This holiday season, while Americans face record inflation and the likely prospect of a recession, President Biden’s Department of Labor has proposed a job-killing rule that would kill the very jobs that many Americans use to get some extra cash and put some presents under the tree.
All of this comes as 98% of CEOs and many others are predicting a recession in 2023.
This proposed rule would be a large step backward for our economy, eliminate millions of jobs, and be a massive giveaway for plaintiffs’ attorneys. At a time when the U.S. economy is in dire straits, with record-high inflation, the last things that Americans need are decreased employment opportunities and frivolous lawsuits resulting in higher prices.
With this proposed rule, the Department of Labor is forcing American workers to accept the dictates of big government against their own wishes, and is taking action that likely has a disproportionate impact on minorities, which stands in stark contrast to the Biden administration’s public push for diversity, equity and inclusion.
Numerous surveys show that the vast majority of independent workers prefer to remain independent contractors. The flexibility and opportunities for entrepreneurship this provides for women and minorities is especially valuable.
One company’s 2022 economic impact report reveals that 73% of its drivers identify as members of racial or ethnic minority groups. Imposing employee status on these workers against their will would be ruinous and, as shown by the data cited above, may even result in a disproportionate negative impact upon minorities.
Another company’s analysis reveals that almost 1 million contractors would lose their livelihood were they to be reclassified as employees. The costs are very real and would come at a time when Americans are faced with a looming recession and skyrocketing prices for goods and services thanks to 40-year record-high inflation.
The proposed rule suffers from two critical flaws.
First, the proposed rule fails to address the principal problem plaguing this area of activity: uncertainty. The rule would replace the Labor Department’s streamlined current test with an all-the-circumstances, amorphous, six-factor test. Worse yet, the proposed rule bends each of those factors toward employee status using a host of legally and logically dubious concepts. The only beneficiaries of this proposed test are plaintiffs’ lawyers, who will be able to leverage the flexibility of the test to push dubious claims past early judicial gatekeeping and extract settlements.
Second, the proposed rule lacks a reasonable rationale. The Labor Department’s current rule on independent contracting is fairly new, having been promulgated at the tail end of the Trump administration. The department lacks any data or experience to show that the current rule is not working well. Nonetheless, the department has, now and previously, evinced a knee-jerk reaction in favor of repeal. The proposed rule’s purported reasons for repeal — that the current streamlined regime is more confusing, or that the current rule is in tension with the law, or that the current rule encourages misclassification of workers — are unconvincing and incorrect.
The department’s current rule is a step in the right direction, providing a legally sound, yet clear and modern, employment test for our modern economy. In stark contrast to the current rule, the proposed rule would kill jobs bring nothing but confusion and litigation as we stand on the doorstep of a crippling recession.
• David McIntosh is a former congressman from Indiana and president of the Club for Growth Foundation.