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Comments on RIN 1235-AA34: Independent Contractor Status Under the Fair Labor Standards Act, Delay of Effective Date

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February 13, 2021 Comments of Eileen Appelbaum, Co-Director, Center for Economic and Policy Research, Washington, DC. Submitted on FederalRegister.gov on February 13, 2021 Amy DeBisschop Division of Regulations, Legislation, and Interpretation Wage and Hour Division U.S. Department of Labor, Room S-3502 200 Constitution Avenue NW Washington, D.C. 20210 Dear Ms. DeBisschop: The Center for Economic and Policy Research (CEPR) submits these comments on the Department of Labor’s Request for Comment on Delay of the Effective Date of RIN 1235-AA34; Fed. Reg. Vol. 86, 8326.  (February 5, 2021)  I am Eileen Appelbaum, Co-Director of the Center for Economic and Policy Research. I direct the Center’s work on domestic economic research and policy issues. CEPR was established in 1999 to promote

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February 13, 2021

Comments of Eileen Appelbaum, Co-Director, Center for Economic and Policy Research, Washington, DC. Submitted on FederalRegister.gov on February 13, 2021

Amy DeBisschop
Division of Regulations, Legislation, and Interpretation Wage and Hour Division
U.S. Department of Labor, Room S-3502
200 Constitution Avenue NW
Washington, D.C. 20210

Dear Ms. DeBisschop:

The Center for Economic and Policy Research (CEPR) submits these comments on the Department of Labor’s Request for Comment on Delay of the Effective Date of RIN 1235-AA34; Fed. Reg. Vol. 86, 8326.  (February 5, 2021) 

I am Eileen Appelbaum, Co-Director of the Center for Economic and Policy Research. I direct the Center’s work on domestic economic research and policy issues. CEPR was established in 1999 to promote democratic debate on the most important economic and social issues that affect people’s lives. Our mission is to inform people about the problems and choices that they face. CEPR is committed to presenting issues in an accurate and understandable manner, so that the public is better prepared to choose among the various policy options.

To that end, CEPR has published numerous analyses and reports about independent contractors, gig economy workers, and multiple job holders who may be independent contractors in one of their jobs. Here I summarize the findings of some of our major reports.

Data on multiple job holders – including those who are independent contractors in their second job or in more than one job – is difficult to find. What is known from tax data is that second jobs as independent contractors are particularly important for minorities and those who report financial hardship as a strategy to improve household finances. These jobs lack benefits such as sick pay, health insurance, and retirement plans – benefits that are generally lacking in these workers’ main jobs. Using a variety of sources on multiple job holding, CEPR’s analysis found that the number of independent contractors increased over the decade to 2019 before collapsing in the Covid-19 pandemic as documented in the 2020 report, Multiple Job Holders: Who Are They and How Are They Impacted by the Pandemic.

CEPR analyzed the May 2017 Contingent Workers Supplement (CWS) conducted by the Bureau of Labor Statistics (BLS) 12 years after the last CWS and 22 years after the first to examine how nonstandard work arrangements had evolved, with special attention to older workers. In the 2019 report Nonstandard Work Arrangement and Older Americans, 2005-2017, we took a broad look at this phenomenon in the U.S. labor market with special emphasis on workers age 65+. Access to Medicare leveled the playing field for older contractors’ access to health benefits compared with those in standard employment. But wages were lower for older independent contractors in 2017, and they were far less likely to have access to a retirement plan than those in standard jobs.

In Young Workers in Nonstandard Work Arrangements, 2005 – 2017, published in 2019, CEPR examined the experiences of the digital native generation. We found that low wages, lack of benefits, and less than full-time hours were among the problems faced by these workers, who overwhelmingly chose jobs that provided standard employment arrangements.

CEPR’s interest in nonstandard work arrangements predates publication of the latest CWS. In What We Can Learn about Contingent and Alternative Work Arrangements, we examined the monthly Current Population Survey to see what it told us about the disadvantages faced by workers excluded from the social protections that employment laws provide to workers who are classified as employees.

My personal interest in independent contractors and their conditions of work extends back several decades. I coauthored an article in Social Policy in 1997 on the challenges nonstandard work arrangements created for workers. I coauthored two studies of the very first CWS: “Managing Work and Family: Nonstandard Work Arrangements Among Managers and Professionals” and Nonstandard Work, Substandard Jobs. Flexible Work Arrangements in the U.S – both published in 1997. The main findings are that flexible work arrangements, including work as an independent contractor, do not provide the advantages to workers that are ascribed to them. Quite the contrary. Workers in nonstandard work arrangements suffer many disadvantages relative to workers with similar education and demographic characteristics who are classified as employees.

I have studied and followed the economic circumstances and job quality issues facing workers employed in nonstandard work arrangements, including independent contractors, the most prevalent of nonstandard work arrangements, for more than two decades. These workers have been historically excluded from the protections of labor laws that provide workers who are classified as employees with rights to a minimum wage, overtime pay, and the protections of child labor laws. As a result, the incomes, job security, and job quality of workers classified as independent contractors have suffered. The Trump administration’s Department of Labor finalized a rule that would further stack the deck against workers and enable employers to classify more and more of them as independent contractors, with all that implies for their pay and working conditions. If DOL’s rule becomes final, it is estimated that workers would experience $3.3 billion annually in lost wages. As my research and that of many other researchers shows, this rule would cause the greatest harm to Black workers and workers of color who predominate in the low-paying jobs where independent contractor misclassification is common. Further, the DOL rule is a clear misreading of the FLSA’s definition of what it means to be an employee. For these reasons, the Center for Economic and Policy Research urges DOL to delay implementation and reconsider this interpretive rule.

Numerous chapters in my co-edited book, Low Wage Work: How Employers are Reshaping Opportunity in the Workplace, document that misclassification of workers is rampant in low-wage, labor-intensive industries where women and people of color, including Black, Latinx, and Asian workers, are overrepresented. All workers who are misclassified suffer from a lack of workplace protections, but women, Black workers, people of color, and immigrants are especially vulnerable to this type of mistreatment.

In conclusion, as research by CEPR’s staff confirms, it would be a great disservice to American workers for the Department of Labor, the one department tasked with standing up for workers’ rights and interests, to deliberately create incentives for employers to classify as independent contractors, workers that clearly do work for their companies. The DOL should not endorse a fiction that shields these employers from responsibility for the workplace conditions they create and that further shifts economic risks to workers.

Sincerely,

Eileen Appelbaum
Co-Director, Center for Economic and Policy Research
1611 Connecticut Avenue N.W., Suite 400
[email protected]

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