If you thought 2024 would bring a reprieve from the Biden administration’s assault on American workers, think again. Two new federal rules take direct aim at independent contractors, franchises, and other businesses, and the Goldwater Institute is standing up for their right to earn a living.
Today, the Department of Labor (DOL) published its final “independent contractor rule,” which will result in the reclassification of millions of gig workers as “employees” under federal law. Unfortunately, the rule means continued uncertainty for gig workers, more lawsuits, and additional costs on self-employed workers and small businesses. Indeed, the DOL admits that its rule, which will take effect on March 11, 2024, will impact millions of workers and result in hundreds of millions of dollars in regulatory costs across the U.S. economy.
Proposed some fifteen months ago in the fall of 2022, the new rule replaces a Trump-era rule—which Biden’s DOL illegally tried to block in 2021—that clarified the “core” characteristics of independent contractors. Today’s rule rejects those “core” identifiers and instead lists an indefinite number of vague factors that will allow bureaucrats, unions, and other Biden allies to classify virtually any worker they want as an “employee,” forcing independent contractors out of the workforce and reducing choices for workers and consumers.
As the Goldwater Institute explained to the department in a formal comment, the new rule continues the Biden administration’s lawlessness by ignoring or misconstruing several U.S. Supreme Court cases that more broadly define the types of workers that legally qualify as “independent contractors” rather than “employees.” The DOL cited the Institute’s objections several times in the agency’s explanation of the rule—but it weakly explained away the analysis, and moved full-steam ahead with its regulatory overhaul. Showing its institutional bias, the DOL favorably cited comments from powerful unions dozens of times throughout its publication, illustrating that the rule was changed at the behest of entrenched union bosses threatened by the innovation of the gig economy.
The rule also violates federalism principles by undercutting many state laws protecting independent contractors, including a 2016 reform the Goldwater Institute supported in Arizona to ensure workers who want to be independent contractors don’t have to jump through bureaucratic hoops to be recognized as such.
The independent contractor rule comes on the heels of another harmful rule recently issued by the National Labor Relations Board (NLRB) regarding “joint employer” status. That rule blurs the lines between franchisors and franchisees (not unlike the DOL’s blurring of the lines between employees and independent contractors).
As the Institute previously explained, the NLRB’s joint employer rule is nothing less than an all-out assault on the franchise business model. The joint employer rule, which took effect on December 26, 2023, destroys the boundary of legal liability between franchisors and franchisees, meaning that when franchisees are sued, franchisors can be held liable, even if the franchisor had little or no day-to-day interaction with the franchisee. The same would also be true for prime contractors and subcontractors, another large segment of the economy that relies on the legal protections of these types of business relationships.
When this rule was proposed in 2022, the Goldwater Institute also submitted a formal comment to the NLRB, warning in part that “[t]he proposal would significantly constrain the ability of American and Arizona businesses alike to contract with each other for the goods and services that businesses need to operate as efficiently and productively as possible.” The NLRB cited the Institute’s comment twelve times, but only slightly narrowed one aspect of the rule in ways that do not lessen the burden of the final rule on the economy—which the board admits will, just like the independent contractor rule, impact millions of businesses and impose hundreds of millions of dollars in added costs on the U.S. economy. Adding insult to injury, the board went even further by adding an entirely new subsection to the rule as a favor to powerful labor unions who want to force franchisors, prime contractors, and other similarly situated businesses to bargain collectively with unions that represent employees of franchisees, subcontractors, and the like.
In short, both the DOL independent contractor rule and the NLRB joint employer rule each embody horrendous anti-worker, anti-business, union-enriching, left-wing policies.
These two rules are just the latest efforts of the Biden administration to reduce worker freedom and consumer choice. These rules also strangle the gig economy, which is already reeling from years of runaway inflation and mountains of heavy-handed government regulations. The Goldwater Institute will continue to sound the alarm against the federal government’s job-killing policies and stand up for American workers’ right to earn a living in the way that they choose.
To read the Goldwater Institute’s full comment submitted to the NLRB, click here. You can read the Institute’s full comment sent to the Department of Labor here.
You can find out more about what Goldwater is doing to confront the Administrative State here. For more on the independent contractor rule, the joint employer rule, and other harmful proposals, please visit our friends at the Institute for the American Worker.
Parker Jackson is a Staff Attorney at the Goldwater Institute.
