Letter to The Honorable Julie A. Su, Acting Secretary, U.S. Department of Labor (January 18, 2024)

Summary

The House Committee on Small Business writes on January 18, 2024 to Acting Secretary Su of the Department of Labor to express deep concern over the finalization of the rule titled Employee or Independent Contractor Classification Under the Fair Labor Standards Act. The Committee states that the rule will make it harder for businesses to classify workers as independent contractors and disproportionally impacts small businesses. The Committee states the rule rescinds the 2021 rule and returns to a totality-of-the-circumstances analysis, and impacts over 22 million independent contractors. The Committee urges the Department of Labor to delay the rule from coming into effect until the Department of Labor provides proper consideration of small entities. The signature block names Roger Williams, Chairman.

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Full text

                                             January 18, 2024

The Honorable Julie A. Su
Acting Secretary
U.S. Department of Labor
200 Constitution Ave. NW
Washington, DC 20210

Dear Acting Secretary Su:

        The House Committee on Small Business (the Committee) writes to express our deep
concern over the Department of Labor’s (DOL) finalization of the rule titled “Employee or
Independent Contractor Classification Under the Fair Labor Standards Act.”1 This rule will make
it harder for businesses to classify workers as independent contractors (IC)—which in turn will
decrease flexibility and employment opportunities resulting in lost earnings for millions of
Americans.2 Further, the rule disproportionally impacts small businesses—particularly in
construction, trucking, and health care sectors.3 It seems that the DOL failed to properly consider
small entities in this rule.

        As outlined by the Small Business Administration’s Office of Advocacy (Advocacy), this
rule threatens the livelihood of many small business owners by re-implementing a confusing
multifactor analysis to determine whether a worker is an IC or an employee.4 As a result,
businesses are less likely to hire gig workers with a fear of increased misclassification lawsuits.5
Instead of using the “core factors” set forth in the 2021 IC rule, this final rule rescinds the 2021
rule and returns to a totality-of-the-circumstances analysis of the economic reality test which
harms both small entities and ICs.6



1
  Employee or Indep. Contractor Under the Fair Labor Standards Act, 89 Fed. Reg. § 1638 (Jan. 10, 2024) (to be
codified at 29 C.F.R. §§ 780, 788, 795).
2
  Chris Marr and Rebecca Rainey, Labor Department Cements Rule Change on Gig Worker Status (1), BLOOMBERG
LAW (Jan. 9, 2024).
3
  Leah Shepherd, DOL’s Rule Narrows Scope of Independent Contractor Classification, SHRM (Jan. 10, 2024);
Chris Marr and Rebecca Rainey, Labor Department Cements Rule Change on Gig Worker Status (1), BLOOMBERG
LAW (Jan. 9, 2024).
4
  Employee or Indep. Contractor Under the Fair Labor Standards Act, 87 Fed. Reg. § 62218 (Oct. 13, 2022)
(comment from Major Clark, III, et al., Deputy Chief Counsel, SBA Office of Advocacy (Dec. 12, 2022)).
5
  Leah Shepherd, DOL’s Rule Narrows Scope of Independent Contractor Classification, SHRM (Jan. 10, 2024).
6
  Employee or Indep. Contractor Under the Fair Labor Standards Act, 89 Fed. Reg. § 1638 (Jan. 10, 2024) (to be
codified at 29 C.F.R. §§ 780, 788, 795).
The Honorable Julie A. Su
January 18, 2024
Page 2 of 2

        This rule impacts over 22 million ICs and threaten their status.7 Many ICs who will be
forced to be classified as employees under the new rule would no longer be able to operate as
their own small business. With that, they lose the unique freedom of being a small business and
the ability to innovate, adapt, and improve to survive and grow. These factors could prevent
small businesses from hiring employees if the costs are too prohibitive. Businesses utilizing ICs
are concerned that the rule will make it harder to hire, which is particularly concerning given
today’s labor shortages.8 In fact, according to Advocacy, the only way employers would have
certainty is by classifying their workers as employees requiring additional costs for benefits and
wages.9

       The DOL’s final rule as written, fails to provide adequate analysis and consideration of
small entities. We therefore urge the DOL to delay the rule from coming into effect until DOL
provides proper consideration of small entities.

       To schedule the delivery of your response or ask any related follow-up questions, please
contact Committee on Small Business Majority Staff at (202) 225-5821. The Committee on
Small Business has broad authority to investigate “problems of all types of small business” under
House Rule X. Thank you in advance for your cooperation with this inquiry.

                                            In God We Trust,




                                         Roger Williams
                                             Chairman
                                     Committee on Small Business




cc:     The Honorable Nydia M. Velasquez, Ranking Member
        Committee on Small Business




7
  Employee or Indep. Contractor Under the Fair Labor Standards Act, 87 Fed. Reg. § 62218 (Oct. 13, 2022)
(comment from Major Clark, III, et al., Deputy Chief Counsel, SBA Office of Advocacy (Dec. 12, 2022)).
8
  Id.
9
  See generally Chris Marr and Rebecca Rainey, Labor Department Cements Rule Change on Gig Worker Status (1),
BLOOMBERG LAW (Jan. 9, 2024); Employee or Indep. Contractor Under the Fair Labor Standards Act, 87 Fed. Reg.
§ 62218 (Oct. 13, 2022) (comment from Major Clark, III, et al., Deputy Chief Counsel, SBA Office of Advocacy
(Dec. 12, 2022)).


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