Comment from The R Street Institute

These comments are submitted on behalf of the R Street Institute, a non-profit public policy research
institution–a “think tank”–based in Washington, D.C. with offices around the country. R Street stands for
free markets and limited, effective government. As an organization, we have long supported efforts to
make work more flexible, accessible, energizing and conducive to human flourishing.1 We have played a
role in calling for more flexible and dynamic ways of working. We commend the Department for its work
and thought put into this NPRM and for its effort to create clarity in the ever-growing haze of conflicting
and confusing laws and interpretations. The rule is a step in the right direction for American workers and
work providers alike. In this context, we offer two major comments:

The rules, as proposed, provide much needed clarity for work providers and workers alike and could help
ease the significant and problematic ongoing decline in the availability of gig and independent
contractor work.

A wide variety of part-time, independent contractor, “gig,” and self-employment options have historically
played a significant role in the economy allowing people who cannot find, cannot perform, or do not want
traditional full-time jobs to earn a living. These types of work provide a safety net for many who are
between full-time jobs, a way to get started for those who lack skills needed for full time work and, most
importantly, flexibility for those who need it. In recent years, these types of employment options, along
with contingent employment, business startups and employment by very small firms have all become lesscommon.2 Other measures that might correlate with the availability of gig work, like part-time work and
average tenure at the same job, track the economic cycle and show few clear long-term trends.3 These
changes—a decline in the availability of gig and contingent work—have had real costs. In particular, they
have correlated with declining workforce participation for the population relative to the 1980-2000 period
and a continuous decline in workforce participation for men during the entire period for which data is
available.4

These trends mean fewer people earning for themselves and supporting their families. This, in
turn, has contributed to growing income inequality.
While the reasons for the decline in the availability of gig and independent contractor work are
complex, it is quite plausible to believe that the tangle of case law and statutory ambiguity described in
the NPRM have a great deal to do with it. Already, because of ambiguity, many job providers who would
rather provide “gigs” and would have people eager to take them are instead being encouraged to search
for W-2 employees. While this may be good for people who want this type of work, it may have significant
downsides for the economy as a whole, the labor force as a whole and, most particularly, the growing
percentage of men who neither work nor undertake significant family/home/community responsibilities.

And state policies—many of them outside of the Department’s purview—are making things
worse. Most prominently, the State of California has, for all intents and purposes, statutorily abolished
the idea of independent contractors in many cases with a state-level statute which requires massive
numbers of workers to become “employees” whether or not they want to.5 The law, Assembly Bill 5,
codifies the California Supreme Court’s Dynamex decision and implements the stringent ABC test
described in the NPRM for all workers.6 Continued ambiguity will, in turn, continue trends that are
negative for the economy as a whole. We think this law is bad public policy and not a model for the country
but fear that it is more likely to become one through case law and legislation if clarity is not restored.

Clarity as to the meaning of existing laws could help revive an important and declining economic engine
provided by contract and gig work.
While still modest in their overall impact, new forms of gig work on app-based platforms are different
from what came before. As such, it would be desirable to create a “third status” for some “gig”
workers. While many changes implied by this status will require legislation, the department should use this rulemaking as an opportunity to provide additional guidance and discussion that helps to lay
the groundwork for such a status.

Contrary to hype in the media and elsewhere, new technology has not resulted in shifts in the nature of
work significant enough to be visible in economy-wide data. While a relatively small number of highprofile companies making innovative use of technology have attracted significant attention, a major
national study of bank deposits shows that only a bit more than one percent of the labor force earns on
these platforms in a given year and that most do so only briefly.7

That said, these platforms are both large
and different from other ways that people have historically done gig and contingent work. Uniform
branding and widespread access to their products along with their sheer scale means that those who work
with them as contractors do have a distinctly different daily experience than, say, a plumber who gets
business mostly by word-of-mouth and search engine advertising. As such, the language of the FLSA as
currently written and interpreted by this rulemaking may not fit the actual needs of these workers or
those who provide work to them. This practical disconnect is embedded in current law which will require
legislative changes in the long run. We believe these should involve the creation of a “third status” that is
neither an employee nor a fully independent contractor and offers both high levels of flexibility and some
of the prerequisites associated with a full-time job.8

Moreover, many policies we believe could be desirable as part of a third status including, for
example, benefits contributions from platforms for gig workers in certain situations, would certainly
require statutory changes. Nonetheless, the Department should explore ways where it can otherwise
adjust this rule to meet realities and modestly help forward the emergence of a third status in a limited
way. In particular, the rulemaking might be improved by outlining some explicit safe harbors for certain
practices which could wrongly be interrupted elsewhere to somehow create an employee relationship
that neither workers nor job providers want. Specifically, the Department may want to consider
expanding on its discussion of the Fifth Circuit’s holdings in Parrish, 917 F.3d 369 to make explicit (and
perhaps provide examples of) cases where the provision of certain work-related benefits, testing,
insurance or training would not, by themselves establish an employer-employee relationship under
FLSA. It may also want to investigate guidance associated with this rulemaking or elsewhere to clarify
that allowing advisory participation of “gig” workers in corporate decision making or the existence of
procedures for reporting sexual harassment while working does not, by itself, create an employeremployee relationship. In other rulemaking, we would also urge the department to investigate that
certain civil rights and labor protections might be extended to specific classes of gig workers. Conclusion

We support the thrust of this NPRM and believe that it will provide much needed clarity that may help
to revive a type of work relationship that has experienced a worrying decline in recent years. Many of
the most needed changes will be statutory in nature. But, with the right efforts, the Department can use
this rulemaking to provide needed clarity and set the stage for innovative, rewarding, wealth-creating
and productive work arrangements.

Comment ID: WHD-2020-0007-0208 | 21-Oct-20

Categorized under Flexibility, Independence

Read the whole comment on Regulations.gov