Emerging regulatory efforts in the states threaten to restrict work opportunities—and the freedom and flexibility—that come from independent contracting. These regulations would affect more than 10 million American workers who earn the majority of their income as independent contractors, as well as another five million who earn income through alternative work arrangements. The impact would extend to tens of millions more who do some sort of freelance work every year.
One example is California’s AB 5 law. It regulates independent contracting and has caused significant labor disruptions affecting hundreds of thousands of Californian livelihoods. Similar proposals are being considered in other states, which would further set back the American workforce and sap the dynamism that comes with labor force flexibility.
The State Solution
States should enact reforms that empower individuals and businesses to freely engage in independent contracting by protecting their right to do so.
Why This Matters
Millions of Americans prefer the flexibility of independent contracting and alternative work arrangements over traditional employment. That includes workers who need a flexible schedule because they are in school, busy parents who split time between work and kids, and other people who value the flexibility to adapt their work schedule around other aspects of life.
Furthermore, the pandemic recession has put extraordinary strains on the American workforce. Tens of millions of Americans lost their jobs at the beginning of the recession, and the labor force recovery is on pace to drag out for years more before making a full recovery. Independent contracting is a critical tool for rebuilding the labor force and restoring lost work opportunities.
A modern economy, especially one recovering from a crisis like the coronavirus pandemic, requires more flexibility in the labor force, not less. Independent contracting holds the promise of rewarding career paths and successful new businesses if it is protected in the states. Businesses and individuals should be empowered to use independent contracting as they see fit.
What States Should Do Next
States should enact reforms that empower individuals and businesses to freely engage in independent contracting by protecting their right to do so. States can do this by providing simple and clear criteria to define independent contractors and to differentiate them from employees.
- Statement of Principles on Independent Contracting (American Legislative Exchange Council)
- Uniform Worker Classification Act (American Legislative Exchange Council)
- How independent contracting works and why it’s good for American workers (Americans for Prosperity)