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The reality about independent workers in our modern economy

November 17, 2022 — Modern Economy Project

Too often, the public discourse about independent contractors focuses on a very specific subset of workers, rather than reflecting how much our modern economy relies on such contractors.

As a result, the narrative has become disconnected from reality, lacking the facts and context about the large role independent contractors play in our economy.

That’s why the Modern Economy Project participated in a recent roundtable discussion hosted by the Small Business Administration’s (SBA) Office of Advocacy about a proposed federal rule that would determine whether workers are classified as independent contractors or employees under the Fair Labor Standards Act.

The Modern Economy Project recently urged the Labor Department to extend the comment period for 90 days. Yet the Labor Department is currently only extending the deadline for two weeks, from Nov. 28 to Dec. 13, after unveiling the proposed rule in October.

We’ve identified a number of ways this proposed rule would create complications for workers and businesses.

The Labor Department should first recognize that the contractual relationship between a company and an independent contractor ends when the performance of services is over. Just because someone has an app downloaded on their phone tied to potential past or future contract opportunities doesn't necessarily mean it should provide for continuous employment. It's common for independent contractors to go months or even years without opening such apps, and then decide one day to pick up work for a few hours at a time.

Another issue is whether investments made by independent contractors – such as cars, phones, and carts – are considered entrepreneurial. The Labor Department should interpret these individual investments as entrepreneurial, since people typically buy these items for their personal day-to-day use and then decide to monetize them through gig work.

Furthermore, we consistently hear from growing minority-owned and women-owned business advocates that working with independent contractors is fundamental to their growth and success.

The economy has naturally evolved to provide a number of benefits and opportunities unique to the community of people who work independently through contractor arrangements. Policy that is out of touch with this reality risks raising unnecessary economic barriers for individuals who identify as independent workers, as well as the businesses and consumers who rely on them.

These workers thrive on the flexibility uniquely offered through these arrangements. They are insurance salespeople, freelance writers, athletic trainers, and scores of other workers across industries.

If employers were forced to classify them as employees, they’d have to adhere to business models that undermine the very flexibility that these workers desire.

We think that the SBA Office of Advocacy should be evaluating this reality with all of the relevant data before the proposed rule is finalized.

The Modern Economy Project is currently in the process of conducting research on the market impact of employers in the communities where they operate. We think that more data would help inform the development of this proposed rule, so that it creates a policy that does not unintentionally harm the people it is meant to help.

That’s how we can build a future that provides economic opportunity for all.

Click HERE to read the full comments submitted by the Modern Economy Project on the proposed rule.

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