Learn From California’s Disastrous Contractor Rule
The Biden administration has taken several pages from California’s playbook over the last three years. The anti-American energy agenda, lax border security policies, and unrestrained budget proposals all look eerily familiar to residents of our state. This trend is especially obvious when it comes to the administration’s war on American workers.
Acting Labor Secretary Julie Su — the longest unconfirmed political appointee in history — served as California’s labor secretary before coming to Washington, and she brought her anti-worker ideas to D.C. with her. Her latest proposal would crack down on freelancers and gig workers across the country, just like California did in 2019 — the delivery drivers, music teachers, freelance writers, makeup artists, and others who work for themselves.
Though California’s law was supposed to “help reduce worker misclassification” and protect workers allegedly exploited by their employers, the law’s flaws were clear from the beginning. It imposed a confusing new test for employers to decide if a worker was an employee or a contract worker — and it was clearly designed to classify most workers as full-time employees, whether they liked it or not.
Turning a contractor into an employee drives up costs for employers, and many industries cannot afford this business model. So California legislators eventually gave 100 professions a partial exemption from having to comply — mostly due to backroom dealing. It took a ballot measure to excuse drivers for major companies like Uber and Lyft.
Despite the exemptions, hundreds of stories still emerged about freelancers losing their livelihoods in California after the new law prevented them from doing contract work. Independent truckers who own their own vehicles were hit particularly hard. Nearly 70,000 have had their livelihoods threatened because they are no longer allowed to work as contractors for their former clients. For various reasons, many truckers do not want to become full-time employees — or their clients cannot afford to hire them. Pending lawsuits will ultimately determine how independent truckers will be classified; in the meantime, many remain in limbo.
After years of these troubling anecdotes and industry-specific issues, new data proves the destruction that California caused to its economy with this law. According to a brand new study from the Mercatus Center, self-employment in affected industries has declined by a stunning 10.5% in California. Proponents had argued that these workers would simply be “reclassified” as full-time employees, but for many, that has not been the case. The same study found an overall 4.4% decline in employment in the industries that didn’t manage to get an exemption.
Amidst these disastrous results, it is still unclear who has actually been helped by the new regime. The majority of independent contractors like their work arrangements and want to retain the freedom to choose their own clients, set their own hours, and direct their own futures. And the American people believe workers should be able to decide for themselves what job classification is best for them.
Nevertheless, the Biden administration charged ahead with its own version of this anti-worker policy, which went into effect on Monday, March 11. Now, Congress or the courts must take action to protect the nearly 64 million Americans who participate in some kind of contracting work. And the rule could be a death knell for small businesses that rely on independent contractor relationships.
As members of the California legislature, we introduced legislation to roll back this disaster and save the livelihoods of California’s independent contractors. Unfortunately, Gov. Gavin Newsom and the legislature refused to act. Now, rather than acknowledging the pain this policy has caused, its proponents are trying to nationalize it. Incredibly, the legislator who authored the original proposal admits that the law has discouraged businesses from hiring in California, but she now hopes the federal rule can prevent businesses from operating in other states instead.
This is the exact opposite of what our workforce needs at a time when so many Americans are still struggling to put food on the table, and there is widespread pessimism about our economic future. The failures of California’s freelancer law and other anti-worker policies are a model for the rest of the country to avoid — not adopt.
Melissa Melendez is the Executive Director of America First Policy Institute—California. She served for 10 years in the California State Legislature, representing the 67th and 28th districts.
Representative Kevin Kiley is the U.S. representative for California’s 3rd district. He served for six years in the California legislature.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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