[House Report 118-445]
[From the U.S. Government Publishing Office]
118th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 118-445
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PROVIDING FOR CONGRESSIONAL DISAPPROVAL UNDER CHAPTER 8 OF TITLE 5,
UNITED STATES CODE, OF THE RULE SUBMITTED BY THE DEPARTMENT OF LABOR
RELATING TO ``EMPLOYEE OR INDEPENDENT CONTRACTOR CLASSIFICATION UNDER
THE FAIR LABOR STANDARDS ACT''
_______
April 5, 2024.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Ms. Foxx, from the Committee on Education and the Workforce, submitted
the following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.J. Res. 116]
The Committee on Education and the Workforce, to whom was
referred the joint resolution (H.J. Res 116) providing for
congressional disapproval under chapter 8 of title 5, United
States Code, of the rule submitted by the Department of Labor
relating to ``Employee or Independent Contractor Classification
Under the Fair Labor Standards Act'', having considered the
same, reports favorably thereon without amendment and
recommends that the joint resolution do pass.
PURPOSE
The purpose of H.J. Res 116 is to disapprove of the rule
related to ``Employee or Independent Contractor Classification
under the Fair Labor Standards Act'' that was first announced
on October 13, 2022, and published as a final rule in the
Federal Register on January 10, 2024.
COMMITTEE ACTION
115TH CONGRESS
Hearings
Subcommittee hearing on the Fair Labor Standards Act
On February 16, 2017, the Subcommittee on Workforce
Protections held a hearing titled ``Federal Wage and Hour
Policies in the Twenty-First Century Economy.'' Witnesses were
Christine Walters, independent human resources and employment
law consultant and sole proprietor, FiveL Company, Westminster,
MD; Andy Brantley, President and Chief Executive Officer,
College and University Professional Association for Human
Resources, Knoxville, TN; Rhea Lana Riner, President, Rhea Lana
Franchise Systems Inc., Conway, AK; and Andrew Stettner, Senior
Fellow, The Century Foundation, Washington, D.C. Witnesses
discussed the Fair Labor Standards Act (FLSA) and policies to
encourage opportunity, economic growth, and the ``sharing''
economy.
Full Committee hearing on the sharing economy
On September 6, 2017, the Committee on Education and the
Workforce (Committee) held a hearing titled ``The Sharing
Economy: Creating Opportunities for Innovation and
Flexibility.'' Witnesses were Michael Beckerman, President and
CEO, Internet Association, Washington, D.C.; Jonathan Johnson,
Founder, SnapSeat, LLC, Hartford, CT; Arun Sundararajan,
Professor, Leonard N. Stern School of Business, New York
University, New York, NY; and Sharon Block, Executive Director,
Labor and Worklife Program, Harvard University Law School,
Cambridge, MA. Witnesses discussed the role that companies,
independent contractors, and consumers play in the sharing
economy.
Full Committee hearing on Department of Labor oversight
On November 15, 2017, the Committee held a hearing titled
``Examining the Policies and Priorities of the U.S. Department
of Labor.'' The sole witness was the Honorable R. Alexander
Acosta, Secretary, U.S. Department of Labor (DOL), Washington,
D.C. During this hearing, Members discussed, among other
subjects, the withdrawal of an administrator's interpretation
that expanded the FLSA's definition of ``employ.''
116TH CONGRESS
Hearings
Subcommittee hearing on worker classification
On September 24, 2019, the Subcommittee on Workforce
Protections held a hearing titled ``Misclassification of
Employees: Examining the Costs to Workers, Businesses, and the
Economy.'' Witnesses were Alexander Passantino, Partner,
Seyfarth Shaw LLP, Washington, D.C.; Alexander Chemers,
Shareholder, Ogletree Deakins, Los Angeles, CA; Sally Dworak-
Fisher, Attorney, Public Justice Center, Baltimore, MD; Matt
Townsend, President, Signatory Wall and Ceiling Contractors
Alliance, Holland, OH; Maria Crawford, Gig Worker, Altadena,
CA; and Karl A. Racine, Attorney General, District of Columbia,
Washington, D.C. During this hearing, Members and witnesses
highlighted the compliance challenges and legal consequences of
the Payroll Fraud Prevention Act, which would make worker
misclassification a separate FLSA violation. Witnesses also
discussed the dangers of the ``ABC'' test created by Assembly
Bill Number 5 (AB5) in California.\1\
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\1\https://leginfo.legislature.ca.gov/faces/
billTextClient.xhtml?bill_id=201920200AB5.
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Joint subcommittee hearing on the future of work
On October 23, 2019, the Subcommittee on Health,
Employment, Labor, and Pensions (HELP) and the Subcommittee on
Workforce Protections held a joint hearing titled ``The Future
of Work: Preserving Worker Protections in the Modern Economy.''
Witnesses were Rachel Greszler, Research Fellow in Economics,
Budget and Entitlements, The Heritage Foundation, Washington,
D.C.; David Weil, Dean and Professor, The Heller School for
Social Policy and Management, Brandeis University, Waltham, MA;
Brishen Rogers, Associate Professor, Temple University Law
School, and Visiting Associate Professor, Georgetown University
Law Center, Washington, D.C.; and Jessica Beck, Co-Founder and
Chief Operating Officer, Hello Alfred, New York, NY. Republican
Members and Ms. Greszler discussed, among other topics, efforts
to classify independent contractors as employees.
117TH CONGRESS
Hearings
Full Committee hearing on DOL oversight
On June 7, 2021, the Committee held a hearing entitled
``Examining the Policies and Priorities of the U.S. Department
of Labor.'' The sole witness was the Honorable Martin J. Walsh,
Secretary, DOL, Washington, D.C. During this hearing, Members
discussed, among other subjects, the withdrawal of the Trump
administration's final rule on the classification of
independent contractors and employees under the FLSA.\2\
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\2\Independent Contractor Status Under the Fair Labor Standards Act
(FLSA): Withdrawal, 86 Fed. Reg. 24,303 (May 6, 2021); Independent
Contractor Status Under the Fair Labor Standards Act, 86 Fed. Reg. 1168
(Jan. 7, 2021).
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Subcommittee hearing on wage-and-hour violations
On May 9, 2022, the Subcommittee on Workforce Protections
held a hearing titled ``Standing Up for Workers: Preventing
Wage Theft and Recovering Stolen Wages.'' Witnesses were Tammy
McCutchen, Senior Affiliate, Resolution Economics, New Market,
TN; Karen Cacace, Labor Bureau Chief, New York State Office of
the Attorney General, New York, NY; Daniel Swenson-Klatt,
Owner/Operator, Butter Bakery Cafe, Minneapolis, MN; and
Francisco Esparza, Representative, United Brotherhood of
Carpenters, Upper Marlboro, MD. Republican Members and Ms.
McCutchen discussed, among other topics, the value and
flexibility of independent contractors.
Full Committee hearing on DOL oversight
On June 10, 2022, the Committee held a hearing entitled
``Examining the Policies and Priorities of the U.S. Department
of Labor.'' The sole witness was the Honorable Martin J. Walsh,
Secretary, DOL, Washington, D.C. During this hearing, Members
discussed, among other subjects, the withdrawal of the Trump
administration's final rule on the classification of
independent contractors and employees under the FLSA and DOL's
May 2021 independent contractor final rule.
118TH CONGRESS
Hearings
Subcommittee hearing on independent contractors
On April 19, 2023, the Subcommittee on Workforce
Protections held a hearing titled ``Examining Biden's War on
Independent Contractors.'' Witnesses were Karen Anderson,
Founder, Freelancers Against AB5, Dana Point, CA; Tammy
McCutchen, Senior Affiliate, Resolution Economics, New Market,
TN; David Long, Chief Executive Officer, National Electrical
Contractors Association, Washington, D.C.; Liya Palagashvili,
Senior Research Fellow, Mercatus Center at George Mason
University, Ephrata, PA, Laura Padin, Director of Work
Structures, National Employment Law Project, Washington, D.C.;
and Kim Kavin, Freelance Writer and Editor, Morris County, NJ.
Witnesses discussed, among other topics, DOL's proposed rule\3\
on independent contractors and California's AB5 law.
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\3\Employee or Independent Contractor Classification Under the Fair
Labor Standards Act, 87 Fed. Reg. 62,218 (proposed Oct. 13, 2022).
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Full Committee hearing on DOL oversight
On June 7, 2023, the Committee held a hearing titled
``Examining the Policies and Priorities of the Department of
Labor.'' The sole witness was the Honorable Julie A. Su, Acting
Secretary, DOL, Washington, D.C. Members discussed, among other
topics, Ms. Su's tenure at DOL, including the proposed
independent contractor rule\4\ and her prior role in
implementing California's AB5 law.
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\4\Id.
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Subcommittee hearing on DOL's Wage and Hour Division (WHD)
On July 18, 2023, the Subcommittee on Workforce Protections
held a hearing titled ``Cutting Corners at WHD: Examining the
Cost to Workers, Small Businesses, and the Economy.'' Witnesses
were Jonathan Wolfson, Chief Legal Officer and Policy Director,
Cicero Institute, Austin, TX; Elizabeth Milito, Executive
Director, National Federation of Independent Businesses (NFIB)
Small Business Legal Center, Washington, D.C.; Rachel Greszler,
Senior Research Fellow, The Heritage Foundation, Washington,
D.C.; and Aaron Sojourner, Senior Researcher, W.E. Upjohn
Institute for Employment Research, Kalamazoo, MI. Witnesses
discussed, among other topics, DOL's proposed rule on
independent contractors.\5\
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\5\Id.
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Subcommittee hearing on WHD oversight
On February 14, 2024, the Subcommittee on Workforce
Protections held a hearing titled ``Examining the Policies and
Priorities of the Wage and Hour Division.'' The sole witness
was the Honorable Jessica Looman, Administrator, WHD,
Washington, D.C. During this hearing, Members discussed, among
other subjects, DOL's January 10, 2024, final rule on
independent contractor classification under the FLSA.\6\
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\6\Employee or Independent Contractor Classification Under the Fair
Labor Standards Act, 89 Fed. Reg. 1638 (Jan. 10, 2024).
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Legislative Action
Introduction of H.J. Res. 116
On March 6, 2024, Representative Kevin Kiley (R-CA)
introduced H.J. Res. 116, Providing for congressional
disapproval under chapter 8 of title 5, United States Code, of
the rule submitted by the Department of Labor relating to
``Employee or Independent Contractor Classification under the
Fair Labor Standards Act,'' with Chairwoman Virginia Foxx (R-
NC) and Representatives Elise Stefanik (R-NY), Warren Davison
(R-OH), Michelle Steel (R-CA), John Moolenaar (R-MI), John
Curtis (R-UT), Darell Issa (R-CA), Michael Cloud (R-TX), Ashley
Hinson (R-IA), Rick Allen (R-GA), Lance Gooden (R-TX), Scott
Perry (R-PA), Jay Obernolte (R-CA), Adrian Smith (R-NE), French
Hill (R-AR), Andy Ogles (R-TN), Julia Letlow (R-LA), Byron
Donalds (R-FL), Tracey Mann (R-KS), Drew Ferguson (R-GA), Gary
Palmer (R-AL), Joe Wilson (R-SC), Mike Flood (R-NE), Mary
Miller (R-IL), Barry Loudermilk (R-GA), Daniel Webster (R-FL),
David Rouzer (R-NC), Ron Estes (R-KS), Ben Cline (R-VA), Bob
Good (R-VA), Glenn Grothman (R-WI), Young Kim (R-CA), Neal Dunn
(R-FL), Burgess Owens (R-UT), Debbie Lesko (R-AZ), Keith Self
(R-TX), Brett Guthrie (R-KY), Tom Kean (R-NJ), Lisa McClain (R-
MI), Glenn ``GT'' Thompson (R-PA), Aaron Bean (R-FL), Russ
Fulcher (R-ID), Brandon Williams (R-NY), Brian Babin (R-TX),
Tim Walberg (R-MI), Eric Burlison (R-MO), Nathaniel Moran (R-
TX), Ralph Norman (R-SC), Claudia Tenney (R-NY), Steve Womack
(R-AR), William Timmons (R-SC), Austin Scott (R-GA), Roger
Williams (R-TX), and Matt Rosendale (R-MT). The resolution was
referred to the Committee on Education and the Workforce.
Committee passage of H.J. Res. 116
On March 21, 2024, the Committee considered H.J. Res. 116
in legislative session and reported it favorably to the House
of Representatives by a recorded vote of 21 to 13.
COMMITTEE VIEWS
Introduction
Independent contractors are self-employed individuals
contracted to perform work or provide services to another
person or business. They are not employees and are not covered
by the FLSA, which applies to 143 million employees
nationwide.\7\
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\7\https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/
overtime_complianceguide.pdf.
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Unlike traditional employment arrangements, under the
independent contracting model, independent contractors have the
freedom to choose their own work schedules, employers maintain
flexibility to adjust work demands with business needs, and
customers benefit from a reduction in the cost of goods and
services. Many businesses and individuals hire independent
contractors when they need temporary or limited help from
workers with special skills or experience or when they need
assistance on short-term projects. Workers, businesses, and
consumers have long benefited from independent work and the
opportunity for workers and businesses to pursue the American
Dream.
Kim Kavin, a freelance writer, stated in her testimony at a
Subcommittee on Workforce Protections hearing in April 2023
that misclassifying independent contractors as employees ``is
not protecting us. It is attacking our livelihoods and
attempting to destroy our chosen careers. Please, focus instead
on protecting the right to choose self-employment.''\8\
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\8\https://edworkforce.house.gov/uploadedfiles/kavin_testimony.pdf.
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Independent contractor rulemaking
In January 2021, the Trump administration DOL published a
final rule on the classification of employees and independent
contractors under the FLSA, the first administrative rulemaking
on the subject.\9\ This rule clarified and simplified the
economic realities worker classification test under the FLSA by
emphasizing two ``core'' factors that guided worker
classification determinations: (1) the nature and degree of the
worker's control over the work and (2) the worker's opportunity
for profit or loss. This approach clarified DOL's
interpretation of worker classification status, provided more
certainty for workers and employers, and promoted economic
growth.
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\9\Independent Contractor Status Under the Fair Labor Standards
Act, 86 Fed. Reg. 1168 (Jan. 7, 2021).
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In October 2022, the Biden administration DOL published a
proposed rule regarding employee or independent contractor
classification under the FLSA, which would replace the 2021
Trump administration final rule.\10\ The proposed rule included
a six-factor ``economic realities'' test to determine whether a
worker is ``economically dependent'' on a company under a
totality of the circumstances.
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\10\Employee or Independent Contractor Classification Under the
Fair Labor Standards Act, 87 Fed. Reg. 62,218 (proposed Oct. 13, 2022).
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On January 10, 2024, DOL published the final rule, which
largely maintained the provisions of the proposed rule. The
final rule delineates six economic factors to determine the
employment status of an individual: (1) opportunity for profit
or loss depending on managerial skill, (2) investments by the
worker and the company, (3) degree of permanence of the work
relationship, (4) nature and degree of control, (5) extent to
which the work performed is an integral part of the company's
business, and (6) skill and initiative.\11\ In December 2022,
then-Ranking Member Foxx and Senator Mike Braun (R-IN) led a
bicameral comment letter to DOL opposing the proposed rule,
signed by 21 House Members and 26 Senators.\12\
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\11\Id.
\12\https://edworkforce.house.gov/uploadedfiles/
bicameral_dol_ic_nprm_comments.pdf.
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Concerns with the Biden DOL independent contractor rule
The Biden administration's final rule replaces the 2021
Trump-era rule,\13\ which provided a workable classification
framework that was practical, predictable, and easy to apply to
the modern economy. The Trump rule clarified and simplified the
economic realities test by emphasizing two ``core'' factors
that guided worker classification determinations: (1) the
nature and degree of the worker's control over the work and (2)
the worker's opportunity for profit or loss.\14\ Moreover, the
2021 Trump rule did not undermine DOL's ability to enforce the
FLSA and protect workers from misclassification. The Associated
Builders and Contractors stated about the 2021 Trump rule,
``Bottom line: DOL's final rule will promote economic growth in
multiple industries, including construction, by providing
greater clarity to industry employers as to the proper
classification of independent contractors and employees under
the FLSA.''\15\
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\13\Independent Contractor Status Under the Fair Labor Standards
Act, 86 Fed. Reg. 1168 (Jan. 7, 2021).
\14\Id. at 1168.
\15\https://www.abc.org/News-Media/News-Releases/abc-supports-
final-dol-revisions-to-independent-contractor-status.
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The new rule abandons the two core factors of the 2021
Trump rule and adopts a test where any of six different factors
could be determinative of employee status. This is an approach
that injects subjectivity and uncertainty into worker
classification determinations.
Among many other concerning elements, DOL states in its
final rule that one of the factors the agency will consider
when assessing whether a worker is an independent contractor or
employee is whether the work performed is an ``integral part of
the employer's business.''\16\ If the work is ``integral'' to
the business, then the worker is more likely to be classified
as an employee under the rule. The problem here is that the
term ``integral'' is vague and ill-defined in the rule.
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\16\Employee or Independent Contractor Classification Under the
Fair Labor Standards Act, 89 Fed. Reg. 1638, 1644 (Jan. 10, 2024).
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Further, determining what is ``integral'' to any individual
business involves expertise in both the general industry as
well as in the individual business--its goals, structure,
priorities, and budget--which requires prudential judgments and
should not be left to the arbitrary and subjective judgment of
non-expert bureaucrats.
A letter to Congress from 47 business organizations stated,
``The new rule will result in confusion and invite frivolous
litigation that could ultimately have a chilling effect on
independent work opportunities and entrepreneurship generally.
This will be highly problematic for small businesses that rely
on independent contractors.''\17\ Former WHD Administrator
Tammy McCutchen agreed with this assessment in her testimony at
the April 2023 Subcommittee on Workforce Protections hearing,
stating about the proposed rule, ``The lack of clarity and
certainty is profound.''\18\
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\17\Letter from Am. Hotel & Lodging Ass'n et al. to Congress (Mar.
7, 2024), https://sbecouncil.org/2024/03/07/business-coalition-letter-
supporting-cra-to-nullify-dols-independent-contractor-rule/.
\18\https://edworkforce.house.gov/uploadedfiles/
mccutchen_testimony.pdf (p. 17).
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An economic analysis by the Chamber of Progress showed the
dangers of reclassifying independent contractors as employees.
Among other findings, the analysis showed that a national rule
reclassifying independent contractors as employees could result
in the loss of direct income for an estimated 3.4 million
workers, with a total of 4.4 million workers involuntarily
reclassified.\19\ An estimated 1.5 million workers choose to
work independently because health, family responsibilities, and
other issues prevent them from working as traditional W-2
employees. The Chamber of Progress analysis showed that
involuntary reclassification would cost these workers $31.4
billion.\20\
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\19\https://progresschamber.org/new-study-finds-millions-could-
lose-work-if-u-s-reclassifies-contractors/.
\20\Id.
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A December 2023 study from the Government Accountability
Office (GAO) found that the federal government lacks sufficient
information on independent workers. Among other findings, the
report notes that ``policymakers do not have reliable and
consistent data with which to make key decisions concerning
these workers.'' The report recommends that DOL ``lead efforts
to improve the measurement of nonstandard and contract
work.''\21\ DOL should not have made sweeping changes to how
workers are classified without better information on
independent workers.
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\21\https://www.gao.gov/products/gao-24-105651.
In December 2022, the Small Business Administration (SBA)
Office of Advocacy (Advocacy) submitted comments to DOL on the
proposed rule.\22\ Among other concerns, SBA Advocacy stated
the following:
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\22\Employee or Independent Contractor Classification Under the
Fair Labor Standards Act, 87 Fed. Reg. 62,218 (proposed Oct. 13, 2022).
Advocacy is concerned that DOL's Initial Regulatory
Flexibility Analysis is deficient for this rule. DOL
significantly underestimates the economic impacts of
this proposed rule on small entities at less than $25
annually per business. Small businesses told Advocacy
that they are very confused on how to classify their
workers and comply with DOL's regulations. DOL's
proposed rule may be detrimental and disruptive to
millions of small businesses that rely upon independent
contractors as part of their workforce. Independent
contractors who may also be small businesses also
believe that they may lose work because of this rule.
Advocacy recommends that DOL reconsider this
proposal.\23\
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\23\https://advocacy.sba.gov/wp-content/uploads/2022/12/Comment-
Letter-DOL-Independent-Contractor-508c.pdf.
Instead of heeding SBA Advocacy's advice, DOL ploughed forward
and published a final rule that did not address these concerns
regarding the negative impact on small businesses.
The Biden administration's independent contractor rule will
have additional adverse impacts, particularly on working women.
Dr. Liya Palagashvili, a senior research fellow at the Mercatus
Center, articulated this in her testimony at the April 2023
Workforce Protections Subcommittee hearing:
Across nationwide surveys, 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 jobs to take on
independent work because they wanted flexibility or
needed more time to care for a child, parent, or other
relative.\24\
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\24\https://edworkforce.house.gov/uploadedfiles/
palagashvili_testimony.pdf.
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California's AB5 Law
In 2019, Gov. Gavin Newsom (D-CA) signed Assembly Bill No.
5 (AB5) into law, which changed the classification of many
workers in the state and now stands as the country's strictest
legal criteria for classifying a worker as an independent
contractor.\25\ AB5 adopts an ``ABC'' test to determine whether
a worker should be classified as an employee or an independent
contractor. When hiring an individual as an independent
contractor, the business must be able to prove the individual
meets all three conditions: (a) the worker is free from the
control of the hiring entity, (b) the work being performed is
outside of the hiring entity's usual course of business, and
(c) the worker is engaged in an independent trade, occupation,
or business of the same nature of work being performed. If the
hiring entity cannot prove all three of these conditions, the
individual must be considered an employee.
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\25\https://www.mercatus.org/research/working-papers/assessing-
impact-worker-reclassification-employment-outcomes-post.
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AB5 has severely restricted independent work and expanded
the definition of ``employee'' in California. Because of the
turmoil it was going to cause the state's economy, California
has now deemed 109 categories of workers as exempt from AB5,
including doctors, real estate agents, and engineers.\26\
However, these exemptions have only partially mitigated the
damage done by AB5. Karen Anderson, founder of Freelancers
Against AB5, stated in her testimony at the April 2023
Subcommittee on Workforce Protections hearing that ``[t]o this
day, despite the so-called exemptions for certain professions
added in September 2020 via the cleanup bill AB2257, the law
continues to wreak havoc on legitimate independent contractors
and small-business owners.''\27\
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\26\https://www.natlawreview.com/article/ab-2257-enacts-
significant-changes-to-ab-5-classification-workers-independent; https:/
/www.ymsllp.com/blog/2020/december/workers-what-to-know-about-
california-s-ab5/.
\27\https://edworkforce.house.gov/uploadedfiles/
anderson_testimony.pdf.
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Analyzing employment outcomes in response to California's
AB5, researchers found that self-employment and overall
employment decreased following the law's enactment. They also
found ``no robust evidence that traditional employment
increased post-AB5.'' The findings suggest that AB5 did not
result in either more workers becoming employees or fewer
workers being classified as independent contractors, despite
California lawmakers' intentions.\28\
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\28\https://www.mercatus.org/research/working-papers/assessing-
impact-worker-reclassification-employment-outcomes-post.
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Conclusion
Much like California's AB5, DOL's independent contractor
rule creates uncertainty for private sector workers and
employers. It stands to make it harder for individuals to
continue operating as independent contractors under the
pretense of addressing ``misclassification.'' DOL should
rescind its harmful rule and instead ensure it is supporting
small businesses and self-employed workers and removing
impediments for those wishing to pursue independent work or do
business with independent contractors.
H.J. RES. 116 SECTION-BY-SECTION SUMMARY
H.J. Res. 116 resolves that Congress disapproves of the
rule related to ``Employee or Independent Contractor
Classification under the Fair Labor Standards Act,'' which was
first announced on October 13, 2022, and published as a final
rule in the Federal Register on January 10, 2024.
EXPLANATION OF AMENDMENTS
No amendments to the resolution were adopted.
APPLICATION OF LAW TO THE LEGISLATIVE BRANCH
Section 102(b)(3) of Public Law 104-1 requires a
description of the application of this bill to the legislative
branch. H.J. Res. 116 provides for congressional disapproval
under chapter 8 of title 5, United States Code, of the rule
submitted by the Department of Labor relating to ``Employee or
Independent Contractor Classification Under the Fair Labor
Standards Act'' and therefore would ensure the standard is not
applied for the Legislative Branch in a manner similar to other
employers.
UNFUNDED MANDATE STATEMENT
Pursuant to Section 423 of the Congressional Budget and
Impoundment Control Act of 1974, Pub. L. No. 93-344 (as amended
by Section 101(a)(2) of the Unfunded Mandates Reform Act of
1995, Pub. L. No. 104-4), the Committee traditionally adopts as
its own the cost estimate prepared by the Director of the
Congressional Budget Office (CBO) pursuant to section 402 of
the Congressional Budget and Impoundment Control Act of 1974.
The Committee reports that because this cost estimate was not
timely submitted to the Committee before the filing of this
report, the Committee is not in a position to make a cost
estimate for H.J. Res. 116. The Chairwoman of the Committee
shall cause such estimate to be printed in the Congressional
Record upon its receipt by the Committee.
EARMARK STATEMENT
H.J. Res. 116 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI of the Rules of the House of
Representatives.
ROLL CALL VOTES
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee Report to include for
each record vote on a motion to report the measure or matter
and on any amendments offered to the measure or matter the
total number of votes for and against and the names of the
Members voting for and against.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES
In accordance with clause (3)(c) of rule XIII of the Rules
of the House of Representatives, the goal of H.J. Res. 116 is
to provide for congressional disapproval under chapter 8 of
title 5, United States Code, of the rule submitted by the
Department of Labor relating to ``Employee or Independent
Contractor Classification Under the Fair Labor Standards Act.''
DUPLICATION OF FEDERAL PROGRAMS
No provision of H.J. Res. 116 establishes or reauthorizes a
program of the Federal Government known to be duplicative of
another Federal program, a program that was included in any
report from the Government Accountability Office to Congress
pursuant to section 21 of Public Law 111-139, or a program
related to a program identified in the most recent Catalog of
Federal Domestic Assistance.
STATEMENT OF OVERSIGHT FINDINGS AND RECOMMENDATIONS OF THE COMMITTEE
In compliance with clause 3(c)(1) of rule XIII and clause
2(b)(1) of rule X of the Rules of the House of Representatives,
the committee's oversight findings and recommendations are
reflected in the body of this report.
REQUIRED COMMITTEE HEARING
In compliance with clause 3(c)(6) of rule XIII of the Rules
of the House of Representatives the following hearing held
during the 118th Congress was used to develop or consider H.J.
Res. 116: On April 19, 2023, the Subcommittee on Workforce
Protections of the Committee on Education and the Workforce
held a hearing on ``Examining Biden's War on Independent
Contractors.''
NEW BUDGET AUTHORITY AND CBO COST ESTIMATE
With respect to the requirements of clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives and section
308(a) of the Congressional Budget Act of 1974 and with respect
to requirements of clause 3(c)(3) of rule XIII of the Rules of
the House of Representatives and section 402 of the
Congressional Budget Act of 1974, a cost estimate was not made
available to the Committee in time for the filing of this
report. The Chairwoman of the Committee shall cause such
estimate to be printed in the Congressional Record upon its
receipt by the Committee.
CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
H.J. Res. 116, as reported by the Committee, makes no
changes in existing law.
MINORITY VIEWS
INTRODUCTION
H.J. Res. 116, Providing for congressional disapproval
under chapter 8 of title 5, United States Code, of the rule
submitted by the Department of the Labor relating to ``Employee
or Independent Contractor Classification Under the Fair Labor
Standards Act,'' would nullify the Department of Labor's final
rule updating the test for determining whether a worker is
misclassified as an independent contractor rather than an
employee for the purposes of the Fair Labor Standards Act of
1938. If enacted, H.J. Res. 116 would have the effect of
reinstating a deficient Trump-era rule that would make it
easier for unscrupulous employers to misclassify their workers
as independent contractors, leaving them excluded from basic
workplace protections such as the minimum wage and overtime.
H.J. Res. 116 is opposed by numerous organizations representing
workers, including the following:
A Better Balance; Action Center on Race and the Economy;
AFL-CIO; AFSCME; American Economic Liberties Project; American
Federation of Teachers; Association of People Supporting
Employment First (APSE); Beyond the Bars; Care in Action;
Caring Across Generations; Center for Justice & Democracy;
Center for Law and Social Policy; Center for Popular Democracy;
Center for WorkLife Law; Chicago Jobs Council; Civic Ventures;
Clearinghouse on Women's Issues; Coalition of Labor Union
Women; Coalition on Human Needs; Communications Workers of
America (CWA); Community Legal Services, Philadelphia; Economic
Opportunity Institute; Economic Policy Institute; Equal Justice
Center; Equal Rights Advocates; Florida National Organization
for Women (FL NOW); Florida Policy Institute; Food Chain
Workers Alliance; Freedom Network USA; Georgia Budget and
Policy Institute; Gig Workers Rising; Good Jobs First; Greater
Orlando National Organization for Women (Greater Orlando NOW);
Hospitality Training Academy (HTA); Impact Fund; Institute for
Women's Policy Research; International Brotherhood Of
Teamsters; Jobs to Move America (JMA); Jobs With Justice;
Justice for Migrant Women; JustUS Coordinating Council;
Kentucky Equal Justice Center; KIWA; Labor Center, University
of Massachusetts-Amherst; Labor Education Program, University
of Massachusetts Lowell; Labor Resource Center--UMass Boston;
Legal Aid at Work; Legal Aid Society; Los Angeles Alliance for
a New Economy; Miami Workers Center; MomsRising; Mon Valley
Unemployed Committee; Mountain State Justice; NAACP; National
Black Worker Center; National Center for Law and Economic
Justice; National Coalition for the Homeless; National Domestic
Workers Alliance; National Education Association; National
Employment Law Project (NELP); National Employment Lawyers
Association; National Immigration Law Center; National
Institute for Workers' Rights; National Partnership for Women &
Families; National Women's Law Center; National Workrights
Institute; NETWORK Lobby for Catholic Social Justice; New
Jersey Association on Correction; New Labor; North America's
Building Trades Unions (NABTU); North Carolina Justice Center;
Northwest Workers' Justice Project; NOW Marion County; Oregon
Center for Public Policy; Pension Rights Center; Philadelphia
Drivers Union; Pinellas County NOW; PowerSwitch Action; Pride
at Work; Progressive Leadership Alliance of Nevada; Public
Justice Center; Public Advocacy for Kids (PAK); Reproductive
Freedom for All (formerly NARAL Pro-Choice America); Restaurant
Opportunities Centers United; Rideshare Drivers United; Service
Employees International Union; Shriver Center on Poverty Law;
Stand Up Nashville; Sugar Law Center for Economic & Social
Justice; Sur Legal Collaborative; TechEquity Collaborative; The
Indiana Community Action Poverty Institute; The Leadership
Conference on Civil and Human Rights; The Legal Aid Society;
The New York Women's Foundation; The Workers Circle; Transport
Workers Union of America; Ujima, The National Center on
Violence Against Women in the Black Community; Unemployment Law
Project; United Brotherhood of Carpenters & Joiners of America;
United Food and Commercial Workers International Union (UFCW);
United for a Fair Economy; United Steelworkers (USW); Voices
for Progress; Women Employed; Women's Law Project; Worker
Justice Center of New York; Workers Defense Action Fund;
Working Partnerships USA; Workplace Fairness; Workplace Justice
Lab at Rutgers University; Workplace Justice Project at Loyola
Law Clinic; Worksafe; and Young Invincibles.
The resolution is also opposed by employer groups,
including the Construction Employers of America; FCA
International; International Council of Employers of
Bricklayers and Allied Craftworkers; Mechanical Contractors
Association of America; National Electrical Contractors
Association; Sheet Metal & Air Conditioning Contractors'
National Association; Signatory Wall and Ceiling Contractors
Alliance; and The Association of Union Constructors.
BACKGROUND
Misclassification
The misclassification of workers as independent contractors
instead of employees denies workers a host of basic workplace
protections. Laws securing the minimum wage, overtime, healthy
and safe workplaces, access to employer-sponsored benefits,
unemployment insurance, workers' compensation, and the right to
organize do so for employees, not independent contractors.
As a result, misclassification comes with steep costs for
workers. A recent study by the Economic Policy Institute (EPI)
estimated that illegal misclassification costs the typical
misclassified construction worker between $10,177 and $16,729
per year.\1\ Comparable estimates put the costs of illegal
misclassification at more than $11,000 per year for truck
drivers, more than $6,000 per year for home health and personal
care aides, and more than $6,000 per year for landscaping
workers.\2\
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\1\John Schmitt et al., The Economic Costs of Worker
Misclassification, Econ. Pol. Inst. (Jan. 25, 2023), https://
www.epi.org/publication/cost-of-misclassification/.
\2\Id.
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Misclassification also creates an uneven playing field for
law-abiding employers. By avoiding expenses such as overtime
pay, unemployment insurance, workers' compensation coverage,
and state and federal payroll taxes, and by paying less in
general to the workers themselves, law-breaking employers can
save an estimated 30 percent in labor-related costs.\3\
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\3\Nat'l Emp. L. Proj., Independent Contractor Misclassification
Imposes Huge Costs on Workers and Federal and State Treasuries 1 (Oct.
2020).
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Additionally, misclassification robs the public fisc.
Estimates vary but suggest that as many as 10 to 30 percent of
employers are currently misclassifying employees.\4\ While the
scope of the problem is difficult to precisely estimate, the
Internal Revenue Service (IRS) last estimated in 1984 that 15
percent of U.S. businesses misclassified 3.4 million workers as
independent contractors, resulting in revenue losses to the
federal government of $1.6 billion in 1984 dollars, or roughly
$4.8 billion in 2024 dollars.\5\ An April 2017 Government
Accountability Office (GAO) report found that misclassification
issues continue to be a chronic problem and accounted for the
largest amount in adjustments to reported wages following IRS
examinations in an analysis conducted for Tax Years 2008
through 2010--as much as $44.3 billion.\6\
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\4\Lalith De Silva et al., Planmatics, Inc., Independent
Contractors: Prevalence and Implications for Unemployment Insurance
Programs, Prepared for the Us Department of Labor Employment and
Training Administration (2000), http://wdr.doleta.gov/owsdrr/00-5/00-
5.pdf.
\5\Gen. Accounting Off., GAO-09-717, Employee Misclassification:
Improved Coordination, Outreach, and Targeting Could Better Ensure
Detection and Prevention 13 Tbl.2 (Aug. 2009), http://www.gao.gov/
assets/300/293679.pdf.
\6\See Gov't Accountability Off., GAO-17-371, Employment Taxes:
Timely Use of National Research Program Results Would Help IRS Improve
Compliance and Tax Gap Estimates 13 Tbl.2 (Apr. 2017), https://
www.gao.gov/assets/gao-17-371.pdf.
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Worker misclassification is widespread. In particular,
industries such as construction, trucking,\7\ home care, and
app-based services are frequently noted for high levels of
misclassification.\8\ Examples include the following:
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\7\Misclassification is rampant in the trucking industry. See
Rebecca Smith et al., Nat'l Emp. L. Proj., The Big Rig Overhaul:
Restoring Middle-Class Jobs at America's Ports Through Labor Law
Enforcement (Feb. 2014), https://www.nelp.org/wp-content/uploads/2015/
03/Big-Rig-Overhaul-Misclassification-Port-Truck-Drivers-Labor-Law-
Enforcement.pdf (documenting improved conditions in drayage trucking as
a result of labor standards enforcement); Catherine Ruckelshaus et al.,
Nat'l Emp. L. Proj., Who's the Boss: Restoring Accountability for Labor
Standards in Outsourced Work 22-23 (May 2014) (documenting
misclassification in the drayage or port trucking component of
industry); Rebecca Smith et al., The Big Rig: Poverty, Pollution, and
the Misclassification of Truck Drivers at America's Ports (2010),
https://s27147.pcdn.co/wp-content/uploads/2015/03/
PovertyPollutionandMisclassification.pdf; J. Edward Moreno, California
Trucker Protest: Worker Classification Feud Explained, Bloomberg L.
(July 22, 2022), https://news.bloomberglaw.com/daily-labor-report/
california-trucker-protest-worker-classification-feud-explained; Alex
N. Press, NLRB Says Trucking Companies Are Illegally Misclassifying
Port Drivers to Stop Unionization, Jacobin (Mar. 28, 2022), https://
jacobin.com/2022/03/nlrb-port-truckers-la-long-beach-misclassification;
Harold Meyerson, Why Trucking Can't Deliver the Goods, Amer. Prosp.
(Feb. 7, 2022), https://prospect.org/economy/why-trucking-cant-deliver-
the-goods/; Tracy Colman, How Does Employee Misclassification Affect
Trucking Independent Contractors?, Top Class Actions (Mar. 19, 2021),
https://topclassactions.com/lawsuit-settlements/employment-labor/
trucking-independent-contractors-often-misclassified-companies/.
\8\Nat'l Emp. L. Proj., supra note 3.
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An analysis of the construction industry
revealed that between 12.4 and 20.5 percent of the
workforce, in an average month of 2017, were
misclassified as independent contractors or working
``off-the-books.''\9\ As a result, up to 2.16 million
workers were misclassified in an average month, and
fraudulent employers saved a conservatively estimated
$11.74 billion annually.\10\
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\9\Russell Ormiston et al., An Empirical Methodology to Estimate
the Incidence and Costs of Payroll Fraud in the Construction Industry 3
(Jan. 2020), https://stoptaxfraud.net/wp-content/uploads/2020/03/
National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-
FINAL.pdf.
\10\Id. at 4.
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An audit conducted by the New Jersey
Department of Labor and Workforce Development found
that Uber and a subsidiary, Raiser, had misclassified
nearly 300,000 drivers as independent contractors in
the state.\11\ The companies paid $78 million in owed
taxes, and an additional $22 million in interest.\12\
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\11\Catherine Thorbecke, Uber and Its Subsidiary Pay New Jersey
$100 Million in Back Taxes over Driver Classification Dispute, CNN
(Sept. 13, 2022), https://www.cnn.com/2022/09/13/tech/uber-new-jersey-
100-million-driver-classification/index.html.
\12\Id.
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A report on the misclassification of workers
by the Pennsylvania Department of Labor & Industry
found that nearly 400,000 workers were misclassified in
the state between 2020 to 2021.\13\ The report
estimates losses of $131 million to the unemployment
insurance trust fund and over $175 million to injured
or ill workers without workers' compensation insurance
due to misclassification.\14\
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\13\PA. Dep't Lab. & Indus., Act 85 of 2020: Joint Task Force on
Misclassification of Employees 5 (Mar. 2022), https://www.pahouse.com/
files/Documents/2022-03-
08_031751__Act%2085%20Annual%20Report%202022.pdf.
\14\Id.
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The Fair Labor Standards Act
H.J. Res. 116 would overturn a rulemaking related to
misclassification pursuant to the Fair Labor Standards Act of
1938 (FLSA).\15\
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\15\Pub. L. No. 75-718, 52 Stat. 1060 (1938) (codified at 29 U.S.C.
Sec. 201 et seq.).
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FLSA is the core workplace standards law governing the
minimum wage,\16\ overtime,\17\ oppressive child labor,\18\
payment of tips,\19\ discrimination in pay on the basis of
sex,\20\ and the right of nursing mothers to take paid breaks
at work for the purpose of expressing breast milk.\21\ It is
administered primarily by the Wage and Hour Division (WHD) of
the U.S. Department of Labor (DOL).
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\16\Id. Sec. 6.
\17\Id. Sec. 7.
\18\Id. Sec. 12.
\19\Id. Sec. 3(m)(2).
\20\Id. Sec. 6(d).
\21\Id. Sec. 18D.
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FLSA defines an ``employee'' as ``any individual employed
by an employer.''\22\ The term ``employ'' includes ``to suffer
or permit to work.''\23\ When establishing the broad ``to
suffer or permit to work'' standard under FLSA, Congress
consciously rejected the narrower common law standard of
employment, which turns on the degree to which the employer has
control over an employee. Congress instead sought to expand the
employment relationship to hold accountable employers who would
not be liable for violations under a control test.\24\ The FLSA
definition of employment is the ``broadest definition that has
ever been included in any one act.''\25\
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\22\Id. Sec. 3(e)(1).
\23\Id. Sec. 3(g).
\24\Bruce Goldstein et al., Enforcing Fair Labor Standards in the
Modern American Sweatshop: Rediscovering the Statutory Definition of
Employment, 46 UCLA L. Rev. 983, 991 (1999).
\25\United States v. Rosenwasser, 323 U.S. 360, 363 (1945) (quoting
81 Cong. Rec. 7,657 (1938) (remarks of Sen. Hugo Black)). The FLSA's
definition of ``employ'' is a standard of ``striking breadth'' that
``stretches the meaning of `employee' to cover some parties who might
not qualify as such under a strict application of traditional agency
law principles.'' Nationwide Mut. Ins. Co v. Darden, 503 U.S. 318, 323
(1992).
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The Economic Realities Test DOL and federal courts have
since the 1940s interpreted the FLSA definition of employment
with a multi-factor test.\26\ Even if an employer decides to
call a worker an independent contractor paid on a 1099 basis,
that worker might actually be an employee entitled to minimum
wage and overtime protections under the ``economic realities''
test.
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\26\For a useful recitation of the legal history, see Employee or
Independent Contractor Classification Under the Fair Labor Standards
Act, 87 Fed. Reg. 62218, 62220-62222 (Oct. 13, 2022) [hereinafter
Misclassification NPRM].
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The decades-old test enables WHD to look past the label and
examine the reality of the relationship based on the totality
of the circumstances to determine whether the employee is
economically dependent on the potential employer.\27\
Ultimately, the application of the economic realities factors
is guided by the overarching principle that the FLSA should be
``construed liberally to apply to the furthest reaches
consistent with congressional direction.''\28\
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\27\Tony & Susan Alamo Found. v. Sec'y of Labor, 471 U.S. 290, 301
(1985) (reiterating that the test of employment under the FLSA is
economic reality); Goldberg v. Whitaker House Co-op, Inc., 366 U.S. 28,
33 (1961).
\28\Mitchell v. Lublin, McGaughy & Assocs., 358 U.S. 207 (1959).
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Trump Administration Rulemaking
The Trump Administration published a rule in January 2021
(Trump Rule) that completely rewrote the longstanding economic
realities test. It emphasized two factors above all--a worker's
opportunity to make a profit under the arrangement, and the
worker's control over schedule or other aspects of the job. If
a worker could arguably make a profit and had control over
something basic such as his or her own schedule, those facts
could alone be enough to overwhelm other factors of the Trump
Rule's new test.\29\
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\29\Independent Contractor Status Under the Fair Labor Standards
Act, 86 Fed. Reg. 1168 (Jan. 7, 2021).
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Biden Administration Rulemaking
Days before the Trump Rule was scheduled to go into effect,
the Biden Administration published a rule delaying the Trump
Rule's effective date (Delay Rule)\30\ and then followed up
with a rule withdrawing the Trump Rule altogether (Withdrawal
Rule).\31\
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\30\Independent Contractor Status Under the Fair Labor Standards
Act (FLSA): Delay of Effective Date, 86 Fed. Reg. 12535 (Mar. 4, 2021).
\31\Independent Contractor Status Under the Fair Labor Standards
Act (FLSA): Withdrawal, 86 Fed. Reg. 24303 (May 6, 2021).
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A coalition of employer groups filed suit in U.S. District
Court for the Eastern District of Texas to challenge the Delay
Rule and Withdrawal Rule under the Administrative Procedure Act
(APA).\32\ Although DOL argued that the APA's requirements of
notice-and-comment rulemaking did not apply because the Trump
Rule, Delay Rule, and Withdrawal Rule were all merely
interpretative rules, the court sided with the employer
groups.\33\
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\32\5 U.S.C. Sec. 500 et seq.
\33\Coal. for Wrkf. Inno. v. Walsh, No. 1:21-CV-130, 2022 U.S.
Dist. LEXIS 68401, 2022 WL 1073346 (E.D. Tex. Mar. 14, 2022).
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The Biden Administrative then undertook a new rulemaking
with notice and comment, resulting in January 2024 in a final
rule that rescinded the Trump Rule and replaced it with a new
rule (Misclassification Rule) that restores the decades-old
economic realities test.\34\
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\34\Employee or Independent Contractor Classification Under the
Fair Labor Standards Act, 89 Fed. Reg. 1638 (Jan. 10, 2024)
[hereinafter Misclassification Rule].
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The Biden Administration's Misclassification Rule clarifies
that the ultimate question of the six-factor economic realities
test is whether workers are running their own businesses
(making them truly independent contractors) or are dependent on
finding work in the business of another.\35\ The
Misclassification Rule also adds helpful explanations for how
and why each factor in the longstanding ``economic realities''
test elucidates this ultimate question.\36\
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\35\Id. at 1742 (revising 29 C.F.R. Sec. 795.105(a)).
\36\Id. at 1742-1743.
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DISCUSSION
H.J. Res. 116 is a resolution of disapproval pursuant to
the Congressional Review Act (CRA)\37\ that would revoke the
Biden Administration's Misclassification Rule and reinstate the
Trump Rule, which is so legally dubious that its reinstatement
would result in confusion about the appropriate test for
misclassification.
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\37\5 U.S.C. Sec. 801 et seq.
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Open Door for Abuse
Revoking the Misclassification Rule would reinstate the
Trump Rule that weakened workers' protections against
misclassification.
Doing so would come with steep costs. According to the EPI,
the Trump Rule would cost workers more than $3 billion each
year in lost wages.\38\
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\38\Heidi Shierholz, EPI Comments on Independent Contractor Status
Under the Fair Labor Standards Act, Econ. Pol. Inst. (Oct. 26, 2020),
https://www.epi.org/publication/epi-comments-on-independent-contractor-
status-under-the-fair-labor-standards-act/.
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Moreover, employers expressed concerns about the unlevel
playing field that the Trump Rule would have created. For
example, the Construction Employers of America (CEA)--a
coalition of construction trade associations representing the
interests of 15,000 signatory contractors who collectively
employ nearly 1.5 million workers--argued the Trump Rule's
lenient framework would put responsible contractors at a
competitive disadvantage to unscrupulous employers who
misclassify their workers as independent contractors to avoid
additional costs and obligations under employment laws. CEA
also argued that worker misclassification degrades workers'
skills and abilities and the maintenance of workforce
standards.\39\ CEA's arguments were echoed by the ride-hailing
service Alto, which submitted comments arguing that the
Misclassification Rule is significantly preferable to the
alternative because ``retaining the [Trump Rule] would have a
confusing and disruptive effect on workers and businesses
because of its departure from the longstanding test applied by
the courts, resulting in greater risk of misclassification,
which would `negatively affect both the workers and competing
businesses that correctly classify their employees.' ''\40\
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\39\Comment of the Construction Employers of America,
Regulations.gov (Oct. 26, 2020), https://www.regulations.gov/comment/
WHD-2020-0007-1641.
\40\Comment from Alto Experience, Inc., Regulations.gov (Dec. 15,
2022), https://www.regulations.gov/comment/WHD-2022-0003-50492.
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Recipe for Confusion
That tally of the harmful consequences of reinstating the
Trump Rule assumes, however, that the Trump Rule has actual
legal effect.
Two courts have already suggested that it does not. A
federal district court in Nevada has ruled that the Trump Rule
is ``merely interpretative'' and ``not generally binding,'' and
it thus ``cannot be considered a change in controlling
law.''\41\ Another federal court has noted that the Trump Rule
``may not be valid.''\42\ It is certainly not clear on what
basis the Trump Administration had the authority to issue a
regulation that by fiat rewrites decades of judicial
interpretation of the law.
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\41\Harris v. Diamond Dolls of Nev., No. 3:19-cv-00598-RCJ-CBC,
2022 U.S. Dist. LEXIS 166300, *4-*5, 2022 WL 4125474 (D. Nev. July 26,
2022).
\42\Wallen v. TendoNova Corp., No. 20-cv-790-SE, 2022 U.S. Dist.
LEXIS 21126, *9, 2022 WL 17128983 (D.N.H. Nov. 22, 2022).
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Given that the Trump Rule is not in alignment with
authoritative interpretations of the law, H.J. Res. 116 would
create a new kind of legal confusion. The CRA prohibits
agencies from issuing any rule ``substantially the same'' as a
previous rule that has been nullified by a CRA resolution.\43\
If, as seems inevitable, courts hearing misclassification
allegations in the aftermath of this resolution determine that
the Trump Rule is an incorrect interpretation of FLSA, the CRA
may nevertheless prohibit WHD from again repealing the Trump
Rule. This resolution is an invitation to years of needless
litigation just to clarify the applicability of the CRA when
the consequence is keeping an rule on the books that does not
comport with the law.
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\43\5 U.S.C. Sec. 801(b)(2).
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Exaggerated Arguments
The Republicans have repeatedly criticized the Biden
Administration's Misclassification Rule as though it radically
rewrites the law. Instead, it merely restores the law as it was
applied from 1938 to 2021.
As a result, some industry groups have spoken out in favor
of the Misclassification Rule. For example, IntelyCare,\44\ LPL
Financial,\45\ Gale Healthcare Solutions,\46\ the National
Electrical Contractors Association,\47\ and the Sheet Metal Air
Conditioning Contractors' National Association,\48\ among
others, submitted comments in support of the Misclassification
Rule. Gig companies, such as Uber, DoorDash, and Instacart,
also stated that the Misclassification Rule would not have a
major or immediate impact on their businesses and their current
approach to worker classification.\49\
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\44\Comment from IntelyCare. Inc., Regulations.gov (Dec. 7, 2022),
https://www.regulations.gov/comment/WHD-2022-0003-46319.
\45\Comment from LPL Financial, Regulations.gov (Dec. 15, 2022),
https://www.regulations.gov/comment/WHD-2022-0003-53699.
\46\Comment from Gale Healthcare Solutions, Regulations.gov (Dec.
13, 2022), https://www.regulations.gov/comment/WHD-2022-0003-48984.
\47\Comment from The National Electrical Contractors Association
(NECA) and the International Brotherhood of Electrical Workers (IBEW),
Regulations.gov (Dec. 15, 2022), https://www.regulations.gov/comment/
WHD-2022-0003-52404.
\48\Comment from Sheet Metal & Air Conditioning Contractors'
National Association, Regulations.gov (Dec. 15, 2022), https://
www.regulations.gov/comment/WHD-2022-0003-53811.
\49\Jessica Bursztynsky, Here's How DoorDash, Uber, and Lyft Are
Responding to Rule Change on Gig Work, Fast Co. (Jan. 9, 2024), https:/
/www.fastcompany.com/91007559/doordash-uber-lyft-new-rule-gig-work.
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The Majority's arguments against the Misclassification Rule
appear to describe something other than the Misclassification
Rule itself. According to the Majority, the purpose of the
Biden Administration's Misclassification Rule is not to fix the
damage of the Trump Rule but, instead, to attack independent
contracting in its entirety by adopting an unrelated California
law:
A 2018 Supreme Court of California decision
known as Dynamex adopted a legal test for determining
whether a worker is an independent contractor or
actually an employee: the ``ABC test,'' a simple three-
part test used in more than 20 states that presumes
most workers are actually employees and is thus
entirely distinct from and unrelated to the much more
fact-specific economic realities test of FLSA.\50\
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\50\Dynamex Operations West, Inc. v. Super. Ct., 416 P.3d 1, 35
(Cal. 2018). See also generally Lynn Rhinehart et al.,
Misclassification, the ABC Test, and Employee Status, Econ. Pol. Inst.
(June 16, 2021), https://www.epi.org/publication/misclassification-the-
abc-test-and-employee-status-the-california-experience-and-its-
relevance-to-current-policy-debates/; Catherine K. Ruckelshaus & Bruce
Goldstein, The Legal Landscape for Contingent Workers in the United
States, Nat'l Emp. L. Proj. (Mar. 2015), https://nelp.org/wp-content/
uploads/2015/03/LegalLandscapeUS.pdf.
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State legislators in California moved in
reaction, with some seeking to overrule Dynamex while
others sought to codify it. The result was the labor-
backed Assembly Bill 5 (AB5), which codified the ABC
test in the state's wage and hour law,\51\ along with a
series of exemptions and very detailed provisions for
specific occupations.\52\ For example, the legislators
detailed the number of articles a publication could
publish by a freelance contributor before crossing the
line into misclassifying the freelancer. Subsequent
legislation was needed to correct controversial
decisions in those detailed provisions.\53\
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\51\Assem. Bill 5, 2019-20 Reg. Sess.
\52\Exemptions include: (1) persons or organizations licensed by
the Department of Insurance; (2) certain licensed physicians and
surgeons, dentists, podiatrists, psychologist, or veterinarians; (3)
state licensed lawyers, architects, engineers, veterinarians, private
investigators, and accountants; (4) certain securities brokers,
investment advisors and their agents; (5) certain direct sales
salespersons; and (6) certain commercial fisher man working on American
vessels. AB5 and Dynamex also do not apply to a contract for
``professional services,'' as defined in the legislation. Assem. Bill
5, 2019-20 Reg. Sess.
\53\Assem. Bill 2257, 2019-20 Reg. Sess.
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According to H.J. Res. 116 sponsor Rep.
Kevin Kiley (R-CA), AB5 then became the template for
the Biden Administration's Misclassification Rule.
Ignoring all the ways that the Misclassification Rule
simply reiterates decades of precedent, Rep. Kiley
claims that the WHD wrote the Misclassification Rule to
``implement the core elements of AB5 without so much as
a vote of Congress''' and therefore ``nationalize AB5
all on its own.''\54\
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\54\House Education and the Workforce Subcommittee on Workforce
Protections Holds Hearing on Independent Contractor Regulations, CQ
Congressional Transcripts (Apr. 19, 2023), https://www.cq.com/doc/
congressionaltranscripts-7722511?3&search=QwDNGrt2 (transcribing
Examining Biden's War on Independent Contractors: Hearing Before the
Subcomm. on Wrkf. Prot. of the H. Comm. on Educ. & the Wrkf., 118th
Cong. (2023) [hereinafter Misclassification Hearing] (opening statement
of Rep. Kevin Kiley)).
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The ultimate aim of the Misclassification
Rule, according to Rep. Kiley, is to ``open[] another
front'' in the Biden Administration's ``war on
independent contractors.''\55\
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\55\Id.
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Echoing the warfare theme of Rep. Kiley's argument, the
Majority invited witnesses to a hearing last year who painted
pictures of severe economic harm likely to ensue from the Biden
Administration's Misclassification Rule. One witness claimed
that the Misclassification Rule would empower the Biden
Administration to ``capture as many legitimate independent
contractors as [it] can simply to force [them] out of
work.''\56\ Another witness argued that the Misclassification
Rule would adopt the ABC test and therefore make it so
difficult ``for many legitimate independent contractors to
pass'' the test that many lines of work would become simply
impossible, even live music performance and standup comedy.\57\
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\56\Id. (transcribing testimony of freelancer-cum-advocate Kim
Kavin).
\57\Written Testimony of Karen Anderson, H. Comm. on Educ. & the
Wrkf. Dems. (Apr. 19, 2023), https://democrats-edworkforce.house.gov/
download/karen-a-testimony, at 4 (submitted for record to
Misclassification Hearing, supra note 54).
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The Majority's tendentious case piles exaggeration on top
of inaccuracy. First, the ABC test and California's AB5 have
nothing at all to do with the Biden Administration's
Misclassification Rule. DOL could not have stated it more
plainly:
[DOL] is not adopting an ABC test. [DOL] continues to
believe that an ABC test would be inconsistent with
Supreme Court and federal appellate precedent
interpreting and applying the FLSA, and therefore, this
final rule declines to adopt an ABC test. The Supreme
Court has repeatedly explained that ``economic
reality'' is the applicable standard for determining
whether a worker is an employee or not under the FLSA .
. . [F]ederal courts of appeals have consistently
interpreted this Supreme Court precedent to apply a
nonexhaustive multifactor economic realities analysis
in which there is no presumption of employee status
that must be rebutted, no one factor is determinative,
and all of the factors must be considered and weighed.
[DOL] is grounding the economic realities analysis set
forth in this final rule in the decades of federal
appellate case law applying such analyses and is
rescinding the [Trump] Rule because of its deviations
from that case law. An ABC test, on the other hand, has
a presumption of employee status, considers only three
factors--each of which can be determinative on its
own--and does not result in all of the factors being
weighed or even necessarily considered. Adopting the
ABC test would be a similarly unsupported deviation
from that case law, would have no moorings in the case
law applying the FLSA or [DOL]'s prior guidance, and
could undermine [DOL]'s well-founded reasons for
rescinding and replacing the [Trump] Rule. For all of
these reasons, this final rule does not adopt an ABC
test.\58\
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\58\Misclassification Rule, supra note 34, at 1662 (emphases
added).
On-demand gig companies such as Uber and Instacart, which
mounted a $224 million campaign in California for a ballot
initiative carving themselves out of AB5,\59\ agree with DOL on
this point.\60\ ``The Department of Labor rule released today
does not reclassify any workers,'' said Instacart in a
statement on the Misclassification Rule. ``It merely provides
interpretation guidance on the factors the agency plans to
consider when determining workers'' status under federal
minimum wage law.''\61\
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\59\Brian Chen & Laura Padin, Prop 22 Was a Failure for
California's App-Based Workers. Now, It's Also Unconstitutional., Nat'l
Emp. L. Proj. (Sept. 16, 2021), https://www.nelp.org/blog/prop-22-
unconstitutional/.
\60\Bursztynsky, supra note 49.
\61\Id.
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Moreover, even if the Misclassification Rule had adopted an
ABC test, the dire consequences for independent contractors in
the Majority's case still would not come to pass, least of all
for standup comics or live musicians:
Fundamentally, the ABC test does not prevent any
work, and musicians, comedians and others regularly
perform in states across the country, including states
that use the ABC test. Massachusetts, to name just one
example, uses an ABC test in its employment laws. My
very brief internet search suggests that both stand up
comedy and musicians are alive and well, and performing
regularly in that state. More importantly, there are no
reported or public cases of any enforcement of these
laws challenging the employment or business
relationships in these sectors.\62\
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\62\Laura Padin, Questions for the Record Responses, Congress.gov,
https://www.congress.gov/118/meeting/house/115679/documents/HHRG-118-
ED10-20230419-QFR001.pdf (submitted to record for Misclassification
Hearing, supra note 54) (last visited Mar. 20, 2024).
There is no credible basis for this attack on a soundly
reasoned rulemaking that simply reiterates decades of settled
precedent.
Real Problems Being Ignored
Ranking Member Robert C. ``Bobby'' Scott (D-VA) and
Workforce Protections Subcommittee Ranking Member Alma Adams
(D-NC) have asked twice for the Committee on Education and the
Workforce to hold a hearing on the crisis of child labor and
consider the legislation offered to solve that crisis.\63\
Democratic members also have been pressing for action to raise
the minimum wage, address heat stress, expand protections for
workers to exercise their rights to join a union and bargain
collectively, and much more.\64\ Instead of addressing the very
real problems that America's working families face, the
Committee reported a resolution attacking a rule that
straightforwardly restates decades of federal precedent.
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\63\See Letter from Reps. Robert C. ``Bobby'' Scott & Alma S. Adams
to Rep. Virginia Foxx (Sept. 13, 2023), https://democrats-
edworkforce.house.gov/download/scott-adams-second-letter-to-foxx-re-
request-for-child-labor-hearing; Letter from Reps. Robert C. ``Bobby''
Scott & Alma S. Adams to Rep. Virginia Foxx, (June 6, 2023), https://
democrats-edworkforce.house.gov/download/scott-adams-letter-to-foxx-re-
request-for-child-labor-hearing.
\64\See, e.g., Asuncion Valdivia Heat Illness, Injury, and Fatality
Prevention Act of 2023, H.R. 4897, 118th Cong. (2023); Protecting
America's Workers Act, H.R. 2998, 118th Cong. (2023); Protecting
Children Act, H.R. 4440, 118th Cong. (2023); Protecting the Right to
Organize Act of 2023, H.R. 20, 118th Cong. (2023); Raise the Wage Act,
H.R. 3264, 118th Cong. (2023); Wage Theft Prevention and Wage Recovery
Act, H.R. 5402, 118th Cong. (2023); Workplace Violence Prevention for
Health Care and Social Service Workers Act, H.R. 2663, 118th Cong.
(2023).
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CONCLUSION
For the reasons stated above, Committee Democrats
unanimously opposed H.J. Res. 116 when the Committee on
Education and the Workforce considered it on March 21, 2024. We
urge the House of Representatives to do the same.
Robert C. ``Bobby'' Scott,
Ranking Member.
Raul M. Grijalva.
Joe Courtney.
Gregorio Kilili Camacho Sablan.
Suzanne Bonamici.
Mark Takano.
Mark DeSaulnier.
Pramila Jayapal.
Frank J. Mrvan.
[all]