[House Report 118-445]
[From the U.S. Government Publishing Office]


118th Congress    }                                     {       Report
                          HOUSE OF REPRESENTATIVES
 2d Session       }                                     {      118-445

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

 
  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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \3\Nat'l Emp. L. Proj., Independent Contractor Misclassification 
Imposes Huge Costs on Workers and Federal and State Treasuries 1 (Oct. 
2020).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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:
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
           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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
           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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
           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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------
    \15\Pub. L. No. 75-718, 52 Stat. 1060 (1938) (codified at 29 U.S.C. 
Sec. 201 et seq.).
---------------------------------------------------------------------------
    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).
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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].
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------
    \29\Independent Contractor Status Under the Fair Labor Standards 
Act, 86 Fed. Reg. 1168 (Jan. 7, 2021).
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \34\Employee or Independent Contractor Classification Under the 
Fair Labor Standards Act, 89 Fed. Reg. 1638 (Jan. 10, 2024) 
[hereinafter Misclassification Rule].
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \35\Id. at 1742 (revising 29 C.F.R. Sec. 795.105(a)).
    \36\Id. at 1742-1743.
---------------------------------------------------------------------------

                               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.
---------------------------------------------------------------------------
    \37\5 U.S.C. Sec. 801 et seq.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------
    \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/.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \43\5 U.S.C. Sec. 801(b)(2).
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
           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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
           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\
---------------------------------------------------------------------------
    \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)).
---------------------------------------------------------------------------
           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\
---------------------------------------------------------------------------
    \55\Id.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    \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]