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Federal Register / Vol. 86, No. 4 / Thursday, January 7, 2021 / Rules and Regulations
balancing test, including the proposed rule. Whereas no single factor necessarily disqualifies a worker from independent contractor status under an economic reality test, each of the ABC
tests three factors may alone disqualify the worker from independent contractor status. Thus, the NPRM stated that adoption of an ABC test to govern independent contractor status under the FLSA would directly result in a largescale reclassification of many workers presently classified as independent contractors into FLSA-covered employees, particularly those in industries that depend on independent contracting arrangements within the usual course of the hiring entitys business. Dynamex, 416 P.3d at 34.
While some independent contractors might benefit from reclassification by newly receiving overtime pay or a guaranteed minimum wage, these workers might also experience a reduction in work hours or diminished scheduling flexibility as their new employers attempt to avoid incurring additional expenses for overtime work.
Others workers, particularly off-site workers who operate free from the business direct control and supervision, might see their work arrangements terminated by businesses unwilling or unable to assume the financial burden and legal risk of the FLSAs overtime pay requirement. After highlighting some of the reports of adverse consequences experienced by workers and businesses in California following the passage A.B. 5, the Department concluded that adopting the ABC test as the FLSAs generally applicable standard for distinguishing employees from independent contractors would be unduly restrictive and disruptive to the economy. Finally, as a matter of law, the Department asserted that adoption of Californias ABC test would be inconsistent with the more flexible economic reality test adopted by the Supreme Court, as it would cover workers who have been held by the Supreme Court to be independent contractors under the economic reality test. See Silk, 331 U.S. at 719; Bartels, 332 U.S. at 130.
The Department received a large volume of commenter feedback on the merits of Californias ABC test. While the majority of these comments were highly critical of the standard, it did have several supporters. Commenters in favor of the ABC test asserted that, as the regulatory alternative most restrictive of independent contracting considered by the Department, it would best effectuate Congress intent to extend FLSA coverage broadly and
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reduce unlawful misclassification of employees as independent contractors.
See, e.g., Matt Brown; National Domestic Workers Alliance; Public Justice Center; SEIU. Numerous commenters asserted that the ABC test, with its three individually determinative factors, was also the clearest and most predictable approach considered. See, e.g., International Brotherhood of Teamsters; Writers Guild of America, East, AFLCIO. New York Universitys Peoples Parity Project argued that given the importance of the California market to the national economy and the fact that it follows the more stringent ABC standard, any business that wishes to operate in California, and any national business, will have economic motivation to follow the ABC standard. NELA similarly disputed concerns that adoption of the ABC test would be unduly disruptive, asserting that Massachusetts wage and hour law has used an ABC test since 2004 and that many other states, including New Jersey, Illinois, Connecticut, and Hawaii, use an ABC
test for certain other purposes, and have similarly suffered no disruption to their economies. Finally, regarding the Departments legal authority to adopt the ABC test, NELA asserted that none of the cases on which the Department relies suggest that the multi-factor test is the only way to test economic reality or that the ABC test ignores economic reality.
A diverse array of commenters voiced strong opposition to adopting an ABC
test under the FLSA, including law firms, trade associations, advocacy organizations, academics, and individual freelancers. Several commenters dedicated the entirety or vast majority of their comment towards criticizing Californias ABC test. See, e.g., American Consumer Institute Center for Citizen Research ACI; Fight for Freelancers USA; Institute for the American Worker; Joint Comment of the Pacific Legal Foundation PLF, the American Society of Journalists and Authors, Inc. ASJA, and the National Press Photographers Association NPPA; Dr. Palagashvili; The People v.
AB5. The primary objection voiced by commenters critical of the ABC test regarded the disruptive economic effects of implementing such a stringent standard, with several asserting that an ABC test would devastate their industry.
See, e.g., American Council of Life Insurers Thousands of jobs would likely have been lost had the California legislature failed to create an exemption for insurance professionals.; Coalition of Practicing
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Translators & Interpreters of California CoPTIC A.B. 5 posed an existential threat to the survival of our profession.; Intermodal Association of North America IANA The ABC test essentially eliminates the independent contractor model for motor carriers involved in intermodal drayage..
Several commenters invoked the numerous exemptions to the ABC test that California lawmakers initially adopted in A.B. 5 and subsequently expanded in A.B. 2257 as evidence of the standards overreach. See, e.g., California Chamber of Commerce During the first few months of the 2020 Legislative Session, more than 30
bills were introduced to add a myriad of exemptions to the ABC test. . . . As a result of the adoption of AB 2257, which was signed into law in September, there are now 109
exemptions to the ABC test.; Rep.
Virginia Foxx et al. Rather than setting a dependable and workable standard, the AB 5 framework results in arbitrary treatment of industries based on political considerations to the detriment of workers.; Joint Comment of PLF, ASJA, and NPPA If a law requires dozens of exceptions to avoid destroying the careers of successful independent professionals, it is a strong indication that the laws basic premisethe ABC testis flawed..
Some individual freelancers, including writer Karen Kroll, filmmaker/actor Margarita Reyes, unspecified professional Chun Fung Kevin Chiu, and unspecified professional Carola Berger, asserted that the ABC test is falsely premised on the assumption that all independent contractors, or at least those who provide services in a clients usual course of business, feel exploited and would prefer to be employees. The Independent Womens Forum and Dr.
Palagashvili asserted that the ABC test implemented in California disproportionately burdened female workers with caregiving responsibilities, who are less able to find adequately flexible work schedules through traditional employment. Finally, some commenters agreed with the Departments conclusion in the NPRM
that Supreme Court precedent precludes the Department from adopting an ABC
test under the FLSA. See NRF; FMI
The Food Industry Association.
After reviewing commenter feedback, the Department continues to believe that the ABC test would be infeasible, difficult to administer, and disruptive to the economy if adopted as the FLSA
standard. The weight of data, arguments, and anecdotes that commenters shared about the ABC tests
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