Flex Association, an industry group representing gig economy companies such as Uber and Instacart, explained that a proposed rule change from the Labor Department threatens millions of American independent contractors who enjoy their current work arrangements.
The new rule, which is undergoing a public comment period slated to conclude in November, would prompt regulators to consider whether independent contractors are “economically dependent” on their employers or are truly conducting business for themselves. Labor Secretary Marty Walsh claimed last week that individuals in the former category may be more easily denied their rights by the companies for which they work.
Flex Association CEO Kristin Sharp told The Daily Wire that most independent contractors “choose this work because of the flexibility it provides,” while a “significant majority have also consistently indicated that they prefer the freedom that comes from independent contractor status.” An analysis from Flex Association revealed that the gig economy has generated $348 billion in economic activity.
“App-based earners can choose when, where, how often and for whom they work; traditional employment does not offer that level of flexibility,” Sharp continued. “While it remains to be seen how the proposed rule might impact the industry we represent, we know that forcing a one-sized-fits-all approach doesn’t match the needs of workers.”
Indeed, roughly 16% of Americans have participated in gig economy and independent contracting work such as delivering groceries, cleaning homes, or delivering packages, according to a survey from Pew Research, which found that young people and low-income individuals are most likely to earn money through a gig platform. As a result of various labor standard laws, hiring an employee can cost between being 25% and 40% more than the worker’s base salary, according to an analysis from the Massachusetts Institute of Technology.
A previous blog post from Flex Association contended that the Labor Department proposal is not consistent with twenty-first century labor market conditions and noted that officials should instead pursue laws that improve independent work. According to a poll from Global Strategy Group, 90% of independent contractors report that their status is a “good arrangement for them and their lifestyle,” while only 3% said the arrangement is “bad.”
The federal rule change proposal induced comparisons to Assembly Bill 5, a statute in California which claims that workers are often “exploited” through their classification as independent contractors. The law entered into effect earlier this year after an extensive series of court battles, inducing protests from owner-operator truckers and a subsequent rebuke from the state government to “move forward” and “comply with the law.”
The costs of such policies incurred by workers appear to outweigh the benefits. An analysis from Chamber of Progress found that a “national rule reclassifying independent contractors as full-time employees” could result in a loss of direct income for 3.4 million American workers, producing a decline in net earnings of more than $42 billion.
In the state of New York, policymakers enacted a measure in the spring of 2020 that temporarily limited the fees which app-based food delivery companies such as DoorDash, Uber Eats, and Grubhub could charge restaurants. The companies filed suit, arguing that the ordinance was “unconstitutional” because of interference with “freely negotiated contracts between platforms and restaurants.”
