Biden Admin Rule Change & Amendment 1

The Biden administration’s long-awaited Department of Labor rule change for independent contractor classification under the Fair Labor Standards Act (FLSA) was made public Tuesday morning.

Labor Secretary Marty Walsh (D, Pro-Labor Unions) stated the following when the rule was announced:

“While independent contractors have an important role in our economy, we have seen in many cases that employers misclassify their employees as independent contractors, particularly among our nation’s most vulnerable workers.

“Misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages.  The Department of Labor remains committed to addressing the issue of misclassification.”

In the Department of Labor’s press release announcing the rule change, it was outlined into the following:

• Align the department’s approach with courts’ FLSA interpretation and the economic reality test.
• Restore the multifactor, totality-of-the-circumstances analysis to determine whether a worker is an employee or an independent contractor under the FLSA. 
• Ensure that all factors are analyzed without assigning a predetermined weight to a particular factor or set of factors.
• Revert to the longstanding interpretation of the economic reality factors. These factors include the investment, control and opportunity for profit or loss factors. The integral factor, which considers whether the work is integral to the employer’s business, is also included.
• Assist with the proper classification of employees and independent contractors under the FLSA.
• Rescind the 2021 Independent Contractor Rule. 

Additionally, the Department’s press release included:

“The department is responsible for ensuring that employers do not misclassify FLSA-covered workers as independent contractors and deprive them of their legal wage and hour protections.  Misclassification denies basic worker protections such as minimum wage and overtime pay and affects a wide range of workers in the home care, janitorial services, trucking, delivery, construction, personal services, and hospitality and restaurant industries, among others.”

The full, 184-page rule change can be viewed here.

After my initial read of the rule change, it is very clear the Worker Classification tests discussed in my previous articles, the “ABC test”, and the common law/IRS test, were not to be codified in the rule change.

But clearly, the rule change incorporates more of the ABC test in a transparent attempt to classify independent contractors into employees.  Thus, the worker would be eligible for the benefits the Labor Department identified, plus making them eligible for union membership/organizing, which is the ultimate goal of organized labor.

Reaction from members of Congress, candidates for Congress, independent contractors, and the mainstream media was a vortex.

Congresswoman Virginia Fox (R-NC), ranking member of the House Education & Labor Committee in line to be chairman should Republicans flip the House next month, and Congressman Fred Keller (R-PA), ranking member of the Education & Labor subcommittee for Workforce Protections, issued a joint statement within an hour of the Labor secretary’s announcement:

“Independent contracting is a popular work model, but the Biden administration would prefer to saddle workers and job creators with red tape instead of encouraging flexibility.  Americans want the freedom and flexibility that comes with independent contracting, and depriving them of such liberties is a kick in the teeth.

“The Biden administration’s proposed rule on independent contractors needlessly attempts to redefine many independent contractors as employees, which many workers do not want, and limits employers’ flexibility to respond to changing economic circumstances.  We should put workers and job creators on the path to success instead of setting up roadblocks. These damaging regulations are not what workers need.”

          Congressman Rick Allen (R-GA) tweeted the following the next day:

“Advocates of the PRO Act like to paint independent contractors with the same broad brush, as though they are all simply mis-classified employees.   The reality is nearly 60M Americans have chosen this model of employment and the government has no right to take it away from them. Who works as an independent contractor? 

Think:

Barbers/hairstylists

Truck drivers

Writers/editors

Photographers

Entrepreneurs

Artists/designers

Consultants

Fitness trainers

Wedding planners

It’s a heck of a lot more than just rideshare drivers.”

This summer, I sent a letter to Labor Secretary Marty Walsh urging the Department of Labor to uphold the rule issued during the Trump administration specifically to protect independent contractors.  If you aren’t an independent contractor, you might wonder why this is such a big deal. Here’s why. If the Biden administration succeeds in scrapping the independent contractor model, we’d be giving the federal government authority to dictate how Americans earn their living. Or, at the very least, we’d be allowing the government to eliminate a perfectly valid career path that’s lifted millions of people out of poverty and helped them accomplish the American Dream.

Who stands to benefit from this? It’s not the people who have chosen independent contractor status freely and for themselves.  It’s the unions, who make huge donations to Democrats and expect this president to prioritize political favors over workers’ freedom of choice.  California Assemblyman Kevin Kiley, Republican nominee in the safe Republican CA-03 seat in the House, tweeted:

“Biden just proposed a new rule that seeks to nationalize California’s disastrous AB 5 by executive fiat.  This threatens the livelihoods of millions of Americans.”

Kiley was one of the leading opponents in the California Assembly during the Assembly Bill 5 (AB5) debate in 2019.

The media followed suit, with The Wall Street Journal editorial in Wednesday’s print edition:

“Newspaper columnists, truck drivers, real estate agents, barbers, consultants and many other freelancers could be ensnared. The Administration is proving it’s an equal-opportunity jobs killer.”

Carol Roth, best-selling author of The War on Small Business:  How the Government Used the Pandemic to Crush the Backbone of America, tweeted the following Tuesday, transcribed:

“The Biden regime has consistently said they are for small business and competition.

“That’s a lie.

“Today they unveil a proposal to move gig/independent workers to employee status, hurting small biz and worker freedom, helping big biz and unions.

“Your work, your choice.”

Financial Services Institute (FSI) President and CEO Dale Brown said in a statement that the trade association is

“thoroughly reviewing the proposed rule as it is imperative to preserve independent financial advisors’ ability to choose to be independent contractors and provide the same level of certainty and clarity the existing rule provides independent advisors.”

Additional reaction from independent contractors I network with were equally, if not more, angry at the Department of Labor continuing to fly the false flag of “misclassification” applied to most legitimate freelancers and law-abiding clients. Clearly, in my honest opinion, the biggest winners will be labor lawyers across the country should this rule be implemented by early to mid-2023.

The rule change will officially be posted on Thursday, October 13, and will begin the 45-day period for written comments to be submitted to the Department of Labor’s Wage and Hour Division.  The comment period ends on November 28.

As stated in a previous article about the FLSA rule change, there will almost certainly be a legal challenge (or two) in federal court to implement the new rule through the FLSA.  This challenge will use the 2022 U.S. Supreme Court ruling West Virginia v. Environmental Protection Agency to prove such a dramatic rule change is unconstitutional under legal precedent set with West Virginia ruling.

It can’t be emphasized enough — independent contracting is NOT only about app-based business and ride-hailing companies.  Many in the media attempt to minimize independent contractors to Uber and Lyft drivers.  Ride-hailing is a small component of independent contracting.  As The Wall Street Journal editorial pointed out, there are numerous professions where workers have chosen to be their own boss through independent contracting, coupled with starting their own businesses to provide such services to clients.

One of the best, detailed and balanced articles by Vox‘s Rachel Cohen can be viewed here.

Impact to Amendment 1 if FLSA rule change goes into effect

Assuming the Biden administration’s rule change survives multiple legal challenges in federal court, here is what the FLSA rule change means for Amendment 1, which is on the ballot November 8.

For reference, here’s the wording of the Amendment on the ballot on November 8 with emphasis added:

“Employees shall have the fundamental right to organize and to bargain collectively through representatives of their own choosing for the purpose of negotiating wages, hours, and working conditions, and to protect their economic welfare and safety at work.

“No law shall be passed that interferes with, negates, or diminishes the right of employees to organize and bargain collectively over their wages, hours, and other terms and conditions of employment and workplace safety, including any law or ordinance that prohibits the execution or application of agreements between employers and labor organizations that represent employees requiring membership in an organization as a condition of employment.”

Per Illinois Senator Ram Villivalam (D-Chicago):

“The Amendment refers to ‘employees,’ and not workers or individuals…done with intention.”

Now what did Villivalam mean when he said, “done with intention”?  State Senator Villivalam’s reference appeared in The Wall Street Journal editorial concerning Amendment 1, published in the August 30, 2022 print edition.  Here’s additional context:

“The National Labor Relations Act already governs private workers and limits who can bargain about what.  Illinois can’t expand the collective-bargaining rights of private employees beyond what federal law allows.”

Sure, the National Labor Relations Act (NLRA) limits governance of private workers and who can bargain for what, but here’s the catch: the definition, or “classification”, of workers can be done at the state level. The emphasis on any discussion about labor law and the definition of an “employee” can be expanded by state governments. Look at what happened in California three years ago with passage of Assembly Bill 5 (AB5).

Additionally, the FLSA rule change would reclassify workers and bring reclassified employees into coverage under Amendment 1 if it’s approved next month.  Yes, “done with intention” is more proof of the hidden agenda being advanced by Amendment 1 proponents in Illinois.  Marc Poulus, counsel for the proponents of Amendment 1 political committee, proved independent contractors are targets for coverage under Amendment 1 if it passes.  Here’s why Poulus’ admission in the Tribune proves proponents’ hidden agenda.

Amendment 1 clearly states “Employees”.  The way to broaden eligible workers to be covered under Amendment 1 is to redefine an “employee” through Worker Classification either through state law, or through the FLSA.  With the proposed change to classifying more workers as “employees” under the FLSA, once the rule is implemented, and should Amendment 1 pass on November 8, many workers in Illinois today will now be covered under Amendment 1, both in the public AND private sector.  The current NLRA would apply to newly classified employees under the FLSA.

What does this mean? More potential members of both public and private sector labor unions.  More reason, beyond taxes, to reject Amendment 1 — FREEDOM!

Note from John Lopez:  The Illinois Economic Policy Institute tweeted a reply to me labeling my linkage of Amendment 1 to Worker Classification as “Misinformation”.  After support from friends and fellow freelancers, the ILEPI deleted their tweet, but enough people saw it, and moving forward, I will be screen capturing all hostile tweets on this topic.

John Lopez has written about policy and elections through the McHenry County Blog since 2019 through July 2021.  He is now semi-retired, and does freelance work with analytics, as well as political candidates, emphasizing policy as the means to advance the conservative message, by engaging through policy “dog fighting”, applying discernment for winning and advancing God’s Kingdom agenda.

John’s known for getting past the talking points, the narratives, the abstracts, the platitudes and the bromides in order to discuss policy and apply Scripture to overcome unholy divisions in the local community, our state, and nation.  John has been married for over 17 years.

Follow John on Twitter: @MarcVAvelar