Tangle - Biden's gig economy rule.

Episode Date: October 19, 2022

We're covering the new rules about contractors and the gig economy, which could impact millions of workers. Plus, a question about how Isaac thinks of the "My Take" section.You can read today's podcast here, today’s “Under the Radar” story here, and today’s “Have a nice day” story here.Today’s clickables: Quick hits (0:56), Today’s story (1:56), Right’s take (7:08), Left’s take (12:03), Isaac’s take (16:58), Listener question (22:00), Under the Radar (23:32), Numbers (24:31), Have a nice day (25:16)You can subscribe to Tangle by clicking here or drop something in our tip jar by clicking here.Our podcast is written by Isaac Saul and produced by Trevor Eichhorn. Music for the podcast was produced by Diet 75.Our newsletter is edited by Bailey Saul, Sean Brady, Ari Weitzman, and produced in conjunction with Tangle’s social media manager Magdalena Bokowa, who also created our logo.--- Send in a voice message: https://podcasters.spotify.com/pod/show/tanglenews/message Hosted on Acast. See acast.com/privacy for more information.

Based on Charles Yu's award-winning book, Interior Chinatown follows the story of Willis Wu, a background character trapped in a police procedural who dreams about a world beyond Chinatown. When he inadvertently becomes a witness to a crime, Willis begins to unravel a criminal web, his family's buried history, and what it feels like to be in the spotlight. Interior Chinatown is streaming November 19th, only on Disney+. The flu remains a serious disease. Last season, over 102,000 influenza cases have been reported across Canada, which is Chinatown is streaming November 19th, only on Disney+. yourself from the flu. It's the first cell-based flu vaccine authorized in Canada for ages six months and older, and it may be available for free in your province. Side effects and allergic reactions can occur, and 100% protection is not guaranteed. Learn more at flucellvax.ca.

From executive producer Isaac Saul, this is Tangle. Good morning, good afternoon, and good evening, and welcome to the Tangle Podcast, the place where you get views from across the political spectrum, some independent thinking without all that hysterical nonsense you find everywhere else. I'm your host, Isaac Saul, and on today's episode, we're going to be talking about something a little wonky, the gig economy rule, I guess that's what we're calling it. It's a new labor department rule that will have a big impact on contractors and gig economy workers.

Before we jump in, though, as always, we'll start off with our quick hits. First up, Igor Danchenko, the consultant whose information comprised the bulk of the Steele dossier, was acquitted on charges of lying to the FBI. Number two, President Biden told voters he would codify Roe v. Wade into law if Democrats keep control of Congress. Number three, Netflix added 2.4 million subscribers after consecutive quarters of losses, beating revenue and earnings expectations. U.S. stocks, the S&P 500, the Dow, and Nasdaq, have risen for two consecutive sessions. Number four, 1.3 million people have been displaced and at least 600 killed during floods in Nigeria. Number five, Lafarge SA, a French cement maker, pled guilty in U.S. court to charges that it made payments to groups designated as terrorists by the United States, including the Islamic State.

President Biden has proposed a new rule that will make it more likely for millions of gig economy workers to be classified as employees. Uber. This change would shake up ride sharing, delivery, and other industries that rely on gig workers. Why would you want to stop a student from being a part-time driver with Uber? You know, a little income on the side, choose your own hours, drive your own car. What is wrong with that? The proposal still needs to go through a formal regulatory process, including time for the public to submit comments. Last week, the Labor Department proposed a new rule that would make it more difficult for companies to treat workers as independent contractors. The change could have a huge impact on the so-called gig economy, impacting ride-hailing drivers, delivery services, janitors, construction workers, home care workers, freelance writers, and other independent contractors. Specifically, the new rule would require that companies consider their workers

to be employees when they are, quote, economically dependent, end quote, on a company. The Labor Department says determining factors would be a worker's opportunity for profit or loss, investment, permanency, the degree of control by the employer over the worker, and whether the work is an integral part of the employer's business. Under the Trump administration, a new rule was introduced that prioritized two specific questions, whether a worker could set their own schedule and work for multiple employers, and how great their opportunity for profit was based on their own initiative or investment. This test allowed most workers to remain independent contractors. The new rule will reinstate a six-factor test that was developed through several Supreme Court cases that were argued around the 1938 Fair Labor Standards Act.

Those tests, roughly speaking, are the worker's opportunity for profit or loss depending on their control over things like accepting or declining jobs. Investments in a worker's ability to do additional work indicate contractor status. Investment in tools to perform a specific job indicate employee status. The degree of permanence of the work relationship. When a working relationship is indefinite, it indicates employee status. The nature and degree of control that a worker has over the economic aspects of the relationship. The extent to which the work performed is integral to the employer's business when it is critical, the work is more likely to be an employee function. The skill and initiative of a worker,

whether the skills used are specialized, is not as relevant to employee status, but rather if a worker's foresight or judgment determines success in the job. So, if a worker, for instance, has little control over how they do their jobs or how much opportunity they have to increase their earnings, they are more likely to be considered an employee. If a worker is considered an employee, that means they are entitled to basic benefits and legal protections, and also that federal and state labor laws like minimum wage and overtime pay would apply to them. The proposed rule lowers the bar for employee classification from the current tests implemented under the Trump administration. Misclassification deprives workers of their federal labor protections,

including their right to be paid their full, legally earned wages, U.S. Labor Secretary Marty Walsh said. The impacts of such a change would be widespread across the economy. More than one-third of U.S. workers, or nearly 60 million people, did some freelance work in the past 12 months, Reuters reported. Additionally, studies have shown employees can cost the company up to 30% more than independent contractors. Shares of Uber, Lyft, and DoorDash dropped dramatically on the news of the rule's introduction. In a time of deep economic uncertainty, it is crucial that the

Biden administration continues to hear from the more than 50 million people who have found an earning opportunity with companies like ours, Uber's head of federal affairs C.R. Wooders told the Wall Street Journal. While the new rule won't directly impact outcomes in litigation, it will help the Labor Department determine how to enforce the rules and positions it takes in certain litigation, a former Labor advisor to President Biden said. The rule will only apply to laws that the Labor Department enforces, like minimum wage. States and other federal agencies will still set the criteria for employment status. The rule is widely expected to be challenged in court.

Today, we're going to explore some reactions to the rule from the right and the left, and then my take. First up, we'll start with what the right is saying. Many on the right are critical of the rule, arguing that it will be a huge disruption to the gig economy. Some point to the high satisfaction many gig workers already have with their situation. Others say the Trump-era rule simplified the test, while this will complicate it. The Wall Street Journal editorial board said Biden is going after gig workers. The Fair Labor Standards Act defines an employee as any individual employed by an employer. But the Supreme Court, in a series of cases starting in the 1940s, laid out a multi-pronged economic reality test that instructs courts and businesses to weigh

many factors when determining whether workers are employees or contractors, the board wrote. These include the degree of a company's right to control the manner in which work is done, a worker's opportunity for profit or loss depending on skill, a worker's investment in equipment or materials, whether the service requires a special skill, the working relationship's permanence, and the extent to which a service is integral to a company's business. Different federal courts have placed different emphasis on different factors, which has resulted in confusion for companies, especially those that operate nationwide. The Trump administration tried to clear up the mess with a rule that told courts and companies to weigh foremost the nature and degree of a worker's control and the opportunity for profit. This test enabled most independent

contractors to remain so. The Biden proposal replaces the Trump rule with a totality-of-the-circumstances analysis that focuses on whether workers are economically dependent upon an employer for work. Under this standard, gig workers would probably have to be reclassified as payroll employees. Newspaper columnists, truck drivers, real estate agents, barbers, consultants, and many other freelancers could be ensnared. The administration is proving it's an equal opportunity jobs killer. In MSNBC, Noah Rothman said the rule would throttle the gig economy. Proponents of the new rule, which would impose on businesses stricter definitions of what constitutes an employee, would extend needed benefits and protections to contract labor,

Rothman said. Critics insist that the practical effect will be to throttle the sharing economy into submission. They're both right, but on balance, the losers from this rule will far outnumber its winners. After all, the new rules are likely to impose new costs on companies that depend upon contract labor, costs that will be passed on to you, the consumer. The PRO Act was modeled after a 2019 California law, AB5, which was supposed to remedy the supposed indignities endured by participants in the so-called gig economy. It was hailed as a victory for workers, but the workers themselves didn't seem to appreciate the reform much. The law's practical effect was to make freelance labor impractical, Rothman wrote.

Overnight, independent writers, graphic designers, photographers, journalists, and content producers found themselves unemployable. Local papers had to contract out of state to get the scoop on what was happening just next door. Music festivals ceased operations and performing arts groups went on hiatus. But it was the law's attack on the popular ride-sharing services Uber and Lyft that proved the bridge too far. In 2020, a ballot measure defining app-based transportation drivers as independent contractors passed by nearly 3 million votes. California lawmakers repealed AB5 not long thereafter. Consumers aren't the only Americans satisfied with the gig economy.

According to a December 2021 Pew Research Center survey, nearly 80% of current or one-time gig workers say their experience was a positive one. In reason, Christian Britschke said Biden is chipping away at Trump's deregulatory legacy. Organized labor and liberal lawmakers have tried to lump as many workers into the employee bucket as possible in an effort to guarantee more people the overtime pay and benefits that come with that designation. But those efforts have often provoked rebellions from gig workers themselves and the companies they do business with, who object to the added regulation and rigidity that comes with being an employee. Sean Higgins, a labor policy researcher at the Free Market Competitive Enterprise Institute, said that litigation chaos is unlikely given that the Department of Labor

is reinstating federal standards that had been on the books for decades. But the Biden administration's new standard reduces certainty for businesses and workers about when an employer-employee relationship exists. The Trump rule, quote, boiled it down to a fairly simple question of just who is in charge around here. That determined whether a worker was a freelancer or not. It put the power in the hands of the workers themselves, Higgins tells Reason. Returning to the old six-factor test makes everything more confusing. The primary impact of the Department of Labor's rulemaking, says Higgins,

will be to make it easier to have states pursue AB5-type bills and regulations by reimposing that more expansive federal definition of employee, Britschke said. Alright, that is it for what the right is saying, which brings us to what the left is saying. Money on the left are supportive of the rule, arguing that it will amount to a massive win for workers. Some point to the absurdly low wages for Uber and Lyft drivers that will get a bump from this change. Others argue that opposition is really just coming from the business lobby.

In the New Republic, Timothy Noah said Biden is telling the gig economy to stop stealing wages. Studies show that somewhere between 10% and 30% of today's workforce in the United States consists of people misclassified under current law as independent contractors so that employers can dodge paying minimum wage, overtime, payroll tax, unemployment insurance, and any other benefits they give their real employees, Noah wrote. A 2009 Government Accountability Office study concluded that misclassification cost the treasury nearly $3 billion last year. That was based on old data and is almost certainly too low. The Labor Department's proposed regulation would make it harder than it is right now for businesses to

classify who work for them as independent contractors. Naturally, it's occasioning bellyaching from the business lobby. It will, quote, foster massive confusion, endless litigation, reduced innovation, and fewer opportunities for employees and independent contractors alike, griped the National Retail Federation to Rebecca Rainey of Bloomberg Law. But all the rule does, really, is bring labor department policy back in line with the FLSA's statutory language and nine decades of judicial interpretation that followed, Noah said. If the worker is an independent contractor, they are not entitled to receive the minimum wage or overtime pay. A recent study of rideshare drivers in California, who are all classified as independent

contractors, found their median wage to be $6.20 per hour. If they were employees, that level of pay would constitute wage theft by Uber and Lyft under both federal law, which sets an hourly minimum wage of $7.25, and California law, which sets it at $15. In Mother Jones, Jacob Rosenberg said the rule could change work for millions. The measure would be a small but significant lowering of a Trump-era standard that could allow more workers to gain the benefits of employment, like guaranteed minimum wage and overtime, Rosenberg writes. The hope of the Trump administration was to enshrine an employment model that carved out contractors aiding gig economies like Uber. But if the new Department of Labor proposal were enacted, companies that make their workers independent contractors instead of

employees, despite workers doing the tasks of an employee, could be punished for violating labor law. After the intense battle over the issue in California, there was a risk, especially among more centrist Democrats, of pissing off not only massive companies like Instacart, but also an extremely vocal coalition of freelancers, including best-selling novelist Walter Kern, who complained that employee status would winnow down their ability to move freely between hustles. It seems those concerns have been pushed aside, Rosenberg said. We've moved from an economic model of mass employment and control in the 20th century, think of the factory, to an atomized series of contractors, subcontractors,

and outsourced laborers such as maids, construction work, and home care workers. This switch has been presented as offering a kind of autonomy to those workers, but it's also meant a mass erosion of the historic win-buy workers that have been tied to employment, healthcare, the minimum wage, and safety standards, to name a few. Not to mention, of course, the power of unionization. Based on Charles Yu's award-winning book, Interior Chinatown follows the story of Willis Wu, a background character trapped in a police procedural who dreams about a world beyond Chinatown. When he inadvertently becomes a witness to a crime, Willis begins to unravel a criminal web, his family's buried history, and what it feels like to be in the spotlight. Interior Chinatown is streaming

November 19th, only on Disney+. It's the first cell-based flu vaccine authorized in Canada for ages six months and older, and it may be available for free in your province. Side effects and allergic reactions can occur, and 100% protection is not guaranteed. Learn more at flucellvax.ca. In the American Prospect, Harold Meyerson called it one more pro-worker move from Biden. Notoriously, the federal minimum wage doesn't amount to very much. It's been stuck at a pathetically low $7.25 an hour for well over a decade, though many states have set their own minimum considerably higher, Meyerson said. Nonetheless, a proposed rule released today by the Department of Labor would effectively guarantee a raise for thousands of

Uber and Lyft drivers in California who are mislabeled as independent contractors and thus not covered under state or federal minimum wage legislation. According to a recent study, when the expenses they have to pay to buy, lease, and or maintain their cars are subtracted from their income, their real hourly income comes out to be less than princely $6.20. Today's proposed rule, accordingly, would raise that level by about a dollar and, more importantly, qualify those drivers for overtime pay and require their employers to pay into the funds for Social Security and unemployment insurance, Meyerson said. Those changes would take place because the Department of Labor's new rule would establish more real-world standards for what constitutes employment, criteria such as determining the rate the drivers charge and what share they pay to the parent company, or if they drive trucks for FedEx or other companies,

whether those trucks can be used for other work or driver use, that sort of thing. It's a, if it quacks like a duck, it's a duck rule, which stands in sharp contrast to the rule still on the books promulgated by Trump's Labor Department. by Trump's Labor Department. All right, that is it for the left and the right are saying, which brings us to my take. So this is actually one of the few times in Tangle I think I should probably start with an ethical disclosure. My entire team's made up of contractors. So in our case, I don't think this rule would impact us much. All of the people who work for Tangle work about five to 10 hours a week, except our social media manager, Magdalena, who works for about 20. And each of their workloads is pretty consistent with how a contractor is defined, even under the new test created by the

Biden administration. But still, it seems worth stating plainly that this is the case from the outset. The other interesting perspective I have on this is as a journalist. For years before creating Tangle, I supplemented my income with contract work. When California's AB5 law went into place, I saw how badly it hurt freelance writers. A lot of journalists were talking about it. So my perspective is tainted in two ways. One, I'm not in a position to afford to pay the extra expenses like paying into unemployment insurance for my contract employees. And two, I'm a former freelance writer who saw how heavy-handed regulation in that industry could damage it. In one specific example, Vox, a company I've actually written freelance pieces for, ended ongoing relationships with 200 freelance writers to give jobs to 20 full-time writers. All this is to say, while I understand

the good intentions of preventing the kinds of horror stories we hear about contract work, I'm quite skeptical of a rule like this. There are lots of gig workers who are essentially working full-time jobs for companies like Uber and Lyft, who should get some kind of worker protections and benefits and pay above the minimum wage. Most of them, the ones I've spoken to, complain about things like the absurdly low real hourly pay once you take into account the costs companies never cover in fuel, maintenance, and the mileage such work puts on their vehicles. I'm very interested in seeing those issues resolved, but I worry that this rule's broad effect is more likely to eliminate contract work and upset the vast majority of contract workers. In this case, we have two pretty solid pieces of evidence to turn

to. One is the passage of a real-world example, which was AB5 in California. The other is the survey data that we have on an array of actual contract and gig workers. AB5 was basically a disaster. It was implemented right before COVID-19 hit, which made the devastation it wrought on freelance workers hard to parse from the pandemic-related job cuts. But its opponents came from all across the ideological spectrum. By the time the law was passed, it was so full of exemptions and carve-outs

that those sections of the bill alone spanned nearly 7,000 words. By the time it went into effect, the backlash to it was swift and widespread. The congressional version of AB5, the PRO Act, failed to pass Congress. So, Biden is now going the executive route, hoping this rule can withstand court scrutiny. Along with the impact of AB5 on California and the wave of backlash to it, the fact is this is something Congress should but couldn't codify into law. There is ample evidence it isn't even something actual contract workers want. Which brings us to the surveys. The 2015 Government Accountability Office, the GAO, Survey of Independent Contractors and Self-Employed Wed writers found that over 85% were content with

their status. In 2018, the Bureau of Labor Statistics said 79% of independent contractors preferred their contracting arrangement over a traditional job. And finally, a 2021 Pew survey found that 8 in 10 gig workers rated their experiences with those jobs positively. The Pew survey showed quite clearly that most gig workers cite saving up extra money, being their own boss, flexibility of their own schedule, and the need to cover gaps in income as their reason for taking these jobs. Only 28% said they chose gig labor instead of more traditional employment opportunities. This makes sense. 80-90% of gig workers work less than 20 hours a week, according to some NLRB surveys. The 10 to 20

percent who don't are the ones I am worried about. For those contractors, the flexibility of work and reliance on income is critical. If I were to adjust the Trump-era rule, I would keep its focus on the flexibility of schedule, but emphasize reliance on income rather than the squishier opportunity for profit. Scheduling autonomy to me is critical. I've heard from Uber drivers, for example, who say that Uber's app will punish them if they decline multiple trips in a row because they are too long or going too far away from their home. That will log them out or stop offering them shorter, closer-to-home rides. If an algorithm in an app can take away a contractor's flexibility, are they still a contractor? These are big and tricky

questions. Still, it seems the legislative version of this rule was a flop, most gig workers don't really want regulations that may restrict any other opportunities, and the undoing of the Trump administration's simplification of the rule could just create a big mess. Given all that, I'm hoping that the public comment period either pushes some constructive changes to the proposal or leads to the failure of its implementation outright. All right, that is it for my take, which brings us to your questions answered. This one is from Kurt in Santa Cruz, California. Kurt asked, your take isn't 100% personal, is it?

It must include some thought about seeking middle ground for the sake of the brand, no? So funny enough, I actually try really hard not to do that. The original promise of Tangle is that I told readers I would not filter my thoughts and instead just give my most honest analysis of the debate at hand. The hardest part of Tangle is actually when I just very obviously agree with one side or another because I know I'm going to upset a big subset of my readers. That makes the challenge of convincing them much harder, but it is always a worthwhile effort to just be straightforward about my views. I've written this before, but I actually think trying to be heterodox or trying to be a centrist is an ideology of its own. Sometimes the mainstream

narrative is the right one. Sometimes Republicans are just right. Sometimes Democrats are just right. Sometimes they're both wrong. And sometimes they both have elements of winning arguments. When I think about my take, I try to focus on a few things. One, just being open-minded. I read each side's arguments with humility that I don't know everything. Two, call out the BS. On most days, there's a popular narrative from the right or left that doesn't hold up to much scrutiny. And three, be honest about what I think. From beating around the bush or kowtowing a line to keep people happy, readers notice and they don't like it. All right, that is it for your questions answered, which brings us to our under the radar section. Yesterday, House Minority Leader Kevin McCarthy, the Republican from California, told Punchbowl News what many have suspected. If Republicans take control of the House,

there is a chance they cut off funding for the war in Ukraine. The United States has already spent over $60 billion in Ukraine and that money has flown out the door with little resistance. But a Republican-controlled House could rein in the spending. Even McCarthy, who has supported the funding and compared Putin to Hitler, said there are already signs of resistance. I think people are going to be sitting in a recession and they're not going to want to write a blank check to Ukraine. They just won't do it, he told Punchbowl News. In May, 57 House Republicans voted no on a $40 billion aid package to Ukraine. That number, McCarthy says, is only going to go up as more money is spent.

Punchbowl News has the story and there's a link in today's episode description. All right, that brings us to our numbers section. The average monthly income of a gig worker is $5,120. The percentage of gig workers who say they prefer a flexible work schedule to a bigger salary is 63%. The median U.S. income is $59,000. The percentage of Ukraine's power stations that have now been destroyed by Russian airstrikes is 30%. The estimated number of reclaimed hours every day thanks to work-from-home policies, according to a Federal Reserve Bank of New York estimate, is 60 million. The percentage of Americans who work entirely remotely is now 15%. The percentage who are on a hybrid schedule is 30%. All right, that is it for our numbers section. And last but not least, our have a nice day story.

The first known map of the night sky was found hidden inside a medieval parchment. The parchment discovered inside a monastery in Egypt yielded a surprising treasure. Hidden beneath Christian texts, scholars found what they believed to be the long-lost star catalog of the astronomer Hipparchus, the earliest known attempt to map the star sky. The manuscript came from the Greek Orthodox St. Catherine's Monastery in the Sinai Peninsula in Egypt. Researchers believe the coordinates were drawn out in 129 BC, centuries before anyone else attempted to map the sky. Nature has the story on this remarkable find and there is a link to it in today's episode description. Alright everybody, that is it for today's podcast. As always, if you want to support our work, please go to readtangle.com slash membership, or just share this podcast with friends, or give us a five-star rating, or, you know, do anything. Spread the

word about Tangle. We'll be back here tomorrow with a special edition of the podcast, a Thursday interview we're dropping tomorrow. We'll see you then. Peace. Our podcast is written by me, Isaac Saul, and edited and produced by Trevor Eichhorn. Peace. Music for the podcast was produced by Diet 75. For more from Tangle, subscribe to our newsletter or check out our website at www.readtangle.com. Can Indigenous ways of knowing help kids cope with online bullying? At the University of British Columbia, we believe that they can. Dr. Johanna Sam and her team are researching how both Indigenous and non-Indigenous youth cope with cyber aggression, working to bridge the diversity gap in child psychology research. At UBC, our researchers are answering today's most pressing questions.

To learn how we're moving the world forward, visit ubc.ca forward happens here. Based on Charles Yu's award-winning book, Interior Chinatown follows the story of Willis Wu, a background character trapped in a police procedural who dreams about a world beyond Chinatown. When he inadvertently becomes a witness to a crime, Willis begins to unravel a criminal web, his family's buried history, and what it feels like to be in the spotlight. Interior Chinatown is streaming November 19th, only on Disney+. The flu remains a serious disease. Last season, over 102,000 influenza cases have been reported across Canada, which is nearly double the historic average of 52,000 cases.

What can you do this flu season? Talk to your pharmacist or doctor about getting a flu shot. Consider FluCellVax Quad and help protect yourself from the flu. It's the first cell-based flu vaccine authorized in Canada for ages 6 months and older, and it may be available for free in your province. Side effects and allergic reactions can occur and 100% protection is not guaranteed. Learn more at flucellvax.ca.