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Federal Register / Vol. 86, No. 86 / Thursday, May 6, 2021 / Rules and Regulations because of the COVID19 pandemic and the resulting economic fallout, there is an even greater need to ensure workers have access to FLSA protections. The Center for Law and Social Policy CLASP cited a study showing that minimum wage violations increased dramatically as unemployment rose during the Great Recession, disproportionately impacting Latinx, Black, and female workers.208 They anticipate that the recent period of high unemployment could lead to similar violations.
Concerning overtime pay, not only do independent contractors not receive the overtime pay premium, but the number of overtime hours worked is also higher.
Analysis of the CWS data indicated that, before conditioning on covariates, primary self-employed independent contractors are more likely to work overtime more than 40 hours in a workweek at their main job 29 percent for self-employed independent contractors and 17 percent for employees.209
Commenters referenced other FLSA
protections that employees would lose if they were reclassified as independent contractors following the Rule. The National Womens Law Center points out that the FLSA also contains provisions that are centered on ensuring that women are treated fairly at work, including employer-provided accommodations for breastfeeding workers and protections against pay discrimination.

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4. Hourly Wages, Bonuses, and Related Compensation Some commenters asserted that independent contractors are compensated better than employees, citing discussions of earnings from the Independent Contractor Rule. The Department is concerned that its 2020, https static1.squarespace.com/static/
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GigReport.pdf.
208 Fine et al., Maintaining effective U.S. labor standards enforcement through the coronavirus recession, Washington Center for Equitable Growth, Sept. 3, 2020, available at https
equitablegrowth.org/research-paper/maintainingeffective-u-s-labor-standards-enforcement-throughthe-coronavirus-recession/.
209 The Department based this calculation on the percentage of workers in the CWS data who respond to the PEHRUSL1 variable How many hours per week do you usually work at your main job? with hours greater than 40. Workers who answer that hours vary were excluded from the calculation. The Department also applied the exclusion criteria used by Katz and Krueger exclude workers reporting weekly earnings less than $50 and workers whose calculated hourly rate weekly earnings divided by usual hours worked per week is either less than $1 or more than $1,000.

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discussion of data on the differences in earnings between employees and independent contractors in the Independent Contractor Rule was confusing and potentially inaccurate, so the findings and methodology are discussed again here. Independent contractors are often expected to earn a wage premium to compensate for reduced fringe benefits, increased tax liability and associated paperwork costs.
However, due to asymmetric information, differences in bargaining power, or a willingness to trade earnings for increased flexibility, this may not hold. The Department compared the average hourly wages of current employees and independent contractors to provide some indication of the impact on wages of a worker who is reclassified from an employee to an independent contractor.
The Department used an approach similar to Katz and Krueger 2018.210
Both regressed hourly wages on independent contractor status 211 and observable differences between independent contractors and employees e.g., occupation, sex, potential experience, education, race, and ethnicity to help isolate the impact of independent contractor status on hourly wages. Katz and Krueger used the 2005
CWS and the 2015 RAND American Life Panel ALP the 2017 CWS was not available at the time of their analysis.
The Department used the 2017 CWS.212
Both analyses found similar results. A
simple comparison of mean hourly wages showed that independent contractors tend to earn more per hour than employees do e.g., $27.29 per hour for all independent contractors versus $24.07 per hour for employees using the 2017 CWS. However, when controlling for observable differences between workers, Katz and Krueger found no statistically significant difference between independent contractors and employees hourly wages in the 2005
CWS data. Although their analysis of the 2015 ALP data found that primary independent contractors earned more per hour than traditional employees do, they recommended caution in interpreting these results due to the 210 L. Katz and A. Krueger, The Rise and Nature of Alternative Work Arrangements in the United States, 19952015, 2018.
211 On-call workers, temporary help agency workers, and workers provided by contract firms are excluded from the base group of traditional employees.
212 In both Katz and Kruegers regression results and the Departments calculations, the following outlying values were removed: Workers reporting earning less than $50 per week, less than $1 per hour, or more than $1,000 per hour. Choice of exclusionary criteria from Katz and Krueger 2018, supra note 210.

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imprecision of the estimates.213 The Department found no statistically significant difference between independent contractors and employees hourly wages in the 2017
CWS data.
Based on these inconclusive results, the Department believes it is inappropriate to conclude independent contractors generally earn a higher hourly wage than employees do.
Therefore, the Department does not assert that wages would be impacted due to the Rule or its withdrawal. The Department ran another hourly wage rate regression including additional variables to determine if independent contractors in underserved groups are impacted differently by including interaction terms for female independent contractors, Hispanic independent contractors, and Black independent contractors. The results did not find a statistically significant difference in earnings for these groups.214
The Mercatus Center commenters also claim that independent contractors earn supplemental compensation, which the Department believes is unsupported by widespread evidence for most independent contractors. They say that the analysis assumes that independent contractors do not receive supplemental compensation, despite widespread evidence to the contrary in the platform economy, such as signing and performance bonuses. The commenters cite one Wall Street Journal article to support their assertion, and this article also discusses the difficulty finding and retaining workers, including statements like, turnover is driven by gig workers unhappiness with their take-home pay, a 2015 analysis found 45% of Ubers workforce left in their first year, and, in any given month, an estimated 1 in six participants in the gig economy is new, and more than half of such workers exit within a year. 215
V. Regulatory Flexibility Act RFA
Analysis The Regulatory Flexibility Act of 1980
RFA, 5 U.S.C. 601 et seq., as amended by the Small Business Regulatory Enforcement Fairness Act of 1996, Public Law 104121 1996, requires federal agencies engaged in rulemaking 213 See top of page 20, Given the imprecision of the estimates, we recommend caution in interpreting the estimates from the ALP.
214 The coefficient for Black independent contractors was negative and statistically significant at a 0.10 level with a p-value of 0.067. However, a significance level of 0.05 is more commonly used.
215 Kelsey Gee, In a Job Market This Good, Who Needs to Work in the Gig Economy?, Wall Street Journal, August 8, 2017.

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