The Trump Labor Department took a step Monday toward freeing American workers. It has further distanced itself from the previous administration, which had previously taken a position that trapped workers.
The Department concluded that one company’s “service providers are independent contractors, not employees.” The decision was delivered in an opinion letter “that addresses compliance issues related to the Fair Labor Standards Act,” and “responds to a request on behalf of a particular virtual marketplace company.”
Fisher Phillips, a workplace law firm, calls the letter “a major positive development for gig economy businesses.”
“While this letter can only be used as an authoritative legal defense by the specific (unnamed) gig economy business that requested the letter, this publication still provides the federal government’s official interpretation on whether a certain business model or practice complies with the law. “
Allowing workers to perform as independent contractors rather than employees gives them the freedom many prefer, and in some cases need. Of course there are workers who are more comfortable as employees. But nearly nine in 1o workers want to make their own hours, and many wish to decide for themselves how many hours they put in from week to week, while some would rather choose which companies they work for, and even take on projects from multiple businesses, an advantage that two-thirds of workers believe increases their job security.
Contract workers don’t necessarily have to give up traditional benefits, either. Health care insurance, retirement accounts, and other perks can be portable through companies that would voluntarily participate in benefit networks.
Classifying workers as contractors is naturally beneficial to businesses. They don’t have to be handcuffed by regulations related to overtime, minimum wage, income tax withholdings, payroll taxes, insurance plans, and unemployment benefits. Wading through that regulatory thicket can increase a company’s costs from 20 percent to 30 percent, which cuts into profits that can be dedicated to expansion.
With fewer rules and burdens hanging over them, and greater resources available, businesses can hire more workers as contractors than they could as employees, and pursue innovations. Startups are able to focus on their visions if they aren’t tangled by government bureaucracy if they can rely on contractors rather than employees.
Policymakers at all levels need to move aside and let the gig economy grow organically. Government shackles will only hold back a wider and deeper prosperity.
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