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Federal Register / Vol. 86, No. 4 / Thursday, January 7, 2021 / Rules and Regulations
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stated, I have been a military spouse for 17 years and the ability to work as an independent contractor has been invaluable to my family. Through every move, my job comes with me; all I need is a computer and access to the internet.
Had I been forced to find a new job with each change of station, our family would have had some very tough times. As a final illustrative example, a woman informed the Department that, I have been an independent contractor for more than 3 decades; it helped me as a single mother and now it helps me help the kids with my granddaughter.
The Department agrees with the above commenters and data indicating that women would benefit from greater access to independent contracting opportunities. By clarifying how workers can be properly classified as an independent contractor, this rule promotes the formation of such opportunities.
e. Tax Filing Costs The AFLCIO and the Washington Center commented that independent contractors have more time-intensive accounting and tax filing processes, and the Department should address these costs. The Washington Center claims that it is inappropriate to quantify time savings from increased clarity but not to quantify the increased time necessary to file taxes, which they estimate to amount to $832.3 million annually.
Even assuming independent contractors spent more on their tax filings than employees, the Washington Centers estimate is based on average costs for all business filers in the country, drawn from the IRSs Estimated Average Taxpayer Burden for Individuals by Activity Table in its 2019 instructions on form 1040.195 This group of business filers includes anyone with income from rental property, royalties, S corporation earnings, farming, and other business ventures, which dramatically expands the scope beyond independent contractors. The Washington Center neither attempts to adjust for this overestimate nor explain how one might disentangle the conflated grouping, so the Department was unable to assess whether a real impact can be expected.
The Department noted in the NPRM that it did not attempt to quantify the numerous benefits that it expects from the increased clarity regarding classification. Instead, it assumed that market actors operate in their own best 195 Based on the difference in estimates of burdens for businesses and nonbusinesses from the table Estimated Average Taxpayer Burden for Individuals by Activity in U.S. Internal Revenue Services, 1040 and 1040SR Instructions, p. 101, 2019, https www.irs.gov/pub/irs-pdf/i1040gi.pdf.

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interest, noting that for those workers that choose to pursue work as an independent contractor, as opposed to an employee, and file taxes as such it can be assumed that they have correctly determined for themselves that the benefits outweigh the costs, including any costs associated with increased time spent on tax filings.196
f. Implementation Costs The PA L&I asserted that the Department provided zero estimates for the cost of actual implementation of the regulation. PA L&I also claimed that implementation costs include reclassifying current workers and identifying the employment status of new hires. Concerning the first, the Department maintains that workers will only be reclassified when the benefits to businesses outweigh the costs.
Concerning the later, the Department believes there will be a cost savings when new employment relationships must be analyzed see following section on cost savings. The Department believes the implementation costs will be de minimis.
g. Income Stability Several commenters asserted that independent contracting is associated with more volatile earnings. The Washington Center asserted that income stability is important for these workers and their families. UFCW cited literature finding that inconsistent earnings are one of the most reported disadvantages to gig work.197
The Department agrees that income volatility may be problematic for some workers and may require better money management to smooth consumption over periods of higher and lower income. However, as stated above, the Department assumes that market actors operate in their own best interest, and if a worker chooses to pursue work as an independent contractor, as opposed to an employee, it can be assumed that the worker has determined for himself or herself that the benefits outweigh the costs. The Department also believes income security is best achieved by removing barriers that prevent laid-off Americans from finding paid work, including as independent contractors.
This lesson may be more important in the wake of the COVID19 emergency, 196 All workers are required to file with the IRS
regardless of classification. The time and cost of tax filing is highly dependent on the individual circumstances of the workers. The Department believes workers are able to best assess the costs and benefits of tax filing.
197 Prudential Research, Gig Workers in America 2017, https www.prudential.com/
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a point that has been presented by hundreds of academics.198 Additionally, some literature indicates that many independent contractors value flexibility over income stability. CWI
submitted a survey they conducted that found 61 percent of independent contractors prefer the flexibility to choose when and where to work over having access to a steady income and benefits. 199
F. Cost Savings This final rule is expected to result in cost savings to firms and workers. While the Department believes that there are multiple areas where firms and workers may experience cost savings, the Department has quantified only two:
The cost savings from increased clarity and reduced litigation. The Department estimates that annual cost savings associated with this rule would be $495.9 million $447.2 million in increased clarity + $48.7 million in avoided litigation costs. Other areas of anticipated cost savings were not estimated due to uncertainties or data limitations. The Department believe the rule will result in the following additional cost savings, which are discussed qualitatively: Making labor market more efficient; improving worker autonomy satisfaction; providing an alternate source of income for some workers during the pandemic; and facilitating independent contractors ability to work for multiple customers.
While public comments specific to parts of the calculations are addressed at the corresponding location throughout this section, some commenters submitted general comments about the cost savings estimates. Several commenters offered supportive comments. The CGO said that the proposed rule carefully quantifies the cost savings of reduced litigation and increased clarity. The AFPF also expressed support but suggested that cost-savings may be underestimated.
Conversely, other commenters objected to the estimated cost savings, including that it was inappropriate to quantify the potential cost savings from this rule but not quantify the costs to workers.
Representative Pramila Jayapal asserted that the Departments analysis did not include any serious, fact-based argument as to why this rules change would be of benefit to the workers who would be most impacted by this rule change. Other commenters offered equivocal comments, including one 198 See 151 Ph.D. Economists and Political Scientists in California, Open Letter to Suspend California AB5 April 14, 2020.
199 Coalition for Workforce Innovation 2020, supra note 77.

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