I wrote this out preparing to leave my comments for the Department of Labor on their proposed new rule about independent contractors. I had to shorten my actual comments due to the character limit, but here’s the gist.
You can leave comments until December 13 at https://www.regulations.gov/commenton/WHD-2022-0003-0001
To the Department of Labor:
For several years I have made a living in the gig economy. I have delivered full-time for gig economy companies like Grubhub, Uber Eats, and Doordash. I've also operated one of the leading websites focusing on being an independent contractor in the gig economy.
I am writing to voice my opposition to the proposed rule. There are four points I want to make:
- Your reasoning for dismissing the old rule invalidates your proposed rule
- It's based on bad logic when determining if someone is operating a business
- The proposed rule supports big business and puts small businesses at a disadvantage
- The people you're supposedly going after here are the ones least likely to be impacted
Your reasoning for dismissing the old rule invalidates your proposed rule
In the introduction, the proposed independent contractor rule states that the existing rule is improper because it gives greater weight to two factors. Ironically, your proposed rule does the exact same thing.
Your propopsed rule offers six factors to consider when determining whether or not an independent contractor relationship is permissable:
- Opportunity for profit and loss
- Investments by the worker and employer
- Degree of permanence of the relationship
- Nature and degree of control
- Is the work integral to the employer's busines
- Skill and initiative
However, the proposed rule includes a worker's investment as a sub-factor when determining if there's opportunity for profit and loss. They also propose that opportunity for profit or loss must be influenced by the worker's initiative or managerial skill.
As a result, the “Investment by the worker” and the “skill and inititiative” factors are given more weight because they not only are factors considered on their own, but are determining factors in weighing other factors as well. Just like the previous rule, you've given more weight to two factors than there was for the others.
The only real difference is, in the previous rule the weight was given to factors that usually favor an independent contractor relationship, and in the new rule the weight is given to factors that typically favor employment.
It's based on bad logic when determining if someone is operating a business
I understand that ultimately the question everyone's trying to get to is whether someone is truly providing services as a business, or are they doing so as an employee? Therefore, it makes sense to look at business factors.
However, it seems to me you've changed the logic in how those factors are weighed. It makes sense that if a person engages in advertising, setting their rates, or paying their own cost of doing business are signs that someone truly is operating a business.
Here's where the logic is off in how you treat these things. You're looking at this as though not having certain activities is activity of being an employee.
It's faulty logic. Because something is evidence of a business relationship does not mean a lack of that particular activity is evidence of not being a business.
Where this really becomes a problem is how you define investment. Lack of investment does not mean one is not running a business. Are you familiar with bootstrapping? Tens of thousands of businesses got off the ground with sweat equity and very little capital investment. But you say the only investment that can be considered is entrepreneurial or capital investments.
If you haven't noticed, the majority of businesses start without angel investors or major purchases to get off the ground. Thousands start out by simply hanging a shingle, offering services, working out of their homes and finding a way to get their business off the ground. They're no less a legitimate business than the multi-million dollar launches (and often more profitable).
The proposed rule supports big business and puts small businesses at a disadvantage
The wording and definitions in your proposed rules greatly restrict one's ability to go into business for themselves.
As you force more to become employees, you do two things for larger corporations. First, you give them more control. Many choose to be independent contractors because they want to operate as they see fit rather than be micromanaged by a corporate boss. You give companies legal control over how people do things.
Second, you take away competition for the larger corporations. There are many things a small operator can do better than larger corporations. Their services are often better and more personal. They can offer things at better prices. They're more flexible in personalizing their offerings. But if you change the rules as to who can operate as a business, you remove the competition and give the larger corporations more power.
If you get what you want, you create a world where the only option someone has is to make money, and the only way you can start a business is to start a big one. You weed out the little guys and give the power to the big companies.
The people you're supposedly going after here are the ones least likely to be impacted
When I read all the rhetoric, it's all about making things fair for gig workers. So you're going after the Ubers, Doordashes and Instacarts of the world.
Have you noticed who's still operating in California? Freelancers and sole proprietors in almost every other field have been devastated, and those guys are going strong.
Here's what's going to happen if you adopt this rule: It's the freelancers and solo operators who will be hurt right away. Their clients won't wait until you take some kind of action. They'll just determine it's not worth the risk and quit using freelancers.
Or worse, they'll outsource to overseas providers.
Uber, Doordash, Lyft and others can afford a fight. And the thing is, the way you've stacked the language against them, they have a good chance at beating this thing.
The little guys get put out of work, and yet in two or three years, gig work will still be happening while these companies file lawsuits, challenge your decisions, and fight it with appeals. The guys you supposedly weren't going after get devastated while your targets stay in business.
Final thoughts
I've been writing about the gig economy for years. I've been observing how gig companies act with their contractors. There's no question in my mind that they're exploiting the independent contractor relationship.
Too many people go into this thinking they're getting jobs. I'm amazed how many times people post in Social Media asking when they get benefits, if they get holiday pay, all sorts of things that make it obvious that a large number of people think they're employees. These companies don't do anything about that because they need it to be that way.
They need people to think and act like employees, or they couldn't meet their demand. That's why I believe that they ultimately want employees for contractor pay.
But the thing is, your rule isn't the answer. Because in the end, you'll just destroy the ability of millions to work for themselves without ever fixing the problem you're going after to begin with. Changing rules that impact millions of other self-employed individuals isn't the way to fix a problem with a handful of companies.
Maybe start by enforcing rules that are already in place.
