From Deborah Lynn Blumberg, Next Avenue
The income Vivian Marlene Dunbar, 75, makes as a contract signature collector for ballot initiatives in California means she will be able to afford groceries, pay medical bills and keep her automobile.
Working as an independent contractor gives her the pliability she wants and wishes to schedule medical appointments. She likes never having to reply to a boss.
The same goes for Lila Stromer, 65, a contract academic editor in New York City for 14 years, and Roger Baumgarten, 63, a full-time freelance photographer in Mechanicsburg, Pennsylvania, since 2017, working primarily for nonprofit groups and health care systems.
Entrepreneur or gig employee?
AARP estimates that greater than 1 / 4 (27%) of older staff freelance or have a job. Many are anxious a brand new regulation from the Ministry of Labor The law, which went into effect on March 11, may lead to the work available to contractors being restricted and their income shrinking significantly as they start retirement.
Like most independent contractors, Stromer and Baumgarten consider themselves small business owners or solopreneurs reasonably than gig staff like Uber
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For one thing, gig staff are inclined to freelance along with their traditional jobs. According to this, only 6% of gig staff (1% of all adults) earned no less than 90% of their income from gig activities Federal Reserve data.
“I like what I do – having my own business – and until I run out of courage, I plan to keep working,” Stromer says. “After just six months of freelancing, I thought to myself, I never want to have a full-time job again.”
An independent contractor test
These older Americans and lots of others like them prefer to be independent contractors because they will, for instance, set a schedule that permits them to look after a sick spouse or arrange their work to accommodate their very own disability wear it if you may have one.
The latest DOL rule repeals a 2021 employee classification regulation that provided a looser definition of who’s an independent contractor and replaces it with a six-factor test that corporations use when classifying staff as employees or Contractors should take into consideration.
The six aspects – none of which, in response to the DOL, carries more weight than the others – include:
- Chance of winning or losing depending on leadership skills.
- Investments by the worker and the potential employer.
- The degree of durability of the employment relationship.
- The type and degree of control.
- The extent to which the work performed is an integral a part of the potential employer’s business.
- Skill and initiative.
Misclassifying staff to get monetary savings
The DOL says “additional factors” might also be considered, but doesn’t specify what they’re. The rule goals to correct employee misclassification, which has been an issue up to now. Some corporations classify staff as contractors as an alternative of employees to avoid giving them advantages or tax contributions.
“The misclassification of employees as independent contractors is a serious problem that deprives workers of fundamental rights and protections,” Acting Labor Secretary Julie Su said in a DOL news release. “This rule will help protect workers, particularly those at greatest risk of exploitation, by ensuring they are properly classified and receive the wages they deserve.”
In fiscal yr 2023, the DOL investigated greater than 600 employers who misclassified over 23,000 staff as independent contractors, leading to staff receiving greater than $13 million in back wages, in response to a DOL spokesperson. But supporters of the brand new rule say it could prevent more people from being misclassified in the primary place.
Sally Dworak-Fisher, a senior attorney on the National Labor Law Projectwhich supports the rule, says the six aspects are the identical ones that courts have used up to now, based on legal precedent, to come to a decision who must be covered by the Fair Labor Standards Act, a labor law that regulates the minimum wage and extra time pay is decided.
“This rule is about restoring an analysis that courts have used for decades and ensuring that vulnerable or exploited workers are protected as employees and receive minimum wage and overtime,” she says.
According to Dworak-Fisher, home health care staff and construction staff are examples of occupations which might be at high risk of misclassification.
A business that willfully violates the FLSA
FLSA
Contractors value their flexibility
Data suggests that employee misclassification stands out as the exception reasonably than the rule in lots of industries. Surveys consistently show that almost all independent contractors prefer their independence. According to the US Bureau of Labor Statistics, around 79% of them prefer their arrangement to a standard job, while lower than one in ten contractors want a standard work arrangement.
Dworak-Fisher believes that true independent contractors who operate for themselves are unlikely to be affected by the brand new rule. “The North Star for all factors is: Is this person running their own business or is they dependent on working for someone else’s company?,” she says.
The DOL recognizes that independent contractors themselves play a crucial role within the economy, a department spokesperson says. “The ministry does not assume that this regulation will lead to a comprehensive reclassification or a decline in self-employment,” says the spokesman.
But because “in business for oneself” is usually not clearly defined and the aspects are usually not entirely clear, an unintended consequence could limit work opportunities for legitimate independent contractors, including older Americans, says Michael Lombardino, an attorney on the law firm Haynes and Boone in Dallas.
“It’s definitely unclear,” he said of the rule. A Haynes and Boone bulletin on the brand new rule, which Lombardino co-authored, said that “many features of the final rule will make it more difficult to classify certain workers as independent contractors.”
A possible decline in self-employment?
Liya Palagashvili – economist at Market centerA free-market think tank at George Mason University in Arlington, Virginia, believes the rule will likely hit two groups hardest: women, who usually tend to seek flexible work options than men, and older Americans.
“With many older Americans seeking these flexible work arrangements near or after retirement, this rule will likely result in limited work options for them,” she says.
California Assembly Bill 5 (AB5) was implemented in 2020 when Acting U.S. Secretary of Labor Su was California Labor Commissioner. But many Californians who worked as legitimate contractors suddenly lost their income after corporations and nonprofits stopped working with them as freelancers and stopped hiring them as employees.
In a recent study, Palagashvili found that after California passed a law to scale back employee misclassification, total employment in affected occupations fell by a median of 4.4%, while self-employment fell by 10.5%. The state ultimately exempted 110 professions from the law after Californians complained. The DOL rule provides no exceptions.
“These results suggest that the DOL rule could lead to a significant decline in self-employment in the U.S.,” says Palagashvili.
Instead of restricting independent contracting, the federal government could higher support the workforce by promoting options that allow contractors to take care of their non-traditional employment relationships while still maintaining access to advantages, says Palagashvili.
Will the contractors’ customers care?
Stromer in New York fears that her customers will break off relationships together with her out of an abundance of caution because she doesn’t wish to by chance misapply the rule. “You handcuff clients so they are afraid to work with me,” she says. “I feel like I’m fighting for my business and that’s annoying.”
Baumgarten also fears that his largest client, a health system with its own photography studio, might find working with contractors too dangerous and fire him. “This rule intervenes in a completely voluntary relationship that works for my client and for me,” says Baumgarten. “I just want to be left alone.”
In recent weeks, independent contractors in areas from writing to trucking have filed a series of lawsuits against the DOL in search of to forestall the rule from taking effect. One of them got here from a bunch of 4 freelance writers and editors, all women over 50, including Kim Kavin, 51.
Freelancers work together
Kavin owns her own self-employed He is a author at a writing and editing company in New Jersey and leads Fight For Freelancers USA, a bipartisan coalition of freelancers from across the country that spans professions from translation to interior design. About 20% of group members are between 55 and 64 years old and almost 10% are 65 years and older.
Some members turned to freelance work after suffering age discrimination that cost them a standard job, says Kavin. “They still want to work and make money, and the only way they can do that is as independent contractors,” she says.
Kavin says she is doing well as a freelancer and doesn’t want a standard job even when she could find one at her age. “It’s much harder to find a traditional job at 50 than at 30, especially with the much higher income I was able to make as a freelancer,” she says. “If I lose this independent business that I just spent 20 years building, there may be nowhere else to turn.”
