Before election, Trump made it easier to misclassify workers as ‘independent contractors’
Truck drivers are among the millions potentially affected by a new Trump Labor Dept. rule making it easier for bosses to misclassify workers as “independent contractors,” allowing companies to get away with not paying Social Security and Medicare payroll taxes, workers comp, and unemployment insurance. | Michael Dwyer / AP

NEW YORK—Donald Trump wants to give another big financial lollipop to the nation’s corporate class, and the proverbial lump of coal to millions of workers, election or no election. New York Attorney General Tish James is trying to stop him.

And so are 23 other state Attorneys General, plus the cities of New York, Chicago, Philadelphia, and Pittsburgh.

The latest goodie the GOP Oval Office occupant tossed to the 1% was to have his Labor Department expand the legions of workers whom bosses could unilaterally declare are “independent contractors,” stripping them of worker rights, including the right to unionize—and even the right to earn the federal minimum wage, or overtime pay when they toil too long.

Not only that, but employers would be able to get away with not paying Social Security and Medicare payroll taxes, workers comp, and unemployment insurance for those workers.

The sum total of all this? Heidi Shierholz, Policy Director for the Economic Policy Institute, who also objected, calculated workers would lose at least $3.3 billion each year in overtime and minimum wages and that Social Security, Medicare, unemployment insurance, and workers comp would take a combined $750 million hit.

And DOL’s new rule “will create confusion, not clarity,” she said. It’s also opposite to the Fair Labor Standards Act—the 1938 law that established the minimum wage and overtime pay and said which workers fall under it—and would let “unscrupulous or unsophisticated employers” misclassify workers as independent contractors, Shierholz stated.

Trump’s DOL allowed only 30 days for public comments and protests, which ended Oct. 26. James and the others previously pointed out major changes such as this usually allowed 60 days for comments. They asked for an extension. DOL didn’t even bother to reply.

So James, New York’s first-ever Black AG, crafted a 27-page letter, delivered on deadline day, to Trump’s Labor Department opposing the plan. Democratic AGs Josh Shapiro of Pennsylvania and Martha Coakley of Massachusetts were her co-authors. AGs from California, Illinois, Michigan, Minnesota, Maryland, Connecticut, D.C., and Oregon were among the 23 co-signers.

“Adopting the proposed rule would harm the people DOL is meant to protect. We believe the proposed rule does not adequately reflect today’s workplace relationships, in which growing numbers of businesses are using alternative work arrangements, which often lead to less accountability for employers and less compliance with labor laws. In addition, some employers deliberately misclassify employees as independent contractors in order to evade legal accountability,” their comments said.

“The proposed rule further complicates these problems as it encourages businesses to avoid FLSA liability by relying on DOL’s new test to classify their workers as independent contractors. In today’s economy, unreasonably broadening independent contractor status will leave millions of workers vulnerable to violations of the FLSA, corresponding state laws, and other state and federal labor and employment laws.

Not only is the Trump DOL’s independent contractor rule wrong, the AGs and the four cities wrote, but DOL couldn’t justify it, either. The Trump DOL Wage and Hour Division presented “insufficient evidence and unsupported assertions, claiming, without basis, that introducing a new independent contractor test will ’promote certainty for stakeholders, reduce litigation, and encourage innovation in the economy.’”

In her protest of Trump’s scheme, Shierholz added it would hurt Black, brown, low-income, and female workers the most. She added it was one of the worst hits government would slam on them in the middle of the coronavirus pandemic, which has disproportionately sickened, killed, or left jobless both women and workers of color.

“Due to occupational segregation by race, discrimination, and other labor market disparities rooted in structural racism, Black and Latinx workers are more likely to work in the occupations affected by this rule,” said Shierholz, DOL’s chief economist in the Obama years.

“It is disgraceful that during a deadly pandemic and a deep economic downturn the Trump administration is choosing to spend its resources further weakening protections for millions of workers,” said Shierholz. “The Department of Labor is doing a disservice to its mission, and our country, by pursuing this agenda instead of providing much-needed protections to U.S. workers.”

The AGs and the four cities provided numerous examples of how bosses had illegally misclassified workers in a changing economy and argued that changing the standards for making workers into “independent contractors” would only make an already difficult enforcement task even worse.

Though James and co-signer Xavier Becerra, the California AG, did not mention it, one of the long-running and largest “independent contractor” disputes is in the Golden State. The Teamsters have been campaigning for years to unionize port truckers at the Port of Los Angeles-Long Beach, the nation’s biggest and busiest.

The trucking firms call all those truckers “independent contractors,” depriving them of worker rights, but also forcing them to shoulder both the employers’ and the worker’s share of Social Security and Medicare taxes, unemployment insurance, and workers comp.

The port truckers also have to pay for their own gasoline, tires, insurance, and other expenses. As a result, their paychecks are often minuscule—or invisible.

The California Department of Labor and Industries has repeatedly ruled the truckers are “employees,” protected by labor law, including the FLSA and the National Labor Relations Act, which means the truckers also have the right to unionize. The port truckers were among the “40-45” industry-wide misclassification cases the agency handled yearly from 2015-19. In 2018 alone, it fined firms $1.295 million for willful misclassification of workers.

Minnesota’s Labor Construction Codes and Licensing Division “opened 2,250 cases and issued 1,597 orders and notices of violation for misclassification in the construction industry,” their letter said. “As of April 2019, the Pennsylvania Department of Labor and Industry estimated 15% of employers misclassified workers, resulting in about 275,000 misclassified employees and $103 million in lost unemployment compensation revenue annually. The top industries for misclassification were construction, trucking, domestic services, food services, and administrative services.”

“And since April 2016, Virginia’s Targeted Audit and Investigative Enforcement Unit of the Virginia Employment Commission closed 106 cases involving worker misclassification. These cases resulted in $125,420,261 paid to 4,741 misclassified workers. Industries with the highest rates of misclassification included drywall, carpentry (framing), roofing, other construction, trucking, and health care.”


CONTRIBUTOR

Mark Gruenberg
Mark Gruenberg

Mark Gruenberg is head of the Washington, D.C., bureau of People's World. He is also the editor of Press Associates Inc. (PAI), a union news service in Washington, D.C. that he has headed since 1999. Previously, he worked as Washington correspondent for the Ottaway News Service, as Port Jervis bureau chief for the Middletown, NY Times Herald Record, and as a researcher and writer for Congressional Quarterly. Mark obtained his BA in public policy from the University of Chicago and worked as the University of Chicago correspondent for the Chicago Daily News.

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