Comment from Chun Fung Kevin Chiu

I am writing to express support for the rule clarification as an independent filmmaker that chose to operate as an independent contractor and benefits greatly from the flexibility and control that it affords me in my work. I, like many sole proprietors, am perturbed by the great degree of uncertainty that recent proposals for legislation by states and the federal government towards forcing businesses to reclassify independent contractors as employees. I share the DOL’s opinion that employing an ABC type test nationally will have a disproportionate effect on a group of individuals that have either voluntarily built strong businesses and careers as ICs or rely on the flexibility of the descriptor due to age, family, or medical/disability reasons. Legal clarity that allows businesses and true independent contractors to safely and confidently contract nationally will provide a great degree of economic opportunity and security for people across many demographics. On the contrary, a nationally divided legal landscape of classification laws make for perilous grounds for contractors and their clients to conduct business.

I fully acknowledge that misclassification both intentional and unintentional can occur when workers who do not wish to be classified as ICs are misled into independent contractor arrangements, but the current push at a state and federal level to proactively declare via ABC type tests all independent contractors, including bona fide ICs, as misclassified unless proven otherwise is in my opinion the wrong approach to address such an issue. This has the effect of severely damaging or destroying many small businesses who do not have the resources to defend against such claims, be they legitimate or not, and eliminating many opportunities for bona fide ICs to do business for oneself, without providing equivalent employment opportunities as such legislation intends to do.

For background, I am a sole proprietor that has invested in, owns, and operate my own equipment, handle my own health and business liability insurance, and charge my clients prices that offsets these costs, ensuring that I can derive profit while still protecting myself from risks. I can easily deny a job request based on any budget or safety concern, negotiate terms, and have a strong network of clients that affords me stability throughout the year due to consistent, simple, and straightforward arrangements that my being an independent contractor allows. Moreover, I am making at or above the income level that I would derive from a similar employment scenario at my level with all the benefits of setting my own schedule and choosing the projects and clients I wish to be involved with. I find this arrangement to be more efficient and satisfactory for my own working experience and that of my clients.

This is all to say that all of this hard work can be severely compromised by state or federal regulations that employ an ABC type test as seen with California’s AB5, the ProACT, or the Senate version of the bill. Many of my clients will not be compelled to hire me as an employee due to their budget or their needs for a flexible arrangement and will most likely end their relationship with me in order to comply. This has already been demonstrated in California for much of 2020 as demonstrated by article citations 150-152 and supplemented by anecdotes from many individuals that have lost their livelihoods due to the legal ramifications of an enforced ABC test, a portion of which I have included a sample of in attachments submitted through a Facebook group called ‘Freelancers Against AB5’ – even if the IC relationship manages to pass through the test.

Even independent contractors who try to register as LLCs or S-Corps are not enough for many clients to risk taking on the liability of accidentally hiring a misclassified employee, and those few proprietors who are forced to reclassify as employees report receiving significantly reduced pay.

Citation (147) noting the decision to analyze California’s AB5 as an alternative to proposed DOL rules because of employers choosing to comply with the most stringent of rules in a patchwork of different nationwide rules in order to ensure consistency is of significant concern as inconsistent federal and state standards with regards to classification may render the DOL rules ineffective in practice for those independent contractors and businesses affected. Regardless, I believe that rules that set a clear and reasonable alternative to draconian and damagingly basic rules following an ABC standard is important to set as an example to protect true independent contractors from harm while still ensuring that proper working arrangements are made for workers that cannot in any way be considered an IC. As such, I reiterate my support for the efforts currently being pursued by the DOL for rule clarification.

Comment ID: WHD-2020-0007-0034 | 5-Oct-20

Categorized under Flexibility, Independence

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