The Labor Department published a rule Friday that would undo egregious attempts during the last administration to classify more workers as employees rather than independent contractors.
At the behest of union bosses seeking to expand their rolls of dues-paying members, President Joe Biden restricted who could be an independent contractor, even though he lacked the votes in the Democratic-controlled Congress to change the law.
The Trump administration announced last year that it would no longer enforce that rule while it drafted a replacement. The new version largely restores the status quo ante for independent contractors while giving employers greater certainty when classifying workers.
This battle centers on the definition of “employee,” which believe it or not is unclear in labor law. It has been defined by decades of court decisions and has resulted in the United States having a large class of workers who are not traditional employees.
Independent contractors lack some protections that U.S. labor law requires be granted to employees, and many don’t have access to employer-sponsored benefits. They also don’t have the right to unionize, which is why organized labor is the strongest supporter of reclassifying independent contractors as employees.
But there are big trade-offs. Independent contractors get the flexibility to work wherever they want, set their own hours and choose which projects they want to work on. Being their own boss gives millions of people the freedom to care for their family.
Advocates for classifying more self-employed workers as employees are generally speaking on behalf of people who don’t want their help. Of the estimated 11.9 million Americans for whom independent contract work is their sole or main job, 80 percent prefer it to traditional employment, according to a 2023 survey from the Bureau of Labor Statistics.
“Gig economy” workers, such as Uber or DoorDash drivers, dominate in the public imagination of what an independent contractor looks like. But that’s the minority. The industries or occupations in which independent contracting is most common include real estate, construction, arts, design and personal care. If someone does not want to be an independent contractor, there’s nothing stopping them from seeking full-time employment.
Bills such as the PRO Act, which would restrict the right to hire independent contractors, have repeatedly failed to pass. But liberal state governments have enacted various restrictions of their own on worker rights. The strictest passed in California in 2019.
After it went into effect, advocates achieved their goal of fewer people working as independent contractors. But there was no corresponding increase in traditional employment. It just led to fewer people working overall.
The new rule from the Trump administration reflects an understanding of the degree to which labor market flexibility is a key ingredient in America’s secret sauce. It’s simply easier for American workers to find the best job to match their skills than it is for Europeans to do the same. That’s largely because bureaucrats have less say in the matter.
Congress would do the economy a favor by codifying the new rule into law so that the next president cannot repeat Biden’s mistake.
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