Seeking the Data

A subpoena sent to the Acting U.S. Labor Secretary asks how many instances of independent-contractor misclassification her inspectors have actually found.

Author’s Note: The U.S. Department of Labor independent-contractor rule is facing lawsuits in five federal jurisdictions, including this case where I’m one of the plaintiffs. There’s also this case and this case and this case and this case.

On Monday, U.S. Representative Virginia Foxx, R-N.C., issued a subpoena to Acting U.S. Labor Secretary Julie Su, commanding Su to appear next month before the House Committee on Education and the Workforce.

The subpoena is the latest move in a years-long war over who can legally earn income as an independent contractor all across the United States. This war has many fronts, with attempts at freelance busting happening in state and federal legislatures as well as regulatory agencies.

One of those regulatory actions was the U.S. Department of Labor finalizing a new rule about independent contractors earlier this year—part of what Foxx, in her letter accompanying the subpoena, described as “the Biden-Harris administration’s efforts to eliminate the independent contractor model and classify as many workers as possible as employees.”

The fact that Foxx issued the subpoena this week, according to Bloomberg Law, “marks an escalation in Republicans’ fight against the rule.”

Foxx’s letter accompanying the subpoena caught my eye because when I read the questions her committee wants answered, I experienced a bit of what the great Yogi Berra called deja vu all over again.

Information now being demanded from the Acting U.S. Labor Secretary under the power of a subpoena includes:

• how many instances of misclassification federal inspectors have found, and the occupations involved;

• the total number of misclassification enforcement investigations that have been initiated, and the industries involved.

Those words sent my brain back to March 10, 2022, and a hearing that was held in my home state of New Jersey about independent-contractor misclassification.

And a similar question from a different lawmaker, to which we still have not received any meaningful answer.

How Many Cases, Really?

At the federal Department of Labor, Su claimed a new independent-contractor rule was needed because “[m]isclassifying employees as independent contractors is a serious issue that deprives workers of basic rights and protections.”

Similarly, at the state level, New Jersey’s governor created a Task Force on Employee Misclassification. It found that mislabeling an employee as an independent contractor “deprives workers of a suite of rights,” and then recommended changes to expand the powers of the state Department of Labor and Workforce Development.

What we’re seeing with this week’s subpoena at the federal level is a lawmaker looking for details about just how much misclassification is truly being found, now that regulatory changes have been made at the federal agency.

That’s eerily similar to what happened in New Jersey at the 2022 hearing, after the state gave New Jersey Labor Commissioner Robert Asaro-Angelo the recommended new powers.

A little more than an hour into New Jersey’s 2022 hearing, state Senator Fred Madden, a Democrat, questioned why Asaro-Angelo had used his new powers in so few instances—in only 44 cases, Madden said.

“Do you think that’s enough?” Madden asked.

Madden followed that question shortly after with, “What’s really going on?”

Forty-four cases seemed like a small number to him, given how widespread a problem the freelance-busting brigade keeps saying misclassification has become, and given how all these regulators are supposedly looking harder than ever to find it.

For years now, we’ve been told that up to 30% of companies are guilty of misclassifying employees as independent contractors. At the federal level, this claim is noted in the text of the Labor Department’s independent-contractor rule itself. In New Jersey, ahead of Asaro-Angelo receiving his new powers, the governor’s task force wrote the same figure into its report.

But what if federal and state regulators are not actually finding anywhere near that level of employee misclassification?

When Su satisfies Foxx’s subpoena before Congress next month, we may all gain some insight into whether there’s a disconnect between reality and all these recent efforts to change independent-contractor policy nationwide.

The 10% to 30% Question

I’ve been wondering for quite a while now about what underpins the oft-repeated claim that 10% to 30% of companies misclassify employees as independent contractors as a form of exploitation.

My curiosity really piqued earlier this year, when Newsweek published this article by Rebecca Dixon. She’s the president and chief executive officer of the National Employment Law Project, a union-backed think tank whose research was cited in the U.S. Labor Department rule and in New Jersey’s task force report.

In the Newsweek article, NELP’s president wrote:

“A 2020 analysis found that between 10 and 30 percent of employers misclassify employees as independent contractors.”

I left the original Newsweek hyperlink in the line above so you can click on it, just as I did when I first read Dixon’s article.

As you’ll see, it doesn’t actually link to a 2020 analysis. It instead links to a 2009 report from the Government Accountability Office.

The first paragraph in that 2009 report does state that 10% to 30% of firms have misclassified employees, but the percentages are based on research done in just nine states back in 2000:

The year 2000 is a long time ago. Britney Spears was on the pop charts with Oops! I Did It Again.

Of course, the NELP hyperlink in Newsweek may also have been an oops. The think tank did release a report in 2020 about misclassification. That report noted that a growing number of states have been “calling attention to independent contractor abuses,” and that trends identified in state-level studies “demonstrate the staggering scope of misclassification.”

This line in particular repeated the 10% to 30% claim:

“Confirming the findings of earlier national studies, these state reports show that 10 to 30 percent of employers (or more) misclassify their employees as independent contractors, which indicates that several million workers nationally may be misclassified.”

Notably, this 2020 NELP report cites the report by New Jersey’s Task Force on Misclassification as one of its state-level sources.

But New Jersey’s report doesn’t offer any original documentation that the level of misclassification is so high. Instead, the New Jersey report cites NELP research.

Oh, yes.

And there’s more.

The New Jersey report also states that misclassification has increased by 40% in the past 10 years. There’s a footnote with that 40% claim, too: It’s based on this 2017 article by David Weil, the philosopher king of modern-day freelance busters.

If you click through and read that 2017 article by Weil, you’ll see that he doesn’t say misclassification has increased by 40%. He instead writes that the use of independent contractors—a legal practice that most independent contractors prefer—has increased by 40%:

Another way to write that would be: A legal method of earning income that a lot of people like has grown in popularity.

Weil goes on to write in his 2017 article that a significant portion of independent contractors are misclassified, a claim that is based on—you guessed it—the 2009 GAO report whose data is actually from 2000:

Oops, they did it again, indeed.

I have not yet combed through all of the state-level sources listed in the 2020 NELP report that supposedly confirms 10% to 30% of employers are misclassifying independent contractors.

But given what I’m seeing from my home state of New Jersey, it seems fair to say that at least some of the regulatory changes and bureaucratic-enforcement powers being launched against independent contractors are based on recirculated data from a quarter century ago.

Question Everything

A couple days before Congresswoman Foxx issued her subpoena to Acting Labor Secretary Su—whom NELP vocally supports being in that job—NELP posted this on X, claiming that 70% of American voters want lawmakers to pass the Protecting the Right to Organize Act:

That 70% claim seemed as questionable to me as the 10% to 30% claim about misclassification. Especially given that the PRO Act includes California-style freelance-busting language that destroyed independent contractors’ income and careers in that state.

I clicked through from the article NELP shared to find the source of the 70% claim. It’s this survey performed by Data for Progress, which describes itself as a progressive think tank “arming movements with the tools they need to fight for a more equitable future.”

Here’s the question that Data for Progress asked people about the PRO Act:

Funny how the question doesn’t even mention all the tens of millions of legitimate independent contractors the PRO Act would reclassify as unionizable employees against our will.

I wonder how survey respondents would’ve felt about the PRO Act if they’d instead been shown what a former chairman of the National Labor Relations Board wrote about this kind of reclassification:

“This is not a mere technical redefinition: it would substantially unravel and change large segments of the US economy and adversely affect millions of service providers who currently view themselves as independent contractors governed by their own entrepreneurial decisions.”

In other words, it’s important to question everything.

It’s good that some lawmakers have been requesting—with Foxx now subpoenaing—actual data about what’s really going on with independent contractors and misclassification investigations.

I’m not a professional research analyst, but I’m guessing there’s oh, say, a 10% to 30% chance that we’ll see more subpoenas issued in the future.