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Two Federal Rules Threaten American Workers—Goldwater Takes Action

December 13, 2022

While the left continues to wage war on worker freedom, the Goldwater Institute is speaking out in defense of millions of small businesses and independent contractors across the country whose livelihoods are being targeted by the administrative state.

Just as small businesses begin grappling with onerous new IRS reporting requirements for the use of popular online payment platforms like Venmo and Paypal, two additional rules proposed by the National Labor Relations Board (NLRB) and the Department of Labor threaten to snuff any remaining life out of the gig economy.

That’s why the Goldwater Institute submitted comments to both agencies this month, asking them to discard these two job-killing regulations.

The first of these proposals, the NLRB’s “joint employer rule,” is an all-out assault on the franchise business model. It would impose liability on franchisors when their franchisees are sued, completely upending the structure of these businesses. If corporate franchisors and small business franchisees were considered joint employers, many small business owners would lose their autonomy and could also become ineligible for certain types of financing. This rule would also dramatically alter the relationship between prime contractors and subcontractors, putting another large segment of the economy at risk of upheaval. As Goldwater’s Vice President for Litigation, Jon Riches, explains in the comment submitted to the NLRB, “[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 second, the Department of Labor’s “independent contractor rule,” significantly restricts the definition of an “independent contractor” and reclassifies many such workers as “employees” for legal purposes. This would prevent millions of Americans from enjoying the flexibility and freedom that come from working as an independent contractor, rather than an employee. Indeed, it will force many Americans, including working parents for whom traditional full-time employment is not viable, out of the labor force altogether. Additionally, this rule violates federalism principles by undercutting many state laws protecting independent contractors, including a 2016 reform passed 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 Goldwater Institute’s comment to the Department of Labor makes clear that the agency’s proposed rule is “antithetical to trends in the modern economy and the desires of American workers.”

Each of these rules would expand federal government control over the American worker by outlawing popular free-market innovations in favor of a one-size-fits-all employment model. While touted as worker protections, these rule changes are, in fact, being pushed by powerful special interests that wish to unionize more workers and grow the progressive political machine.

These rules would take our economy two more steps backward at a time when businesses and families are suffering from massive inflation, high energy prices, and a declining labor participation rate (particularly among working-age men, who increasingly reject conventional employment models).

Workers and small businesses alike should be allowed to freely choose the type and terms of their business arrangements. Not everyone wants to work a typical 9 to 5 job for an established company. Many choose to blaze new trails as entrepreneurs, supplement their income with a side gig, or simply work for themselves. Freelance writers, online influencers, rideshare and delivery drivers, direct sales workers, and countless others stand to be harmed by the proposed independent contractor rule. That is to say nothing of the hundreds of thousands of franchise operations across the country that could be crushed by the “joint employer” proposal.

In short, both proposed rules embody horrendous anti-worker, union-enriching policies.

The Goldwater Institute will always stand up for American workers’ right to earn a living in the way that they choose. The NLRB and the Department of Labor should do the same by rejecting these harmful proposals.

To read the full comment submitted to the NLRB, click here. You can read the full comment sent to the Department of Labor here.

Click here to read about Goldwater’s work to fight onerous taxes and defend Americans’ right to earn a living in the profession of their choice. You can find out more about what Goldwater is doing to confront the administrative state here, and read about our work to hold powerful unions accountable 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.



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