A Win for Independent Contractors and the Gig Ecosystem
-by Karen Kerrigan –
Entrepreneurship and economic freedom got a boost last week, as a federal court tossed out an attempt by the Biden Administration to rescind a much-needed regulatory improvement (enacted in the previous Administration) that clarified the rules governing independent contractor status. The court told the Department of Labor (DOL) “you can’t do that” noting that regulators violated the law twice through their actions to delay and rescind the rule, and that yanking the improved rule was “arbitrary and capricious.”
This is a big win for people who are self-employed and want to start businesses, independent entrepreneurs who value the control they have over their time and how they work, and the many businesses who utilize independent contractors. As I noted in a media release about the court’s ruling:
“Providing clarity for independent contractors is a good thing for the future of entrepreneurship and a vibrant, competitive economy. The DOL’s efforts to undermine entrepreneurship and independent work reek of special-interest pandering, and government-knows-best thinking. We urge DOL Secretary Marty Walsh and all of his department’s leaders to meaningfully engage with small business owners and self-employed Americans before taking further regulatory actions on all matters that impact the success and growth of their enterprises.”
Which brings us to another harmful action being pursued by the DOL – Expansion of the Overtime Rule.
In a Small Business Insider blog post on the DOL’s tone-deaf priorities at a time when small business owners are struggling under massive inflation, labor shortages, and supply chain disruptions, I write that the DOL “seems dead set on moving forward with a costly Obama-era-like expansion effort, which could end up being bigger and more costly than that failed attempt.”
If you are thinking: “Wait didn’t the federal government just update the overtime rule?” The answer is “yes.” Updated rules went into effect in January 2020. The current threshold, under which employees must be paid overtime, is $35,568 per year or $684 per week.
SBE Council believes it is a very bad idea for the DOL to move forward on this potentially costly and burdensome rulemaking, and I will be participating in a DOL stakeholder meeting on March 22 to communicate just that. I will be sharing information on how increasing the threshold would harm startups and small businesses, and of course their employees. If you would like to share your two-cents on this important matter, please email me directly at kkerrigan@sbecouncil.org with your story.
If you recall, President Obama’s DOL raised the overtime threshold to $47,500 in 2016 (with an automatic increase every three years.) A legal challenge to the rule ensued, and the rule was blocked by a judge. The Trump DOL increased the threshold to its current level, but did not include an automatic bump. President Biden’s DOL is expected to propose an increase to at least the amount attempted during the Obama presidency, and perhaps automate the increase thereafter. Some Democrats in Congress have called for increasing the minimum salary threshold to $82,732!
Expect the Unexpected
Many small business owners have been forever transformed by the pandemic. Now, with red-hot inflation, rising gas prices and events that may disrupt supply chains and labor markets even further, small business owners have been reminded to expect the unexpected and are responding more quickly than ever to challenges and opportunities in the marketplace. SBE Council chief economist Ray Keating outlines some of the black swan events over the past two years in a Small Business Insider blog post and offers suggestions for navigating “more of the unexpected.”
New Survey Results This Week Featuring Pandemic Startups: In a new survey of startup entrepreneurs who launched their businesses during the pandemic (that SBE Council will release on March 23), we found that new business owners are indeed expecting the unexpected – 47% anticipate that they will need to change their business models in response to future events. Also, these startup entrepreneurs are not expecting much policy help from Washington and are not too keen on policies being pursued. In very large numbers, they view actions being taken by Congress and the Biden Administration as harmful to their new enterprises and the broader economy. We will unveil the priorities of these “pandemic startups” on March 23, along with their aspirations and outlook, and specifically what they think about some lawmakers’ obsession with targeting America’s tech leaders and how they believe these policies will impact their revenues and operations.
In a March 14 CNBC piece on the recent spending bill and the state of the small business policy agenda, and whether small businesses can expect any support or favorable policies leading up to the election, I said:
“The bottom line is that Democrats and Republicans are far apart on addressing issues like inflation and high gas prices, healing the labor market, and how to fix supply chains.”
That means, unfortunately, little traction on pro-growth policies that could provide relief and support for our small businesses. None-the-less, SBE Council will continue to work to identify paths for advancing favorable policies and legislation that address the pain points of small businesses. We never give up!
Cheers to embracing change and to enduring, in spite of it all!
Karen Kerrigan, president & CEO
P.S. Interesting data via the U.S. Census Bureau:
Wealth Grew: The newly released 2016–2020 ACS 5-year data shows that U.S. median household income increased to $64,994 when compared to the 2011–2015 ACS 5-year data adjusted for inflation ($59,000.)
Poverty Dropped: From 2011–2015 to 2016–2020, the overall poverty rate decreased from 15.5% to 12.8%. Across these two time periods, the poverty rate decreased in 49 states, the District of Columbia and Puerto Rico, while the change in the poverty rate in Alaska was not statistically significant. No state had an increase in poverty.
This post appeared in SBE Council’s March 20 Small Business Insider enews update. To sign up for the report for free, please click here.