WASHINGTON, D.C.- The Office of Advocacy, the independent voice for small business within the executive branch, applauds the U.S. Department of Labor (DOL) for proposing a rule to rescind the Biden-era independent contractor regulation, paving the path for flexibility in hiring freelancers and gig workers. If enacted, the Labor Department’s proposed rule is estimated to save U.S. small businesses $2.31 billion over the coming 10-year period (discounting at 7%), amounting to $329 million in annualized cost savings.
The 2024 DOL independent contractor rule used a six-factor test that frequently categorized independent contractors as employees, paving the way for more paperwork and expenses in addition to higher legal risks.
DOL’s proposed rule instead concentrates on economic dependence and specifically on two fundamental factors:
- Control over work: Does the worker decide how, when, and for whom they work?
- Chance to make profits: Can the worker earn extra money or lose money depending on how they manage their work, make business choices, or spend their own money?
If the two factors suggest that the worker is either an employee or an independent contractor, there is a substantial likelihood that it is the accurate classification for the worker. Additionally, the DOL’s proposed rule considers skill, how long the work lasts, and whether the work is part of a bigger production team.
“Small businesses throughout the U.S. have shared with Advocacy that the Biden Administration’s independent contractor rule has amounted to uncertainty, more paperwork, more expenses, and more headaches,” said Dr. Casey B. Mulligan, Chief Counsel of Advocacy. “It is refreshing to see federal agencies listen to and take into account the voices of our nation’s small businesses.”
Advocacy created the “Most Wanted” reforms list as a result of hearing directly from thousands of small businesses about the regulatory burdens they face. The 2024 independent contractor rule is one of nine rules on Advocacy’s “Most Wanted” reforms identified for rescission, withdrawal, or modification to lessen small businesses’ regulatory burden. If implemented, the associated deregulatory actions could save small businesses over $150 billion in compliance costs. Learn more about the “Most Wanted” reforms list.
To submit a public comment on the Labor Department’s proposed rule, visit federalregister.gov.
During the first year of the Trump 47 Administration, Advocacy worked with federal agencies to save small businesses $110 billion in regulatory costs. The office met with more than 12,000 small businesses in 48 states and launched the Red Tape Hotline to gather feedback from U.S. small businesses about regulatory burdens and share it with the White House, Congress, and federal agencies with the goal of slashing red tape. Learn more about Advocacy’s other highlights in the First Year Report.
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SBA No. 26-09 ADV
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Created by Congress in 1976, the Office of Advocacy of the U.S. Small Business Administration is an independent voice for small business within the executive branch. Appointed by the President and confirmed by the U.S. Senate, the Chief Counsel for Advocacy directs the office. The Chief Counsel advances the views, concerns, and interests of small business before Congress, the White House, federal agencies, federal courts, and state policymakers. Economic research, policy analyses, and small business outreach help identify issues of concern. Regional Advocates and an office in Washington, DC, support the Chief Counsel’s efforts. For more information on the Office of Advocacy, visit advocacy.sba.gov or call (202) 205-6533.