The Small Business and Entrepreneurship Council (SBE Council) is warning that there are profound policy threats that would deeply harm US entrepreneurship. Perhaps most pressing is the new rules under the Biden Administration that would conflagrate Independent Contractor status. These new rules go into effect on March 11th unless a last-minute miracle in Congress takes place or the courts block the rules.
Initiated by the Department of Labor (DOL), the proposed rulemaking, “Employee or Independent Contractor Classification Under the Fair Labor Standards Act,” claims it addresses the “misclassification” of employees, which denies them certain rights.
The SBE Council joined many others in opposing the new rules, submitting a comment in late 2022 explaining their opposition to the regulations. SBE Council said the changes would undermine the current independent contractor classification rule, as it will “upend flexibility, financial security and success for millions of self-employed Americans, small businesses and freelancers.”
“The proposed rule would significantly turn back the clock on the type of policy that is needed for Americans to succeed and successfully navigate the modern economy. It would foist a groundless, archaic, inappropriate, complex and inflexible regulatory framework onto the productive and successful U.S. independent contractor model, which is making our economy more competitive, vibrant, and responsive to ever-changing economic conditions, and the global marketplace.
The proposal is out-of-step with the foundational and growing shift in how people want to work. More people are starting independent businesses because they have access to modern tools and platforms that make it simple and affordable.”
Testimony by DOL Wage and Hour Administrator Jessica Looman provided an example of how confusing the new rules are as she struggled to explain them.
SBE Council cautioned that the new rules would be a “massive step backward for women and all self-employed freelancing Americans.”
Representative Kevin Kiley has listed the 600 types of jobs that would be devastated by the new rules as they may find themselves unemployed.
Wage and Hour Administrator Jessica Looman could not explain how the new Independent Contractor rule would apply to millions of Americans. It will cost workers, like Barbara, their livelihoods. My CRA will block this rule and protect independent contractors. #FightForFreelancers pic.twitter.com/D9kvL7f2OK
— Rep. Kevin Kiley (@RepKiley) February 15, 2024
It is estimated that approximately 6.5 million small businesses could be affected by this rulemaking, along with 22.1 million independent contractors.
So..Congressman @RepKiley…Administrator Looman just admitted how arbitrary and intrusive the new independent contractor rule actually is. There is no clarity, there is no certainty, and indeed there will be full-on chaos as you so stated. https://t.co/349Zx671cn
— SBE Council (@SBECouncil) February 14, 2024
The new rules were effectively a copy of AB 5 enacted in California. A study was completed by the Mercatus Center at George Mason University, which found the Independent Contractor rules in California reduced the number of jobs and overall employment and workforce participation in California without increasing full-time employment.
