
classification tests at the State and Federal levels. During 
this time, what has been your experience interacting with 
Federal and State lawmakers and regulators who are seeking to 
implement policies that would destroy your career?
    Ms. Kavin. I have had lawmakers laugh in my face. They have 
ignored us by the dozens in public hearings. They have refused 
to give us a seat at the table when they are writing 
regulations about us. Perhaps most egregiously, we have been 
told that if we want to see any changes in the language of the 
legislation that we are questioning and challenging, that we 
cannot even discuss it with our elected officials, we have to 
discuss it with the AFL-CIO.
    I have numerous examples in my written testimony of things 
that we have endured these past few years. I will share one 
brief story with you here now. We did a phone call with the top 
aid on the PRO Act to U.S. Senator Patty Murray. It was the 
four co-leaders of Fight for Freelancers, all of us women. One 
of them is a working mom named Karen Warren, from Georgia.
    Karen explained to this aide that in the previous year as a 
freelance writer she had about 30 different clients, and she 
was able to manage her couple of kids, the car pools, the Girl 
Scout cookies, all the things that she does because she was her 
own boss, and she could work with those people as she pleased.
    Karen then explained to this aide that the best-case 
scenario--forget about her income being wiped out, but the best 
case scenario if this ABC test goes nationwide, is she now has 
30 part-time bosses. She asked this aide, how is a human being 
supposed to do anything with 30 part-time bosses?
    How could you schedule so much as a bathroom break, yet 
alone function? This aide said to us, I have no problem with 
that outcome.
    Mrs. Foxx. Well, thank you very much. Ms. Palagashvili, 
excuse me, in your comment letter on DOL's proposed independent 
contractor rule you wrote that, ``DOL implicitly assumes that 
100 percent of potential contracting jobs will be turned into 
employment jobs.'' This seems hard to believe. Are you aware of 
any economic research that supports DOL's assumptions?
    Ms. Palagashvili. Thank you for your question. No. There is 
no economic research that supports the DOL's implicit 
assumption that there will be zero contracting losses.
    Mrs. Foxx. Thank you very much. Mr. Chairman, I only have 
30 seconds, but if you can use them, you are welcome to them.
    Chairman Kiley. Thank you, Dr. Foxx. Ms. Kavin, did 
President Biden cite AB 5's ABC test as his model for labor 
relations?
    Ms. Kavin. He ran on it. If you go to joebiden.com/
empowered workers, it is right there on his website. He said he 
plans to work with Congress to make the ABC test the basis for 
all labor, employment and tax law.
    Chairman Kiley. Is the ABC test in the PRO Act?
    Ms. Kavin. Yes it is. It is right at the top.
    Chairman Kiley. Do you believe that the practical impact of 
the Department of Labor rule will be similar to the ABC test?
    Ms. Kavin. They have made clear in their own words that 
they think the ABC test is great, and they are trying to get as 
close to it as they can without the Supreme Court stopping 
them.
    Chairman Kiley. Thank you very much. I will now recognize 
Ms. Stevens.
    Ms. Stevens. Thank you, Mr. Chair, and thank you to all of 
our witnesses for appearing before our Subcommittee today. The 
misclassification of workers as independent contractors is 
certainly a pervasive issue affecting a host of workers and 
their families with national implications. Fortunately, the 
Michigan State legislature, I am a Representative from the 
Great Lake State, is taking concrete action to address this 
problem.
    This month they are taking up a series of bills, one of 
which cracks down on this type of payroll fraud, by prohibiting 
the misclassification of employees as independent contractors, 
in addition to shifting the burden of proof to employers facing 
complaints that they have misclassified workers. Let us be 
clear when it comes to worker misclassification, there are many 
losers and only one winner.
    That winner is the employer who adopts misclassification as 
a business model to gain an unfair competitive advantage over 
other law-abiding businesses, costing billions in lost tax 
revenue each year by short-changing workers and what they are 
owed. This lost revenue, which our Republican colleagues appear 
wholly satisfied to see continue, corrodes key programs like 
Social Security and Medicare.
    An interesting point as we are heading into budget debates 
and negotiations. This should not come as a surprise however, 
that our House Republican members right now are making this 
argument. Ms. Padin, from your testimony, it appears data has 
been spotty over the years as to the extent of 
misclassification.
    What are we able to glean from this data on the prevalence 
of misclassification?
    Ms. Padin. Thank you for your question. Most of the recent 
data on the prevalence of misclassification is coming from 
states that have created interagency task forces to study this 
issue. They have shown that the prevalence is vast. Studies in 
Illinois estimate over 350,000 workers are misclassified. In 
New York, it is over a quarter of a million. In Pennsylvania, 
it is a half a million.
    It is important to emphasize these State level studies are 
usually based on unemployment insurance tax audits of employers 
registered in the UI program, but these UI audits are rarely 
identifying employers who fail to report any worker payments to 
State authorities or workers paid completely off the books.
    The critical point here is that they are missing a large 
portion of the misclassified workforce. The studies are showing 
that misclassification is a huge problem, but they are still 
very likely understating the scope of the problem.
    Ms. Stevens. So how would more current and comprehensive 
national data help us combat employee misclassification?
    Ms. Padin. We absolutely need more data here. It would be 
useful in so many ways, including giving us insight into the 
occupations and industries where misclassification is 
prevalent, so agencies know where to focus their attention and 
resources. It would provide information on what 
misclassification is costing.
    What it is costing in terms of cost to transfer to 
misclassified workers, what it costs to law abiding businesses, 
and what it costs to the government in terms of lost social 
insurance contributions.
    Ms. Stevens. You touched on this briefly in your testimony, 
but could you extrapolate further, what are consequences for 
workers when they are misclassified?
    Ms. Padin. They are vast. I mean in addition to losing out 
on almost--on all employment-based rights and protections, 
right to minimum wage, right to collectively bargain, social 
insurance programs like worker's comp and unemployment 
insurance, there is a growing body of research showing that low 
and middle earning independent contractors are even making less 
money than employees in the system.
    Ms. Stevens. Are there impacts to retirement?
    Ms. Padin. Yes. That is huge. These folks, if they have to 
pay into Social Security themselves, they are paying both the 
employer and the employee's share of Social Security, and they 
do not have access to any employer provided benefits.
    Ms. Stevens. Yes. Costing them money.
    Ms. Padin. It is huge.
    Ms. Stevens. Recently, Bloomberg News had an article that a 
good chunk of people 59 and older do not have anything saved 
for retirement. I think the number was close to 60 percent. By 
putting into place some of the better labor practices, do you 
think we better position people for retirement if we start 
classifying workers properly?
    Ms. Padin. We absolutely better position people for 
retirement. Yes.
    Ms. Stevens. Yes. Thank you so much. With that Mr. Chair, I 
yield back.
    Chairman Kiley. I recognize Mr. Burlison.
    Mr. Burlison. Thank you, Mr. Chair. Ms. Kavin, I believe I 
am pronouncing that right. I want to applaud, you know, your 
effort, and you have a great resume here, but as the Founder of 
the Fight for Freelancers, especially in telling your story, it 
appears to me in listening to some of these hearings, and I am 
going to ask you a rhetorical question.
    It appears that the people testifying, and the position of 
the Biden administration, is that you just simply are not 
making good decisions for yourself in choosing to be a 
contractor. Is that the case?
    Ms. Kavin. Not only that, but I think it is noteworthy that 
in literally every hearing I have attended, whether at the 
State levels, in New Jersey or California, or at the Federal 
levels, the U.S. DOL hearings last summer, or the U.S. Small 
Business Administration Office of Advocacy hearings last 
summer, the vast majority of participants who are actual 
independent contractors are screaming no and saying stop.
    The people who are showing up to push this on us are people 
like union lawyers, like the woman sitting next to me.
    Mr. Burlison. I have got to think in your position it would 
be extremely demeaning to be told that you are not intelligent 
enough, basically is what is being told, to make the decision 
that is best for you.
    Ms. Kavin. What we see among the members of our group, they 
tend to go through something like the stages of grief. When 
they first find out what is going on, their first response is 
disbelief. There is no way the government could be trying to 
take away my income. Who am I bothering? I am not doing 
anything wrong.
    Then they go and try to talk to their lawmakers, and they 
get the door slammed in their face. Then it turns to shock, 
then it turns to anger. If they voted in the past for a lot of 
Democrats their next emotion is betrayal. We see it all the 
time. At that point, they are ready to fight. They are ready to 
stand up and fight for their careers.
    Yes, sir, we do feel quite disturbed by this whole thing, 
and we do intend to continue fighting for our rights to choose 
self-employment.
    Mr. Burlison. I do not know if you can see this from where 
you are at, but this is a photo and a website about a new 
constituent of mine. Her name is Dee Sova. She was a resident 
of California, and she has an amazing record. She has 27 years 
of experience as a truck driver, all of which there are no 
accidents involved, millions of miles without having an 
accident.
    She is a member of Mothers Against Drunk Driving. She 
established an organization called Trucking Divas Rock. Okay. 
This is a community leader. This is someone that any State 
would be proud to have as a constituent. I am happy to be the 
lucky community that got her because of the failed policies 
that California implemented.
    To me, the idea that she is not capable of making good 
decisions for her and her family is what is ridiculous. I think 
it is demeaning to this woman, who is a minority business 
owner, who is successful, has been extremely successful, for us 
to basically jerk her around, make her up her family and move 
to an entirely new State, because we want to get more people on 
union dues? Right?
    Ms. Kavin. Not only that sir, UCLA Health put out a study 
less than a year ago; self-employed women have 43 percent lower 
risk of high blood pressure, 34 percent lower risk of reporting 
obesity, and 30 percent lower risk of reporting diabetes 
compared to women who work for salaries and wages. Self-
employed women were also more likely to report exercising and 
having a lower body mass index.
    I do not think that is a shock to anybody, right? You get 
to be your own boss. You get to be in charge of your own life. 
You get to choose what happens to you every day, day in and day 
out. You feel a lot better, and you do a lot better.
    Mr. Burlison. Thank you. I am going to butcher your name.
    Ms. Palagashvili. Okay.
    Mr. Burlison. Ms. Palagashvili.
    Ms. Palagashvili. That is good. That is great.
    Mr. Burlison. Okay. As an economist, you talked about the 
impact on the economy. Can you elaborate? Especially when we 
are you there is a 64 percent chance, according to the people 
that are studying the economy, that we are facing a recession. 
Can you describe the impact of if we get into a recession, and 
jobs are hard to find now there is not an option for people to 
become independent contractors.
    Ms. Palagashvili. Thank you for your question. I just want 
to add a little note here that the DOL rule will lead to 
significantly fewer independent work opportunities, and the way 
it will do that is two ways. One, it makes it illegal for some 
freelancers to continue being freelancers because of the way 
that the DOL has written the law.
    The second way it does that is even if an independent 
contractor is properly classified under the new DOL rule, it 
adds--the rule itself adds so much confusion, complexity, that 
it would deter small organizations from working with 
independent contractors all together, because they do not have 
extensive legal counsel to rely on to say hey, is this person, 
you know, properly classified or not.
    That is exactly why the Small Business Administration wrote 
a letter to the Department of Labor saying we have grave 
concerns about this rule for small business owners. Now what 
that means is----
    Chairman Kiley. Thank you. The gentleman's time has 
expired.
    Ms. Palagashvili. Oh, I am sorry. Excuse me.
    Chairman Kiley. I now recognize Ms. Omar.
    Ms. Omar. Thank you, Chairman. Thank you all for being 
here. Ms. Padin, are you a union lawyer, and is there anything 
that you would like to respond if I gave you a few minutes?
    Ms. Padin. No. I will just correct the record on that. I am 
not a union lawyer. I work for a non-profit. I am a union 
member though.
    Ms. Omar. I was as well. I just want to say, you know, 
Michigan is considering updating its laws. Minnesota is too, 
and we have had so many gig workers out rallying to get 
protection, so I really do not know when it is being said here 
in this hearing that there are only people with a special 
interest, or unions that are advocating for this.
    We hear it from constituents regularly. You cited DOL data 
that showed up to 95 percent of workers who claim to be 
misclassified should have legally been considered employees. I 
agree with you. Misclassification is a widely spread problem in 
our country, likely affecting millions of workers, and it is a 
shame that our Republican colleagues are not taking it 
seriously.
    According to the Minnesota Attorney General's Office, as 
many as 20 percent of employers misclassify at least one 
employee. Last October, Minnesota's AG filed a lawsuit against 
gig economy company Shipt, for misclassifying delivery workers 
to avoid fair wage and hour laws.
    Ms. Padin, could you explain what industries are 
particularly liable for independent contractor 
misclassification, and how it harms these workers?
    Ms. Padin. Yes. I would be happy to. Misclassification 
rates are disproportionately high in low-wage, labor-intensive 
industries. That includes construction, home care, trucking, 
janitorial work and app-based work, like ride hailing delivery. 
Many of these jobs are known for being again, and many of these 
jobs are low-wage, labor intensive jobs, where the work is 
disproportionately being done by people of color and women.
    Ms. Omar. Thank you. I know that in this committee we like 
to vilify unions, and union members, but union membership is 
vital to supporting better wages and safer workplace for all 
workers. It is also beneficial to small businesses who see an 
impact in employee retention and improvement in their ability 
to compete with large corporations.
    Sadly, a decline in unionization has cost the average full-
time worker over $3,000.00 in lost earnings per year according 
to the Economic Policy Institute. Workers should be given the 
freedom to unionize and receive the full wages and benefits 
they deserve.
    Attacks on organizing workers are only putting good faith 
employers at a competitive disadvantage and taking money out of 
taxpayer's pockets. Can you explain how union benefits workers 
and employers alike? Why would the PRO Act and the proposed DOL 
rulemaking help cut down the economic cost of 
misclassification?
    Ms. Padin. Sure. There are many studies showing that union 
members make more money than non-unionized workers, that they 
have better benefits, and they have more economic security. 
They have healthcare, they have pensions, they have retirement 
benefits. The benefits to workers of unionization are quite 
large.
    Now I would also just say here a lot has been said about AB 
5, and conflating it with the PRO Act. Yes, they both use the 
ABC test for purposes of determining who is covered, but they 
are very different laws. PRO Act would use the ABC test for 
determining who is covered under the National Labor Relations 
Act, our Federal law that provides a right for employees to get 
engaged in concerted action.
    It is the right to band together with your fellow coworkers 
to advocate for improvements in the terms and conditions of 
employment. Adopting the ABC test would ensure that more people 
have this right. It is your choice whether to exercise that 
right. If you do not want to engage in concerted action with 
your fellow coworkers to improve your workplace, then do not.
    If you do not want to join a union, then do not organize 
your workplace. This is all about expanding the choices 
available to workers. Not the obligations.
    Ms. Omar. I appreciate you. Thank you for your testimony 
and for your time. I yield back.
    Chairman Kiley. Thank you. I would like to use my time 
today to look more closely at President Biden's selection of 
Julie Su, an architect and a lead enforcer of AB 5, to be his 
next Secretary of Labor. This nomination truly boggles the 
mind. It would be hard to find a State official with a greater 
record of mismanagement than Julie Su had in California.
    The work of Su and her department were subject to scathing 
bipartisan criticism in California by the Democrat super 
majority in that State. During the COVID shutdowns you had 
many, many people who were unable to get their unemployment 
checks.
    I was a State lawmaker. It was the No. 1 thing that 
occupied my office, the folks who were told they were not able 
to work, who were entitled to unemployment benefits, and who 
had to wait weeks, months, sometimes indefinitely just to get 
those benefits because of the mismanagement of the EDD, 
California's unemployment office, which fell within Julie Su's 
department.
    At the same time, you had her department, that agency, the 
EDD, that was sending out checks to hardened criminals in the 
largest fraud of taxpayers' dollars in State history, amounting 
to what is estimated to be 32 billion dollars in fraud, and 
this too has been subject to scathing reports by the 
independent State auditor in California, and has been subject 
to harsh bipartisan criticism.
    There is really no predicting what the consequences would 
be if that level of mismanagement was brought to the top post 
at the United States Department of Labor. There is predicting 
what would happen if her approach to AB 5 were nationalized. 
One of the things that we saw in California, Ms. Anderson, is 
that as bad as AB 5 is on its face, Ms. Su was able to use her 
role as the enforcer of the law, to make it even more 
destructing.
    Can you tell us a little bit about what the folks that you 
have worked with in California experienced?
    Ms. Anderson. Well, during the pandemic, they doubled down 
on these audits on small businesses that were already 
struggling or actually dead in the water from the shutdowns. 
Instead of suspending audits, these ruthless, aggressive audits 
on moms and pops and single business people, she doubled down 
on these audits, and a lot of people actually, you know, were 
dragged through the mud for a year and ended up passing their 
audit.
    It put them out--the whole process put them out of business 
anyway. All you have to do is read the scathing report from the 
State auditor from 2021 about Julie Su's unprecedented 
mismanagement of the EDD and the fraud fiasco that she oversaw. 
It is inexplicable that she would be worthy of a promotion.
    It is also inexplicable that she said, ``AB 5 is a model 
for the Nation.'' I mean anybody, Democrat, Republican, or 
Independent, or anyone in between, who has been a victim of AB 
5 in California, and there are hundreds of thousands of us, if 
not millions, would just find that to be a disqualifying 
statement.
    She was Labor Commissioner from 2011 to 2018, and then she 
became the head of the EDD from 2019 to 2022. She is all about 
enforcement. That is going to be her focus if she were to be 
made the top Labor Secretary. She tried to entrap independent 
contractors into applying for unemployment insurance benefits, 
even though they are not qualified traditionally for that.
    If they were to do that and name their client as their 
employer, it would trigger an automatic audit on these 
businesses and these hiring entities, and that is what started 
to play out in our group when I started getting stories and 
calls from small business owners and moms and pops, who were 
being audited aggressively by the EDD during the pandemic.
    Chairman Kiley. I just want to get this straight. We all 
remember the lockdowns that happened in California and across 
the country. We had millions of people put out of work, and at 
this very moment Julie Su decides it is her priority to devote 
resources to enforcing a law that is going to put even more 
people out of work. Is that what happened?
    Ms. Anderson. Well beginning of 2020, after AB 5 went into 
effect, there were 20 million dollars allocated by Governor 
Newsom to the enforcement of AB 5.
    Chairman Kiley. Small businesses who were on their last 
legs were subject to audits. These audits were done, by the 
way, by EDD personnel. Is that right?
    Ms. Anderson. That is correct. I have an example of a 
single woman of color who owned a platform in San Diego that 
connected independent contractor referees and umpires with 
local schools and referees. I mean local schools and sports 
leagues. The lawyer fees alone put her out of business.
    Before referees and umpires received a last-minute 
exemption in the clean-up bill in September 2020. It was too 
late for her and her business, and she was dragged through the 
mud during the entirety of the pandemic. That audit went on for 
over a year, and she actually ended up passing it.
    Chairman Kiley. Thank you very much, and these are the 
personnel that could have been used to get people their 
unemployment checks, or to stop fraud from happening, were 
instead used to conduct harassing audits, and put even more 
people out of work. I will now recognize Mr. Scott.
    Mr. Scott. Thank you, Mr. Chairman. Ms. Padin, let us just 
get back to what we were talking about. The independent 
contractors, as opposed to employees. Are independent 
contractors guaranteed minimum wage and overtime?
    Ms. Padin. They are not.
    Mr. Scott. Employees are?
    Ms. Padin. Yes.
    Mr. Scott. What about if you lose your job through no fault 
of your own, are independent contractors covered by 
unemployment insurance?
    Ms. Padin. They are not.
    Mr. Scott. Employees are?
    Ms. Padin. Yes.
    Mr. Scott. What about if you are hurt on the job? Do you 
get workers compensation if you are an independent contractor?
    Ms. Padin. No.
    Mr. Scott. Are employees?
    Ms. Padin. Yes, they can.
    Mr. Scott. Okay. Now are independent contractors entitled 
to benefits awarded to other employees of the business in terms 
of healthcare, pensions and sick leave?
    Ms. Padin. No.
    Mr. Scott. The employees of the business are entitled to 
those benefits?
    Ms. Padin. Yes.
    Mr. Scott. In states that require paid sick days, are 
independent contractors covered?
    Ms. Padin. No.
    Mr. Scott. Are independent contractors covered by paid 
family leave if that is passed on a State level?
    Ms. Padin. No.
    Mr. Scott. What about health and safety protections under 
OSHA? Are independent contractors covered?
    Ms. Padin. No. I do not believe so.
    Mr. Scott. Now are employers required to pay the employer 
portion of Social Security for independent contractors?
    Ms. Padin. No.
    Mr. Scott. Independent contractors, they have a right to 
join a union?
    Ms. Padin. No.
    Mr. Scott. If the employees are relieved of all that, how 
much money can the business save by misclassifying a worker as 
an independent contractor, rather than employee?
    Ms. Padin. Estimates put it at about 20 to 40 percent of 
payroll costs, employers can pocket if they misclassify 
workers.
    Mr. Scott. Mr. Long, how does that give a business an 
unfair competitive advantage if they misclassify employees?
    Mr. Long. Well, I want to start off by saying the National 
Electrical Contractors is a pro-business organization. That we 
have educational programs that help new entrepreneurs start a 
contracting firm, and we have educational programs to help our 
smaller firms.
    You know, a person who wants to be an independent 
contractor and create a business, we support that 1,000 
percent. The construction firm who may use a term independent 
contractor to build a workforce, that is a huge negative impact 
on the financial burden of our contractors, is something 
completely different.
    You know a construction worker, our workers back during 
COVID was deemed essential. I do not want us to confuse 
flexibility with independent contracting. Our workforce works 
24 hours a day, 7 days a week. Here in America, keeping our 
industry running.
    However, I am very concerned about the inability for 
independent contracting to allow the bypassing of OSHA 
regulations and Federal and State compensation laws that become 
very much different on the bottom line of not only the 
taxpayers, but our contractor members and our workers.
    Mr. Scott. Thank you. Why would somebody lose their job if 
they are classified as an employee?
    Mr. Long. To get worker benefits, unemployment benefits.
    Mr. Scott. The employer decides not to hire them just 
because they do not want to pay minimum wage, overtime, 
unemployment compensation and the rest, and that is why they 
might lose their job?
    Mr. Long. That is correct.
    Mr. Scott. Is there any restriction on flexibility? Can you 
get flexibility as an employee?
    Mr. Long. In our model, we are, like I say, we are 
absolutely at workforce working 7 days a week, 24 hours a day. 
Our flexibility many times depends on the end user or the 
customer. However, our workers have the ability to work any 
time on any working day. What is not avoided in that is 
deductions that are paid to the Federal Government in the State 
taxes that would allow that worker to have workers compensation 
if they are injured, or unemployment benefits if they are 
unemployed.
    Not only that, it gives us an opportunity to train our 
workforce in a more comprehensive manner.
    Mr. Scott. Thank you. Ms. Padin, is there a difference 
between AB 5 in California as implemented and the ABC test in 
general?
    Ms. Padin. I am sorry, can you repeat that question?
    Mr. Scott. Is there a difference between California law AB 
5 as it was implemented and the ABC test in general?
    Ms. Padin. Is there a difference between AB 5 and the ABC 
test?
    Mr. Scott. Right.
    Ms. Padin. AB 5 created the--used the ABC test.
    Mr. Scott. It is implemented. Were there differences that 
made life difficult in California that are not necessary by the 
ABC test?
    Ms. Padin. I am not sure if I understand that question. Can 
you say it one more time?
    Mr. Scott. Are there things that were done in California 
that were not required by an ABC test.
    Ms. Padin. I do not know. I am not aware of that. I can get 
back to you on that.
    Mr. Scott. Okay. Thank you. I yield back.
    Chairman Kiley. I will now recognize Mr. Walberg.
    Mr. Walberg. Thank you, Mr. Chairman, and thanks to the 
panel for being here. This is deja vu all over again. It has 
gone on for years. Chairing this Subcommittee myself for 6 
years, this is a warm and fuzzy producing, debate issue that 
goes on here. I think it will continue, just coming from a 
hearing dealing with rural broadband and trying to mobilize 
that and get a workforce out there, in many cases, independent 
contractors, et cetera, is a real challenge that we have.
    This is an important hearing to deal with. We have to come 
to a conclusion, and not do wood sawing back and forth. Ms. 
McCutchen, you State in your--and good to see you again. You 
State in your testimony that the war on the independent 
workforce is perpetuated by the chaos of the legal standards 
for determining who is an employee, and who is an independent 
contractor.
    I have long supported legislation to provide certainty in 
our laws for entrepreneurs. Specifically, last Congress, I 
offered bipartisan legislation to clearly define direct sellers 
as independent contractors under the Fair Labor Standards Act, 
consistent with the Internal Revenue Service code.
    I look forward to reintroducing this legislation this 
Congress as well to include the entirety of the IRS code 
section, which includes real estate agents as well. Ms. 
McCutchen, how would harmonizing our Federal laws help curb the 
legal attacks on independent contractors?
    Ms. McCutchen. Well, because both workers and businesses 
would know exactly, and have much better predictability of who 
is an independent contractor, and who is an employee. That can 
only be done by Congress to adopt a single rule under every 
Federal statute, including the FLSA which uses the reality 
test, which was created by the Supreme Court. Congress can take 
us back to a common law test, which focuses on who controls the 
work, which is the key distinction between an independent 
contractor, and an employee is control and that flexibility.
    Mr. Walberg. It is a key distinction, is it not? Maybe not 
simple to understand, but it seems like a key distinction, yes. 
Moving on, Ms. McCutchen and Ms. Palagashvili.
    Ms. Palagashvili. Palagashvili.
    Mr. Walberg. Okay. Vili. Forgive me for that. Yesterday, 
the Wall Street Journal published how nursing shortages are 
driving innovation and digital platforms that enable nurses to 
work independently on their own terms, specifically the Wall 
Street Journal cites that many nurses across the country are 
not practicing because a traditional hospital and healthcare 
facility schedule does not fit their lives.
    Unfortunately, my colleagues on the other side of the aisle 
continue to support policies to codify a broad and vague 
standard for joint employment that would stifle this type of 
innovation and flexibility that workers are seeking and 
healthcare needs. What are your primary concerns with the 
Democrat joint employer standard as it pertains to business and 
workers alike, and should not we be facilitating innovation 
promoting flexibility?
    Ms. Palagashvili. Thank you for your question. My expertise 
is on the independent workforce, and I am here to testify about 
the independent contractor rule from the Department of Labor. 
There are similarities, and one thing that is helpful to note 
here is that the healthcare workers who are independent workers 
would also be impacted by the Department of Labor independent 
contractor rule adversely.
    Actually, according to IRS tax, healthcare is a second 
industry that is seen the greatest growth in independent 
contractors since 2001, and we have seen a lot of individuals 
go into healthcare as independent workers. That sector in 
particular I have looked at that would be adversely impacted by 
the Department of Labor rule.
    Mr. Walberg. Ms. McCutchen.
    Ms. McCutchen. Especially in healthcare. What happens is 
nurses who want to be independent contractors take jobs in a 
hospital, and then the DOL finds that the hospital is a joint 
employer with whatever, like, market app they have. First, you 
get into are they an employee, or yes, they are an employee.
    By the way, the hospital is not the employer, right? That 
means that hospitals trying to, you know, meet their staffing 
levels, are----
    Mr. Walberg. Are frustrated.
    Ms. McCutchen. Yes. Yes.
    Mr. Walberg. The patients are hurt?
    Ms. McCutchen. Correct.
    Mr. Walberg. Thanks for your answers, my time is expired. I 
yield back.
    Chairman Kiley. Thank you. Finally, I recognize Mr. 
Norcross.
    Mr. Norcross. Thank you, Chairman. I ask unanimous consent 
to enter into the record two letters. One from the Sheet Metal 
and Air-Conditioning Contractors National Association. One from 
the TAUC.
    Chairman Kiley. Without objection.
    [The letters of Mr. Norcross follow:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    
    Mr. Norcross. Thank you. Thank you for holding this 
hearing. Something that I know quite a bit about from my 
previous life as an electrician out in the field, and it is in 
many ways the difference between a contractor being selected as 
low bidder, the low qualified bidder, and the difference 
between somebody losing out.
    There is time after time, particularly in the construction 
industry, where by deviating and going around the rules of what 
an independent contractor is, that gives them an unfair, 
illegal advantage. This is something that is not designed, it 
is not helping the employee.
    It is skirting around the rules and creating an unfair, 
illegal advantage. New Jersey, where I am from, our 
Commissioner of Labor, Rob Angelo, had instituted an ABC test 
that has worked quite well, frankly, in fact we get virtually 
zero complaints from the employee, but hear much from employers 
who traditionally would operate within that gray zone.
    I think like any of us, doing an examination of what 
actually is happening. Audits are generally something that 
everybody in Congress likes, because it cuts through the BS, 
and finds out what are the facts. It is extraordinary to hear 
that audits are now the bad thing that we should be doing.
    I hear this day after day, we need to find out facts. I 
agree with that. In 2019, they put together this task force on 
employee misclassification. Remarkably, they found in New 
Jersey, that over 12,000 were misclassified with the equivalent 
of 462 million dollars of wages underreported.
    Now I do not suggest anybody who is an independent 
contractor is not following the rules. In fact, I would guess 
that most of them are. Remarkably, during the pandemic, 
remarkably, independent contractors were able to get 
unemployment. That does not happen normally. They were self-
reporting, and they got unemployment because they needed it.
    We all understand that. There is a difference between 
playing by the rules and taking unfair advantage to illegally 
lower the wages. Mr. Long, coming from the construction 
industry, you see time after time low bid going in if it is not 
a negotiated job. You see what can and cannot be done, what 
your contractors do versus others.
    Can you kind of just walk us through how misclassification 
would give a contractor an unfair advantage?
    Mr. Long. Well in our industry, especially in this market, 
50 percent of our cost is labor. If you have a firm that can 
take advantage of the independent contracting and reduce their 
burden of costs on those workers, anywhere from 20 to 40 
percent, you can see the magnitude on the balance sheet. That 
is one.
    No. 2, we as contractors, are trying to develop training 
programs and advancement placement for our workers, and on top 
of that we have to ensure a safe worker at OSHA. We have to 
live by the State regulations. Every one of our contractors are 
masters of their trade. They have taken license certification 
examinations; they have to pay the cost for liability and 
operating insurance.99 percent of them have a place of address. 
They are paying local taxes. They are developing the community. 
In the process they are raising the worker as they go. Our 
organization spends hundreds of millions of dollars on 
technical training. Your colleague was just talking about 
broadband. We are ramping up all the training with broadband 
because we know that that is going to be as essential as 
electricity and water.
    Those are the kind of things. When we have a situation and 
it really affects, Congressman Norcross, our small business 
owners that are getting started, because they need that bid, 
and 20 to 40 percent difference puts them in business or out of 
business. They do not have an opportunity to expand and to 
grow, hire four more people, do more work, buy more trucks, pay 
more taxes, and build a community from a broad base.
    That is what the American dream is, to own a business and 
move forward. We are not for people not starting businesses and 
being independent and doing the things they want to do. We just 
want them to make sure that there is an even playing field for 
our contractors.
    Mr. Norcross. Thank you. Chairman I yield back.
    Chairman Kiley. Without objection before we close, I enter 
into the record letters opposing the Biden administration's 
proposed independent contractor rule from the Coalition for 
Workforce Innovation, the Direct Selling Association, the 
Financial Services Institute, Flex Association, the Intermodal 
Association of North America, Leading Financial Services Trade 
Associations, the Modern Economy Project, the National 
Association of Home Builders, the National Association of 
Insurance and Financial Advisors, The National Association of 
Small Trucking Companies, the National Retail Federation, the 
Transportation Alliance, and Truckers Integral to our Economy.

    [The letters of Chairman Kiley follow:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    
    
    Chairman Kiley. I would like to again thank our witnesses 
for taking the time to testify before the Subcommittee today. 
Without objection, there being no further business, the 
Subcommittee stands adjourned.
    [Whereupon, at 12:08 p.m., the Subcommittee adjourned.]