MYTH V. FACT: How the Department of Labor Rule Will Impact Workers, Businesses, and the Economy

Myth: The DOL Rule is Not the ABC Test From AB-5

Fact: While the DOL rule is not the ABC test in form, it is in substance. Specifically, the DOL rule states that if a worker is “integral,” meaning the work they do is important to the entity who receives the worker’s services, then that worker would likely be deemed an employee rather than independent worker. Under the ABC test, the B prong concludes an individual is an employee if that individual is doing work in the same or similar type of business as the entity using those services.These are two variations of the same overly broad test that finds individuals as employees versus independent workers, even if their work is not integrated with the work of employees, contrary to federal law.

Myth: The DOL Rule Simply Returns to the Current State of the Law

Fact: The DOL’s 160-page rule is not a return to the current state of the law – rather, it creates an even more ambiguous and vague standard. For example, under the law prior to the current rule a worker was more likely to be considered an independent contractor if they invested in the business. Under DOL rule, the worker is more likely to be an employee even if the worker invests in the business, but the department states the investment would have to be substantial when compared qualitatively with the investment by the business.

Myth: Most Independent Workers Want to be Traditional Employees

Fact: Survey after survey finds that most individuals who engage in independent work prefer to  work in that way. Specifically, in 2023, 63% said working independently was  their choice entirely, and 72% of independents said it was easier to work as  an independent than ever before, up from 70% in 2022.[1]

[1] https://www.mbopartners.com/state-of-independence/

Myth: The Previous  Policy Did Not Allow for DOL to Effectively Pursue Misclassification

Fact: Under the policy created by the previous Administration the DOL has successfully identified, investigated, and resolved cases of misclassification.[1]

[1] https://www.dol.gov/newsroom/releases/whd/whd20230607

Myth: The CRA Would Undermine Unionization

Fact: The DOL Rule and the CRA only impact the Fair Labor Standards Act, which has no bearing on unionization.  A separate unaffected law, the National Labor Relations Act, is what grants employees the right to form or join unions.

Myth: The CRA Would Allow Abuse of Workers in Industries Like Construction and Undercut Union Shops

Fact: Most independent workers across industries prefer that style of work.[1] In fact, the consistent and likely long-lasting worker shortage will demand that companies continue to partner with all types of workers ranging from union-represented employees to independent workers.[2]

[1] https://www.agc.org/independent-contractor

[2] https://www.cnbc.com/2023/07/29/the-hard-hat-job-with-highest-level-of-open-positions-ever-recorded.html

Myth: The CRA Would Mean No Policy Would Exist to Prohibit Workers From Being Misclassified

Fact: The CRA would repeal the current DOL Rule and return to the 2021 policy which was widely popular and created clearer rules of the road for all regulated stakeholders.

Myth: The DOL Rule Will Not Have a Negative Impact on the Economy or Prevent Individuals From Engaging in Independent Work

Fact: As with AB-5 in California, the impact of the policy will be significant. In fact, a recent study of the impact of AB-5 found job losses and a decline in willingness of companies to offer independent worker opportunities.[1] And, it is likely that the DOL Rule will have an even greater negative impact, because unlike AB-5 it does not contain the 109 exemptions for commonly understood and accepted independent worker relationships across industries and occupations.

[1] https://laweconcenter.org/liya-palagashvili-on-californias-ab5/

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