When then-candidate Biden was on the campaign trail, he frequently criticized employers for allegedly “misclassifying their employees as independent contractors,” which amounted to both “wage theft” and cheating “on their taxes.” Biden also promised his administration would “enact legislation that makes worker misclassification a substantive violation of law under all federal labor, employment, and tax laws.” While Congress is yet to enact such a law, Biden’s administration has taken several regulatory steps that make it harder for independent contractors to participate in alternative forms of employment.
The latest attempt to crack down on independent contractors has emerged from the National Labor Relations Board (NRLB), which has expressed interest in changing the rules to make it harder for independent contractors to participate in alternative forms of employment. If the NRLB and federal government want to protect workers, they must resist any temptation to change the rules governing independent contractors, which makes it more difficult for them to operate.
In 2021, Upwork estimated that 36% of Americans had undertaken work as independent contractors, contributing about $1.3 trillion in annual earnings. These figures show how critical independent contractors are to both the labor market and the wider U.S. economy. In addition, unlike traditional employees, independent contractors have greater flexibility in their hours, how they complete assigned work and the type of work they undertake.
Despite the growing importance of independent contractors, the federal government has taken steps to make it harder for them to operate. Shortly after entering office, the Biden administration withdrew a final rule enacted by the Trump Administration that provided greater clarity on who could be classified as an independent contractor. The Biden administration also announced it had nominated David Weil, a known independent contractor skeptic, as Wage and Hour administrator at the Department of Labor.
If the NRLB imposes rules that make it harder for independent contractors to operate, they will be denying gig workers the opportunity to participate in an employment structure they overwhelmingly approve of. For example, in October 2021, Statistica found that 80% of independent contractors were satisfied, well above the national average of just 53.7%. Moreover, 78% of independent contractors cited greater flexibility as the main reason they overwhelmingly approve of gig work.
Such high satisfaction rates that also eclipse national worker satisfaction dispels the notion that nefarious companies are exploiting independent contractors. Instead, it shows they are offering independent contractors the opportunity to work in a favorable employment structure. Moreover, such high satisfaction rates suggest that any attempt to regulate independent contracting could force Americans to participate in a less satisfactory working environment.
Further regulation of independent contractors could deny millions of Americans the opportunity to earn extra income. The ability to earn extra income is especially important when the cost of living is increasing and when gas prices are at a record high. Upwork’s Freelance Forward study found that 44% of independent contractors “earn more than their traditional jobs.” Without the opportunity to earn more money, Americans will inevitably face a decline in economic security.
With independent contracting becoming a major part of the U.S. economy and disrupting how Americans earn income, federal regulators must craft a regulatory environment that allows workers to participate in this alternative employment structure. Unfortunately, the recent announcement from the NLRB shows regulators are looking to make it much harder for Americans to work as independent contractors. Given the Biden administration’s overt hostility to alternative forms of employment and promises to restrict worker freedom, the move from the NLRB is unsurprising. Regrettably, those looking for some more economic security and a satisfying working environment will pay the price.