Comment from Debbie Kaplan

I am writing in support of the Department of Labor’s proposed Economic Reality Test (or the IRS Test) to be used in classifying work status.

I am a small business owner who provides writing services to publications and companies. As a work-at-home mom, I ramped up my business to coincide with the time I had available while raising my kids. I worked during their nap times, and then added more hours as they went to school. Even before the pandemic, I was there when they came home from school, to help with homework, drive them to activities, and hear about their days. As we’re seeing in the pandemic, that flexibility is everything. I value my independent contractor status as it gives me the freedom to work when I want, for whom I want, and on my own terms.

Laws like California’s AB5, and proposed federal laws like the PRO Act and the Senate’s Worker Flexibility and Small Business Protection Act use the ABC test, and the laws purport to provide protections to those who do not have employee status, presuming they are disadvantaged, underpaid and exploited. I beg to differ. These bills would kill my career and limit my earning opportunities and growth. As a writer negotiating my own rates, I earn an effective rate of $100-$200 an hour, and I am my own boss. If I were to be paid hourly as a W2, even part time, my earnings would be much lower, and the only advantage would be the company would pay half of what is now my self-employment tax.

My freelance work brings a stability that seems counterintuitive to a “freelance” perspective. I often have at least 25 clients per year. For some I write one article a year, for others I write dozens. If one or a handful of clients don’t need my services, there are others that do, making my work more stable than many of my friends and relatives who have W2 full time jobs.

If I were to hold a W2 part time job, I would not have the benefits promised to me and the legal classification would actually work AGAINST me. How? As a part time employee, I’m usually not eligible for company retirement plans. I can’t use that W2 money to contribute to my own SEP IRA or individual 401(k) plan as I do now. I can currently contribute up to $57,000 to my individual 401(k) plan or SEP IRA. I can only use that W2 money to contribute $6,000 to an IRA. How does that help me save for retirement? Also, I cannot take the deductions due to me as a self-employed business person, like the home office deduction or for my computer and supplies.

As a writer, retaining copyright is an important benefit of my work. I create something, I keep the copyright. As an employee, that copyright belongs to the employer. I lose that valuable right with employment. Employers can also enforce “do not compete” clauses, telling me that I can’t work with a competitor. As an independent contractor, I can work with competing companies or competing publications. It’s up to me whether I agree to a non-compete clause. As an employee, that decision is out of my hands, which limits my ability to earn a living.

As we’ve seen with AB5 in California, companies do not want to HIRE freelancers to be part time workers. They will either hire a handful of people and leave the rest behind, or they will look elsewhere (including outside California – or in the case of a federal bill, abroad) for freelancers. I will lose clients because they don’t want to hire freelancers for small amounts of work. My clients hire me because they need my expertise for specific assignments, but they don’t necessarily need me on a regular basis. They won’t be saddled with the administrative work to get me onboarded for what could be a one-time project.

As a part time employee, if I were to get carpal tunnel syndrome or some work-related ailment, how would I get worker’s comp benefits, if I had 25 employers, just like right now I have 25 clients? Which one would cover me? How do I prove it happened on their watch? If they stop giving me assignments, do I file for unemployment insurance? If I have assignments from other clients, unemployment benefits won’t be granted. What’s the point?

AB5 in California harmed hundreds of professions due to the rigid ABC test, so much so that the state had to pass a clean-up bill with additional exemptions. That still puts many professions at risk and Californians are losing work and income as a result.

The ABC test does not belong in state or federal legislation. It was passed in the 1930s for factory workers, a huge change from how America now works. We need a more nuanced employment test and the Economic Reality test is much better than the ABC test. I would support this in becoming a standard under the Federal Fair Labor Standards Act.

Comment ID: WHD-2020-0007-0098 | 15-Oct-20

Categorized under Family, Independence

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