Submitted via: federalregister.gov
Amy DeBisschop
Division of Regulations, Legislation, and Interpretation
Wage and Hour Division
U.S. Department of Labor, Room S-3502
200 Constitution Avenue NW
Washington, D.C. 20210
Comments on RIN 1235-AA34: Independent Contractor Status Under the Fair Labor Standards Act, Delay of Effective Date
Dear Ms. DeBisschop:
The National Employment Lawyers Association (NELA) submits these comments on the Department of Labor’s (“Department” or “DOL”) Request for Comment on Delay of the Effective Date of RIN 1235-AA34; Fed. Reg. Vol. 86, 8326. (February 5, 2021)
NELA is the largest professional membership organization in the country comprised of lawyers who represent employees in labor, employment, wage and hour, and civil rights disputes. Our mission is to advance employee rights and serve lawyers who advocate for equality and justice in the American workplace. NELA and its 69 circuit, state, and local affiliates have a membership of over 4,000 attorneys who are committed to working on behalf of those who have faced illegal treatment in the workplace. NELA has filed numerous amicus curiae briefs before the United States Supreme Court and other federal appellate courts regarding the proper interpretation of federal civil rights and worker protection laws and comments on relevant Notices of Proposed Rulemaking (NPRMs). NELA also engages in legislative advocacy on behalf of workers throughout the United States. Many NELA members represent workers who have been misclassified as “independent contractors”, allowing employers to deny them the most basic protections guaranteed under the FLSA.
Workers across the country, especially those who have been historically excluded from labor law protections, are winning dramatic expansions of their rights. Paid sick leave and paid family leave are available in states and cities across the country; domestic workers and farmworkers are winning the right to organize and coverage under wage and hour laws; and gig workers who are wrongly classified as independent contractors are fighting for and winning wage and hour protections, unemployment insurance, and the right to organize. In the face of these victories, the prior administration’s Department of Labor, finalized a rule that would further stack the deck against workers and enable employers to classify more and more of them as independent contractors with no rights to minimum wage, overtime, or the protections of our child labor laws.
If DOL’s rule becomes final, it will fuel a race to the bottom where employers will be able to reclassify their employees as independent contractors and evade minimum wage, overtime, and child labor laws. It is estimated that the rules would cost workers $3.3 billion annually in lost wages, at a time when many Americans are struggling to keep their heads above water amidst the twin crises of pandemic and recession.
While implementation of the rule will harm a broad array of workers, it will inflict the most damage on workers of color who predominate in the low-paying jobs where independent contractor misclassification is common in industries, such as delivery services, janitorial services, agriculture, transportation, and home care and housekeeping, as well as in app-dispatched work.[1] For these reasons, and because DOL’s attempt to rewrite the definition of “employ” under the FLSA is contrary to controlling law, NELA urges DOL to delay implementation and reconsider this interpretive rule.
The Department’s interpretation is contrary to law because it ignores the plain language of the FLSA’s definition of “employ,” which “includes to suffer or permit to work,” 29 U.S.C. §203(g), and ignores decades of U.S. Supreme Court and federal circuit court authority interpreting the Act. The words of the FLSA are unrecognizable in DOL’s cramped reading of the law and its adoption of entirely irrelevant factors, twisting of the meaning of other factors, and narrowing of the measure of what it means to be an employee.
The current language of the rule makes it harder for workers to assert their rights under the law. It is already exceedingly difficult for misclassified workers to challenge misclassification. Allowing the rule to take effect only makes this problem worse. In fact, it can be incredibly difficult to find attorneys who are able to litigate these cases. Misclassification cases are often complex, particularly as collective and class actions. The multi-factor analysis is intensely factual. Hundreds of attorney hours are required to prepare a case, including many hours interviewing workers. These cases are made more difficult with the widespread use of arbitration agreements for workers classified as independent contractors. Many of these agreements include class action waivers that require cases to be arbitrated individually, making them even more costly and labor-intensive. See Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1623 (2018).
The number of attorneys who are able and willing to take on these complex and labor-intensive cases is small. NELA and its state and local affiliates have a membership of more than 4,000 attorneys. Of that total, only about 300 attorneys participate in the national organization’s wage and hour practice group, and fewer than 150 members attend NELA’s biannual wage and hour seminar. These numbers can serve as an approximation of the number of experienced practitioners who regularly take on representation of wage and hour cases.
Further adding to the complexity of misclassification cases, many states are legislating in a different direction than the Department’s rule, reforming the test for misclassification so that workers are more likely to be recognized as employees. See, e.g., Va. Code § 40.1-28.7:7; Cal. Labor Code § 2750.3 (2020); Hargrove v. Sleepy’s, LLC, 220 N.J. 289 (2015). Instead of seeking to benefit employers (as the Department did here), these states have determined that the societal cost of misclassification to workers and their families and to state revenue, is significant, and they have adopted tests that are more employee-friendly. As sophisticated practitioners often file cases alleging violations of both the FLSA and state law, courts in these states are forced to employ two divergent tests and may reach different results under state and federal law, within the same employment relationship. In addition to being a challenge for employees and practitioners, this inconsistency also poses a problem for employers who have businesses that cross over state lines.
The Department of Labor also takes on relatively few of these cases. In FY2019, for instance, the DOL Wage and Hour Division had only 18,844 registered complaints in total, a historically low number. Wage and Hour Division Fiscal Year Data, https://www.dol.gov/agencies/whd/data/charts/all-acts (last visited Oct. 19, 2020). Only a fraction of these complaints likely involved misclassification issues.
Misclassification is a widespread problem that requires the concerted efforts of government and private attorneys to correct. National and state studies have estimated that 10 to 30 percent of employers misclassify their employees as independent contractors. National Employment Law Project, Independent Contractor Misclassification Imposes Huge Costs, at 2 (Sept. 2017) (citing Department of Labor, Government Accountability Office, and state agency reports). If these estimates are accurate, this means that millions of American workers are misclassified. Id. Despite these staggering misclassification numbers, only 6,780 FLSA cases were filed in 2019. Seyfarth Shaw LLP, Annual Workplace Class Action Litigation Report: 2020 Edition (Jan. 2020). And only a small number of these cases involved misclassification issues. See 85 Fed. Reg. at 60632 (estimating that 7 percent of the federal FLSA cases filed in 2019 involved misclassification issues). Comparing these numbers reveals the mismatch: there are not enough attorneys taking on these cases.
Any rule that makes it more difficult (or that appears to make it more difficult) for workers to be classified as employees will make it less likely that attorneys take on these already demanding cases.
It is also no coincidence that corporate misclassification is rampant in low-wage, labor-intensive industries where women and people of color, including Black, Latinx, and Asian workers, are overrepresented.[2] All workers who are misclassified suffer from a lack of workplace protections, but women, people of color, and immigrants face unique barriers to economic security and disproportionately must accept low-wage, unsafe, and insecure working conditions. And in times of high unemployment like today, individual workers have even less market power than usual to demand fair conditions, especially in jobs that historically have been undervalued; they are forced to accept take-it-or-leave-it job conditions.
Conclusion
The Department of Labor should not create incentives for employers to contract away their legal duties and immunize themselves from responsibility for the workplace conditions they create. Such a standard would degrade workers’ labor conditions, permit wage theft and unlawful child labor, and shift all economic risks to the workers, depriving them of their statutory rights.
Though the Department claimed that the goals of this rule were to simplify and clarify the FLSA misclassification test, the rule as it stands achieves neither. As written, the rule does not use the correct cost-benefit analysis, purposely ignoring the economic havoc that it would wreak on workers and annual tax revenues. It also flies in the face of the pro-worker intent of the FLSA, which was created as a remedial measure with a broad scope for the purpose of protecting workers. This rule breaks from decades of precedent, weighing two employer-friendly factors above the others. For the foregoing reasons, we urge the Department delay the effective date of this rule. Further, the Department should adopt a test that fairly and adequately addresses the widespread problem of worker misclassification.
NELA thanks the Department for its attention to and consideration of NELA’s views on these issues. If you have questions or wish to discuss these matters, please contact Laura Flegel at lflegel@nelahq.org.
Sincerely yours,
Laura M. Flegel
National Employment Lawyers Association
Director of Legislative & Public Policy
[1] Independent Contractor Misclassification Imposes Huge Costs on Workers and Federal and State Treasuries, National Employment Law Project (October 2020), https://www.nelp.org/publication/independent-contractor-misclassification-imposes-huge-costs-workers-federal-state-treasuries-update-october-2020/.
[2] Charlotte S. Alexander, Misclassification and Antidiscrimination: An Empirical Analysis, 101 Minn. L. Rev. 907, 924 (2017) (finding that “seven of the eight high misclassification occupations were held disproportionately by women and/or workers of color”).
