January 4, 2021

How freelance work could change under President Biden

Bobby Burch @bobburch

According to a recent Upwork study, more than one in three working Americans are freelancing during the pandemic, an increase of two million since 2019.

And now that President-elect Joe Biden's party has secured a Senate majority, he hopes to transform the freelancing space in 2021.

Here's how: Biden is aiming to implement a federal gig-economy policy similar to California's controversial AB-5 law. That measure, which has been fiercely fought by Uber and Lyft, extends the benefits and protections of a W-2 employee relationship to many freelance workers. Currently, over 100 other industries have been granted an exemption as well.

The problem: The law uses an "ABC Test" to determine whether workers are independent contractors under the California Labor Code. Freelancers are automatically presumed to be W-2 employees, and the burden is on the company to show otherwise. To reclassify the person as an independent contractor, the company must satisfy the test's three criteria.

The numbers: According to a study by the UC Berkeley Center for Labor and Education, 64% of independent contractors in California would be categorized as an employee under the current AB-5 law.

Here's Biden:

"This epidemic of misclassification is made possible by ambiguous legal tests that give too much discretion to employers, too little protection to workers, and too little direction to government agencies and courts."

The players: Over the summer, five union presidents served on Biden's unity task force, and two union Presidents (Teresa Romero of the United Farm Workers and Lonnie Stephenson of the International Brotherhood of Electrical Workers) were recently appointed to his transition team advisory board.

The Biden Administration looks to address employer misclassifications of gig workers that enable companies to withhold legally required benefits and protections from their employees.

Stay informed on the ways Big Tech impacts indie business:

Could Biden's Efforts Backfire?

Background: Biden supports the Protecting the Right to Organize Act, which would hold company executives liable if they interfere with union organizing efforts. The Biden Administration maintains that it will "aggressively pursue employers who violate labor laws, participate in wage theft, or cheat on their taxes by intentionally misclassifying employees as independent contractors."

The issue: Biden's gig economy goals have alarmed many freelancers across the country. Some fear that the "B" portion of the ABC Test, which defines a "contractor" as a person performing work that is outside the usual course of the hiring entity's business, may make it difficult for freelancers to accept work within their actual industries. The federal act would use that same California-ABC test to decide who is considered a freelancer nationwide.

Looking forward: Even with a divide Senate, Biden's Administration would have had authority to influence existing labor laws. For example, a re-interpretation of the Fair Labor Standards Act could allow gig workers to qualify for minimum wage and receive overtime pay. But the president-elect's party won both houses of congress. So he'll have many more tools at his disposal.

What are your thoughts on the Biden Administration's goals for the gig economy?

  1. 15

    I generally don't like when the gov interferes with free markets, so I don't support this...

    1. 4

      Labor is not a "free market" so this shouldn't really bother you. In free markets, both participants have equal information and prices are transparent. If you have ever interviewed for a new job, you know that neither of these things are readily available to workers as employers hold a significant information advantage. Compare that to trying to purchase a stock on the free market stock exchanges. It's the reason "Labor Economics" is it's own field of study.

  2. 12

    It just seems that these solutions are not eve wrong. They are starting from the wrong foundational principles. US labor policy orients around full-time jobs and assumes that is the central aim of life. Until we have a different philosophy of work and its role in our lives I don't see much changing for the better.

  3. 9

    I don't like anything about it. These politicians seem to think there are only 2 types of workers: those who have full time jobs with benefits, and those who live in poverty and can't feed their families. They are missing a large part of the picture and they seem to be more interested in claiming they've "protected workers" than actually understanding how freelancing and the gig economy function. We should be moving away from employer tied benefits and towards employment with more personal freedom and a la carte options. I'm all for thoughtful protection of gig workers, but that is not what this is.

  4. 8

    This is terrible news for Indie Hackers. One of the best strategies for launching a product is to get your income by freelancing, which is way more flexible (and lucrative) than full-time employment.

    W2 employment in the US gives you predictability and stability at the expense of freedom and agility. That's a bad tradeoff for us.

  5. 6

    Not a fan. If my client and I agree on a contract scope, that’s that. The gov shouldn’t interfere with the way business is done with freelancers.

  6. 5

    I lived in CA when AB5 passed. I suddenly couldn't get a part-time gig online (in addition to my 40+ hour M-F office job), doing editing or writing for extra money, as I had for many years. Instead, I went back to waiting tables at a restaurant. The result was burnout within about 2 months since restaurant hours aren't flexible like editing or writing from home. I didn't make enough money to justify all the hours I put in.

    The issue with AB5 is it ended up taking choice away from employees, instead of forcing global corporations like Uber to pay their fair (fare?) share to protect their workers. Also, if the goal of AB5 was to provide high paying union jobs, it's not like waiting tables at a chain restaurant got me that, either - I made far less as a server (a dismal ~$8 an hour after taxes automatically taken out - including tips) than the $25 an hour I charge freelance (with the ability to write off working expenses on my taxes).

  7. 4

    This is such a bummer. Feels like the gov't doesn't understand the big picture here. Freelance income is such a game changer and I'm sure it would dry up quite quickly if these policies were enacted. Is there any type of Indie Hackers lobbying group?

  8. 2

    Whatever the outcome is, we ought to remember that he'll be legislating for the whole world and not just the US when it comes to these matters. So, yes, a reflection on “the future” of work and how we should depart from the idea of 9-to-5 is surely granted, but protecting workers affected by legislation that trickles down everywhere through global companies and their business models is too.

    1. 3

      I disagree with this. The United States implementing bad policy that specifically targets the most lucrative and mobile of workers will simply work as a magnificent incentive for other countries to accomodate and attract for this workforce.

      Costa Rica is already passing Digital Nomad visas for up to a year, and all foreign income earned while living in Costa Rica is tax free...

  9. 2

    I think a bigger problem, in freelance web development, is how job interview processes has evolved.

    In the future most people will be carrying out web development tasks to some extent. For example Amazon just announced free training for 29 million people. So it’s a problem that’s only going to get much worse.

    It’s structured to keep freelancers poor and developers locked-in.

    Some policies to combat this trend would go a long way to creating a better working and living environment for all.

  10. 1

    There seems to be wide consensus amongst the people that this policy would affect that this is bad policy. However, what I am really interested in, is to consider all the consequences and possible scenarios. As nothing is ever stagnant, I would expect American-based freelancers to be excluded from freelancing platforms, which in turn would prompt people to relocate. I suspect Canada and Mexico are going to benefit greatly from this.

    Would you consider relocating to another country that would allow you to continue to have total control over your freelance work?

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