OAKLAND – California Attorney General Rob Bonta today joined a coalition of 17 attorneys general, as well as state and local labor agencies, in a comment letter in support of a U.S. Department of Labor (DOL) proposal to strengthen federal protections against worker misclassification. Worker misclassification occurs when a firm inappropriately treats its employees as independent contractors, thereby evading legal obligations such as minimum wage, overtime, payroll taxes, and workers’ compensation insurance. In the comment letter, the coalition urges DOL to act swiftly on its proposal to rescind and replace a Trump-era rule regarding independent contractor status, which put workers at increased risk of misclassification by unlawfully broadening the definition of an independent contractor and upending previous standards implemented under the federal Fair Labor Standards Act (FLSA).
“Every worker is entitled to dignity and respect on the job,” said Attorney General Bonta. “In order to make that happen, we need regulations that accurately reflect modern work arrangements. It’s unacceptable for big businesses that reap massive profits to turn around and push costs onto workers through misclassification. When workers are misclassified, they lose out on critical supports like overtime, paid sick leave, and unemployment insurance. Instead of supporting workers across the country, the Trump-era rule threatened their livelihoods. It’s time to rescind and replace it. I applaud DOL’s proposal and urge the federal government to act swiftly to help better protect workers in California and across the nation.”
The misclassification of employees as independent contractors is detrimental to workers, states, and law-abiding employers. First, misclassified workers are typically not entitled to basic protections such as minimum wage, overtime, timely payment of wages, timekeeping records, pay stubs, paid leave, and reimbursement for expenditures that primarily benefit the employer, e.g., uniforms or travel expenses. In addition to the need for increased law enforcement actions, misclassification results in lost revenue and increased administrative burdens and costs to states. Due to misclassification, states suffer from a loss of tax revenue they would otherwise receive from payroll taxes and a loss of funds to unemployment insurance, workers’ compensation, and paid leave programs. States also incur additional costs, such as providing healthcare coverage and hospital costs for uninsured workers, as misclassified workers cannot access benefits like employer-provided health insurance, 401(k) plans, or unemployment insurance, and often lack appropriate workers’ compensation coverage. Finally, misclassification hurts employers who play by the rules. Employers that properly classify employees and run their business in accordance with wage and hour laws often operate at a competitive disadvantage when competing for the same work with employers that skirt the law.
States, through their departments of labor or through their attorneys general offices, are responsible for enforcing labor standards and must regularly determine whether a worker is an employee or an independent contractor as a preliminary factor to establish that they are subject to wage and hour and other protections under state and federal law. However, today’s workers, as a result of changing technology and workplace norms, are increasingly part of alternative work arrangements where employers disproportionately shift costs to workers, often misclassifying employees as independent contractors in the process. As DOL’s proposed rule recognizes, a flexible standard for determining whether a worker is an independent contractor that considers the totality of the circumstances is required to address ever-evolving work arrangements. Unlike the Trump-era standards, DOL’s proposed multifactor economic realities test addresses this need because no one factor is controlling, nor is the list exhaustive. It adapts to innovative work arrangements to ensure that the most vulnerable workers are protected under the FLSA. The focal point of the test is simply whether workers are economically dependent on the business to which they render service or are, as a matter of economic fact, in business for themselves.
In the comment letter, the attorneys general, among other things, assert:
In filing the comment letter, Attorney General Bonta joins the attorneys general of Massachusetts, New York, Pennsylvania, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Maine, Maryland, Michigan, Minnesota, Nevada, New Jersey, Rhode Island, and Washington, as well as the City of Philadelphia, the Pennsylvania Department of Labor and Industry, and the Washington Department of Labor and Industries.
A copy of the comment letter is available here.