[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]



                    UNLOCKING OPPORTUNITY: ALLOWING
                       INDEPENDENT CONTRACTORS TO
                            ACCESS BENEFITS

=======================================================================


                                HEARING

                               Before The

                        SUBCOMMITTEE ON WORKFORCE 
                               PROTECTIONS

                                 of the

                      COMMITTEE ON EDUCATION AND THE 
                               WORKFORCE
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION
                               __________

             HEARING HELD IN WASHINGTON, DC, APRIL 11, 2024
                               __________

                           Serial No. 118-44
                               __________

  Printed for the use of the Committee on Education and the Workforce
  
  
  
  
  
               [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]





        Available via: edworkforce.house.gov or www.govinfo.gov
                              ______

                 U.S. GOVERNMENT PUBLISHING OFFICE 

56-785 PDF               WASHINGTON : 2024        
        
        
        
        
        
        
        
        
          
        
        
        
        
        
                COMMITTEE ON EDUCATION AND THE WORKFORCE

               VIRGINIA FOXX, North Carolina, Chairwoman

JOE WILSON, South Carolina           ROBERT C. ``BOBBY'' SCOTT, 
GLENN THOMPSON, Pennsylvania           Virginia, Ranking Member
TIM WALBERG, Michigan                RAUL M. GRIJALVA, Arizona 
GLENN GROTHMAN, Wisconsin            JOE COURTNEY, Connecticut
ELISE M. STEFANIK, New York          GREGORIO KILILI CAMACHO SABLAN,
RICK W. ALLEN, Georgia                 Northern Mariana Islands
JIM BANKS, Indiana                   FREDERICA S. WILSON, Florida 
JAMES COMER, Kentucky                SUZANNE BONAMICI, Oregon
LLOYD SMUCKER, Pennsylvania          MARK TAKANO, California
BURGESS OWENS, Utah                  ALMA S. ADAMS, North Carolina
BOB GOOD, Virginia                   MARK DeSAULNIER, California
LISA McCLAIN, Michigan               DONALD NORCROSS, New Jersey
MARY MILLER, Illinois                PRAMILA JAYAPAL, Washington
MICHELLE STEEL, California           SUSAN WILD, Pennsylvania
RON ESTES, Kansas                    LUCY McBATH, Georgia
JULIA LETLOW, Louisiana              JAHANA HAYES, Connecticut
KEVIN KILEY, California              ILHAN OMAR, Minnesota
AARON BEAN, Florida                  HALEY M. STEVENS, Michigan
ERIC BURLISON, Missouri              TERESA LEGER FERNANDEZ, New Mexico
NATHANIEL MORAN, Texas               KATHY E. MANNING, North Carolina
LORI CHAVEZ-DeREMER, Oregon          FRANK J. MRVAN, Indiana
BRANDON WILLIAMS, New York           JAMAAL BOWMAN, New York
ERIN HOUCHIN, Indiana                
VACANCY
                       Cyrus Artz, Staff Director
              Veronique Pluviose, Minority Staff Director
                                 ------                                

                 SUBCOMMITTEE ON WORKFORCE PROTECTIONS

                   KEVIN KILEY, California, Chairman

GLENN GROTHMAN, Wisconsin            ALMA ADAMS, North Carolina,
ELISE M. STEFANIK, New York            Ranking Member
JAMES COMER, Kentucky                ILHAN OMAR, Minnesota
MARY MILLER, Illinois                HALEY M. STEVENS, Michigan
ERIC BURLISON, Missouri              MARK TAKANO, California 













                         C  O  N  T  E  N  T  S

                               ----------                              
                                                                   Page

Hearing held on April 11, 2024...................................     1

                           OPENING STATEMENTS

    Kiley, Hon. Kevin, Chairman, Subcommittee on Workforce 
      Protections................................................     1
        Prepared statement of....................................     3
    Adams, Hon. Alma, Ranking Member, Subcommittee on Workforce 
      Protections................................................     5
        Prepared statement of....................................     7

                               WITNESSES

    Sharp, Kristin, Chief Executive Officer, Flex Association....     9
        Prepared statement of....................................    12
    Hoffman, Gabriella, Senior Policy Analysis, Independent 
      Women's Forum Center for Economic Opportunity..............    21
        Prepared statement of....................................    23
    Wells, Dr. Katie, Postdoctoral Fritz Fellow, Tech and Society 
      Initiative, Georgetown University..........................    30
        Prepared statement of....................................    32
    Palagashvili, Dr. Liya, Senior Research Fellow, Mercatus 
      Center at George Mason University..........................    36
        Prepared statement of....................................    38

                         ADDITIONAL SUBMISSIONS

    Foxx, Hon. Virginia, a Representative in Congress from the 
      State of North Carolina:
        Letter from Stride Health, Inc...........................    63
    Scott, Hon. Robert C. ``Bobby'', a Representative in Congress 
      from the State of Virginia:
        Statement dated May 25, 2023, from NELP..................    57
        Letter dated November 28, 2022, from AARP................    59

 
                    UNLOCKING OPPORTUNITY: ALLOWING
                       INDEPENDENT CONTRACTORS TO
                            ACCESS BENEFITS

                              ----------                              

                        Thursday, April 11, 2024

                            House of Representatives,
                   Subcommittee on Workforce Protections,
                     Committee on Education and the Workforce,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 9:01 a.m., in 
room 2175, Rayburn House Office Building, Washington, DC, Hon. 
Kevin Kiley [Chairman of the Subcommittee] presiding.
    Present: Representatives Kiley, Grothman, Miller, Burlison, 
Foxx, Adams, Stevens, and Scott.
    Staff present: Cyrus Artz, Staff Director; Nick Barley, 
Deputy Communications Director; Mindy Barry, General Counsel; 
Isabel Foster, Press Assistant; Daniel Fuenzalida, Staff 
Assistant; Sheila Havenner, Director of Information Technology; 
Alex Knorr, Legislative Assistant; Trey Kovacs, Professional 
Staff Member; Georgie Littlefair, Clerk; John Martin, Deputy 
Director of Workforce Policy/Counsel; Hannah Matesic, Deputy 
Staff Director; Audra McGeorge, Communications Director; Kevin 
O'Keefe, Professional Staff Member; Rebecca Powell, Staff 
Assistant; Maura Williams, Director of Operations; Brittany 
Alston, Minority Operations Assistant; Ni'Aisha Banks, Minority 
Intern; Ilana Brunner, Minority General Counsel; Stephanie 
Lalle, Minority Communications Director; Raiyana Malone, 
Minority Press Secretary; Kevin McDermott Minority Director of 
Labor Policy; Veronique Pluviose, Minority Staff Director; 
Dhrtvan Sherman, Minority Committee Research Assistant; Bob 
Shull, Minority Senior Labor Policy Counsel; Banyon Vassar, 
Minority IT Administrator.
    Chairman Kiley. The Subcommittee on Workforce Protections 
will come to order. I note that a quorum is present. Without 
objection, the Chair is authorized to call a recess at any 
time. How can we ensure that American workers remain secure and 
prosperous in the modern economy?
    Expanding access to benefits is central to that goal, 
benefits, including paid leave, retirement, health insurance, 
life insurance, childcare allowances, and more are 
indispensable in today's American workforce. According to the 
Society of Human Resources Management, 60 percent of employees 
find benefits extremely or very important when considering 
future jobs.
    However, millions of hardworking individuals across the 
country lack access to such benefits. Independent contractors 
who are not covered by Federal employment statutes, have 
indicated the benefits are important to them, but not at the 
expense--this is important, not at the expense of their 
flexible work schedule.
    For instance, a 2020 survey of ride share drivers showed 
that 67 percent of drivers prefer to get benefits with their 
independent contractor status intact instead of receiving 
benefits through traditional employment. Now, estimates vary, 
but on the high end nearly 70 million American workers rely on 
independent forms of work, and on the low end about 17 million.
    This segment of the workforce is only growing. That is a 
lot of wives, children, families that may not have reliable 
benefit coverage, no matter how you slice it. There are two 
basic ways forward. One is to accept tomorrow's workforce will 
have less access to benefits than today's. I think the better 
course, however, is to transition to a new model in which 
benefits are attached to the worker and not the employer.
    We should not resign our workforce to the constant struggle 
of searching for benefits every time they pursue a new form of 
work. American families should not be put at risk for the type 
of livelihood one chooses to pursue. Benefits need to be 
flexible, customizable and fit the nature of every type of 
work.
    The solution is very clear. It is portable benefits. By 
attaching benefits to the worker, portable benefits build a 
bridge from traditional employment to the modern workforce 
without putting families at risk. In fact, this transition is 
already underway. Many states are spearheading portable benefit 
program, and more than 10 states are taking a serious look at 
implementing portable benefits.
    In my State, California, there are over 200,000 Uber 
drivers alone that stand to benefit from such a program. That 
number does not include the thousands of photographers and 
freelance writers, and hundreds and hundreds of other types of 
freelancing that exist across the Golden State and across the 
country.
    Now, I will be the first to admit that neither California, 
nor the Department of Labor have been especially supportive of 
independent workers. Quite the contrary. However, I see policy 
movement in this direction as common ground that we can all 
share, regardless of which side we have been on, on some of 
these more vexing issues to this point.
    With that, I look forward to the insights of our witnesses, 
and I yield to the Ranking Member for an opening statement.
    [The statement of Chairman Kiley follows:]
    
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    Ms. Adams. Thank you, thank you, Mr. Kiley, and thank you 
to our witnesses for being here today. Basic worker 
protections, including fair wages, reasonable hours, and safe 
workplaces are grounded in two key employment laws: the Fair 
Labor Standards Act and the Occupational Safety and Health Act.
    Unscrupulous firms have sought ever since to erode 
protections, which generations of exploited workers fought and 
sometimes died to achieve. Many companies are now squeezing 
workers to save money by shifting away from direct employer-
employee relationships to outsource subcontractors and hiring 
what they claim are independent contractors.
    Doing this benefits companies by saving labor costs, while 
offloading risk to workers. Committee Republicans can rebrand 
misclassifying workers as independent contractors, or gig 
workers, a thousand times over. The problem is the same. These 
workers are deprived of basic protections like minimum wage, 
paid leave, and safe workplaces.
    Instead of following the law, gig platforms have worked in 
State legislatures across the country to change the law around 
their models. More recently, after mounting reports of horrific 
on-the-job incidents, assaults, and working conditions, gig 
platforms have begun to propose what seems on the surface to be 
generous new supplements to workers' income.
    As they funneled millions into campaigns for portable 
benefits, they are continuing to push for special laws to 
support their business practice of misclassifying workers as 
independent contractors. In California, for example, gig 
platform companies spent over 200 million dollars on 
Proposition 22, a ballot measure that forced gig platform 
drivers to be classified as independent contractors.
    In exchange, gig platform companies established portable 
benefits that are weak replacements for health insurance, paid 
leave, and other essential benefits. Even these watered-down 
benefits are inaccessible for most applicable workers. In a 
2021 survey of 531 California drivers, only 10 percent reported 
receiving a health care stipend, which, I might add, only 
covers 82 percent of the cost of a Bronze Plan in the ACA 
marketplace.
    If corporations with multi-billion-dollar valuations are 
truly interested in improving the lives of their workers, they 
can start by ending the practice of misclassifying their 
workers as independent contractors. Unfortunately, a consistent 
lack of profitability suggests that misclassification is not a 
coincidence, but a core principle of gig platforms' business 
model.
    Our policy choices shape workers' rights and conditions of 
employment. Congress can strengthen and modernize protections 
for American workers while also promoting innovation. 
Misclassifications are not an innovation. Finally, I would like 
to make one last point. This Subcommittee should be focused on 
improving workers' protections.
    This is the fifth time that this Subcommittee has met this 
Congress, yet four of the five hearings have focused on how 
Congress can tilt the scale in favor of corporations to allow 
them to improve their bottom line on the backs of workers. We 
have had no hearings on abusive child labor violations. We have 
had zero hearings on wage theft, which robs workers of billions 
of dollars every year.
    That is billions with a B. According to the Economic Policy 
Institute, Americans lose more from wage theft than all 
robberies, burglaries, and motor vehicle thefts combined. We 
have had zero hearings on how to protect workers from unsafe 
conditions such as heat or deadly airborne viruses. These are 
the issues that we should be focused on, and not how we can 
deny Uber drivers access to affordable health care, or a 
reliable retirement plan, or unemployment insurance, or 
employment training, or overtime, or paid leave.
    My colleagues on the other side of the aisle also have us 
in a race to the bottom. For the sake of workers and our 
economy, I hope that this will be the last hearing where the 
basic rights of workers are ignored. With that, Mr. Chair, I 
yield back.
    [The statement of Ranking Member Adams follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
    
    Chairman Kiley. Pursuant to Committee Rule 8-C, all 
Committee members who wish to insert written statements into 
the record may do so by submitting them to the Committee Clerk 
electronically, in Microsoft Word format by 5 p.m. after 14 
days from the date of this hearing, which is April 25, 2024.
    Without objection, the hearing record will remain open for 
14 days after the date of this hearing, to allow such 
statements and other extraneous material referenced during the 
hearing to be submitted for the official hearing record.
    I will now turn to the introduction of our distinguished 
witnesses. Our first witness today is Ms. Kristin Sharp, who is 
the Chief Executive Officer of the Flex Association, located 
here in Washington, DC.
    Our second witness is Ms. Gabriella Hoffman, who is a 
Senior Policy Analysis for the Independent Women's Forum Center 
for Economic Opportunity, located in Winchester, Virginia.
    Our third witness is Dr. Katie Wells, who is a Postdoctoral 
Fritz Fellow at the Tech and Society Initiative at Georgetown 
University here in D.C.
    Our final witness is Dr. Liya Palagashvili, who is a Senior 
Research Fellow with the Mercatus Center at George Mason 
University, located in Arlington, Virginia. We thank the 
witnesses for being here today, and look forward to your 
testimony.
    Pursuant to Committee Rules, I would ask that you each 
limit your oral presentation to a 5-minute summary of your 
written statement. I would also like to remind the witnesses to 
be aware of their responsibility to provide accurate 
information to the Subcommittee. I will first recognize Ms. 
Sharp.

    STATEMENT OF MS. KRISTIN SHARP, CEO, FLEX ASSOCIATION, 
                        WASHINGTON, D.C.

    Ms. Sharp. Chairman Kiley, Ranking Member Adams, and 
distinguished members of the Subcommittee, thank you for the 
opportunity to appear before you today. My name is Kristin 
Sharp, and I am the CEO of the Flex Association, the voice of 
the app-based economy.
    We represent America's leading rideshare and delivery 
companies, DoorDash, Grubhub, HopSkipDrive, Instacart, Lyft, 
Shipt and Uber. We believe in creating opportunities for people 
to live, work and run their businesses on their own terms. The 
app-based economy is an opportunity economy. It is enabled 
thousands of restaurants and merchants to grow and compete in 
today's economy. It better prepared them for the future.
    For consumers, the app-based industry has brought 
unparalleled savings, choice and convenience. For workers, it 
is an opportunity to be your own boss. Being your own boss is a 
powerful thing. Whether you are a single parent, a student, or 
a recent retiree, app-based innovations provide additional 
opportunities to earn money with flexibility and control over 
your time and earnings.
    We are still a young industry, but one that is quickly been 
embraced by millions of Americans. Last month, Flex released 
the first ever app industry economic impact report. The top 
line, the industry contributed more than 212 billion dollars in 
GDP last year.
    As we look to the future our mission at Flex is to ensure 
that app-based innovations continue to deliver for American 
consumers and workers, which is why we are excited to spend 
time today discussing a portable benefits system.
    One key way to support independent workers is to facilitate 
their access to portable benefits. Benefits tied to the person, 
rather than the job. Independent work, outside of traditional 
employer, employee relationship is not new. In fact, Upwork 
estimates that 64 million people earned freelance income last 
year alone.
    Technology like apps have made accessing freelance work 
easier than ever. At the touch of a button for anyone who wants 
to open the app. This work offers a level of autonomy not 
possible in a traditional job. An app-based worker, you do not 
have to log on for a specific amount of time, or at a 
particular time, or even a particular place.
    You can multi-app, or earn through more than one company at 
a time at your own discretion. In short, you can work as much 
or as little as the market allows, when, where and if you want, 
in ways that make sense for your life and personal obligations. 
That flexibility and scalability is what people like about this 
work. It is what drew 7.3 million active drivers in 2022 alone.
    Data bears this out. 90 percent of app-based workers say 
flexibility is why they choose to drive or deliver. Workers 
value flexibility so much that a majority say they would choose 
to keep their flexible schedule, rather than received a 50 
percent pay bump with a fixed schedule.
    The common thread is that app-based work is overwhelmingly 
additive, and nearly two-thirds of app-based earners spend 15 
or fewer hours per week earning. Why do traditional W-2 
employees have better access to benefits? First, Federal and 
State employment laws are partly to blame.
    Misclassifying a worker as an independent contractor, even 
unintentionally can trigger liability. Companies choosing to 
provide independent workers with benefits under the wrong 
circumstances, could open themselves up to substantial legal 
risk.
    Second, conventional workplace benefits are tied to the 
employer rather than the worker, so people have to change them 
every time they change jobs. This model just does not work for 
independent workers. Last summer, Flex released a set of 
principles to guide portable benefits development.
    To work well, portable benefits must be flexible, so that 
workers can choose the kinds of benefits they need. Portable, 
so that contributions are tied to the worker, so that they can 
accrue from more than one income source and proportional to 
their earnings.
    Any potential Federal portable benefits framework will take 
time. In the meantime, states are experimenting with ways to 
support independent workers. Just last week for instance, 
DoorDash launched a new portable benefits pilot program in 
partnership with Pennsylvania Governor Shapiro, in the hopes 
that it can serve as proof of concept.
    Utah is following suit. In conclusion, Congress can support 
State efforts by clarifying that a company's contributions to a 
portable benefits program authorized by State law, cannot be 
used as a factor in determining a worker's labor classification 
status. Companies looking to improve the status quo, and 
enhance independent work should not be penalized for their 
creativity.
    Members of the Subcommittee, we appreciate your dedication 
to entrepreneurship and American ingenuity, and we look forward 
to working with you on policies that make sense for the 21st 
Century economy. Thank you, and I look forward to your 
questions.
    [The Statement of Ms. Sharp follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
      
    Chairman Kiley. Thank you very much, Ms. Sharp. I will now 
recognize Ms. Hoffman.

      STATEMENT OF MS. GABRIELLA HOFFMAN, SENIOR POLICY 
        ANALYST,  INDEPENDENT WOMEN'S  FORUM CENTER FOR 
        ECONOMIC OPPORTUNITY, ALEXANDRIA, VIRGINIA

    Ms. Hoffman. Chairman Kiley, Ranking Member Adams, and 
members of the Subcommittee, thank you for the opportunity to 
participate in today's hearing to explore portable benefits 
access for independent contractors. My name is Gabriella 
Hoffman, and I am a Senior Policy Analyst with the Independent 
Women's Forum, Center for Economic Opportunity.
    We are a nonprofit organization that advances policies that 
enhance people's freedom, opportunities and well-being. My work 
has chiefly focused on exploring opportunities for independent 
contractors. I am also an award winning freelance writer, a 
media strategist who has personally benefited from independent 
contracting opportunities.
    Today 64 million Americans partake in full-time, part-time, 
or occasional freelance work. It is estimated that half the 
workforce are 86.5 million individuals who will partake in 
flexible work by 2027. These workers overwhelmingly desire to 
maintain their independence, and do not self-identify as 
traditional W-2 employees.
    Nevertheless, regulators frequently target these 
individuals using worker classification tests, intended to 
force them back into employee arrangements, alleging they do 
not have access to benefits like health insurance. They believe 
they know what is best for these workers but let us put that 
hubris aside.
    To deter forced reclassification while preserving worker 
flexibility, policymakers should create a voluntary portable 
benefit systems that decouples benefits like health insurance 
from traditional employment. The Journal of Economic 
Perspectives shows that 80 percent of self-employed U.S. 
workers would support a voluntary, portable benefits program.
    While some self-employed workers forego benefits, like 
health insurance, many do secure coverage on their own, or get 
coverage through spouses and family members. About 25 percent 
of freelance workers do not possess health benefits, but could 
be open to obtaining them through a voluntary portable benefits 
program.
    Given the success of portable benefits for employees, the 
model could be replicated for independent contractors and gig 
workers considering benefits. States are already adopting the 
portable benefits model for freelancers. In March, 2023, Utah 
became the first State in the U.S. to create a voluntary 
portable benefits plan for independent contractors and gig 
workers.
    The law states that portable benefit planned contributions 
are voluntary and cannot be used to determine an individual's 
worker classification status. Utah is not the only State 
exploring portable benefits for independent contractors. 
Similar proposals have been introduced and debated in 
Massachusetts, Minnesota, New Jersey, Virginia, West Virginia, 
and Wisconsin.
    In 2022, Washington State established a portable benefits 
program for rideshare drivers who are independent contractors. 
Following the disastrous rollout of California's ABC test, that 
forcibly reclassified most Golden State independent workers as 
traditional employees, Californians supported a ballot measure 
to allow rideshare drivers to keep their independent status, 
while enjoying access to limited benefits.
    Federal lawmakers have similarly mulled creating a portable 
benefits grant fund to incentive states, localities and 
nonprofit organizations to experiment with the portable 
benefits models. If the government refuses to modernize 
benefits, the free market is fully capable of developing and 
revolutionizing a voluntary, portable benefits program.
    In 2008, the Freelancer's Union, established the first ever 
portable benefit system for freelancers under the Freelance 
Insurance Company to offer benefits. Last week, financial 
technology company Stride, announced the establishment of a 
pilot portable benefit savings account program, Stride 
contributions for DoorDash drivers in Pennsylvania.
    Independent contractors are their own best negotiators, and 
are fully capable of securing their own benefits without the 
threat of forced reclassification into W-2 employee status. To 
further unleash our economy's economic potential, policymakers 
must bring labor and tax law into the 21st Century to ensure 
all workers, not just employees, can have access to and pay 
into a benefits program should they choose.
    During my time as a full-time freelancer, I was empowered 
in my work, and fully capable of obtaining benefits on my own 
accord without entities mandating choices. Flexibility and 
freedom are primary motivations to enter independent contractor 
work arrangements, but freelancers like me, regardless if they 
are full-time, part-time, or occasional freelancers, should not 
have to choose between independence and security benefits like 
basic dental, health and vision coverage.
    More American workers will make the jump into flexible work 
arrangements if they know they will have some security with 
respect to benefits. I thank the Subcommittee for the 
opportunity to testify today, and your willingness to educate 
the public about making portable benefits a viable option for 
independent contractors who desire them.
    [The Statement of Ms. Hoffman follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
    
    Chairman Kiley. Thank you very much, Ms. Hoffman. I now 
recognize Dr. Wells.

     STATEMENT OF DR. KATIE WELLS,  POSTDOCTORAL FRITZ  
       FELLOW, TECH AND SOCIETY INITIATIVE, GEORGETOWN 
       UNIVERSITY, WASHINGTON, D.C.

    Dr. Wells. Thank you, Chairman Kiley, Ranking Member Adams, 
and members of the Subcommittee for this opportunity to 
testify. My name is Katie Wells, and I am a Postdoctoral Fellow 
at Georgetown University. For 8 years, I have investigated the 
working conditions and policy campaigns of the largest gig 
economy companies in the U.S.
    Last year, I published a report about the instant delivery 
industry, as well as a book about Uber. Today, I will address 
the shortcomings of new portable benefit proposals. True 
portable benefits are substantial programs that are maintained 
across jobs like social security, unemployment insurance, and 
paid family leave.
    The new portable benefit proposals put forward by gig 
companies are different. They are restricted to specific 
sectors and negligible in size. The new DoorDash pilot program 
that we have begun to hear about offers drivers who work a 
certain amount on its platform alone a tiny subsidy of 4 
percent.
    This means a driver who earns $2,000.00 in a month will 
receive $80.00 in benefits. While gig companies and their 
associations promote this program as a policy innovation, in 
reality it is two things. One, an inferior contribution for 
workers, and two, a public giveaway for corporations. New 
benefit proposals are a distraction from the ongoing problem of 
worker misclassification, which denies workers actual benefits.
    What is often lost in debates about misclassification, is 
it is not just the workers who lose out. The public and our 
government lose out too. Gig companies amass billions of 
dollars in valuations but avoid even the most basic 
contributions to social programs. During the pandemic, the 
Federal Government created an emergency assistance program for 
tens of millions of American gig workers.
    The gig companies did not contribute a dime, leaving the 
Federal Government with an 80 billion dollar bill. In 
interviews with hundreds of Uber and Lyft drivers, Instacart 
delivery shoppers, elderly care workers, and app-based nurses, 
I have seen firsthand the costs of misclassification.
    This year, I met Ashley, a 31-year-old certified nursing 
assistant, or CNA, in Pennsylvania. For 2 years, Ashley has 
worked in nursing homes through ShiftKey, a new platform that 
classifies her as an independent contractor. On ShiftKey, 
Ashley can technically set her own rate and bid on shifts, but 
to actually win shifts over peers, she has had to lower and 
lower her hourly rate.
    It is a race to the bottom. Ashley is also required to pay 
$6.00 in fees for each shift, as well as annual bills for drug 
tests and vaccines. She is uninsured and receives no paid sick 
leave. As she puts it, ``You get treated differently because 
you are not an employee.'' Ashley's working conditions would 
not be improved with the kind of portable benefit proposals put 
forward by gig companies.
    To make matters worse, labor platforms like ShiftKey are 
part of a massive lobbying effort to exempt themselves from 
labor standards. As I document in my new book, Uber has been at 
the forefront of this decade-long and nationwide campaign to 
minimize regulation of gig companies.
    Since 2017, Uber and its peers have won legislation already 
in 34 states to preempt municipal law. Gig companies are 
aggressively pitching proposals like portable benefits to 
soften the image of their exploitative business. Portable 
benefits are a new strategy to fortify an old model of worker 
misclassification and tax avoidance.
    These new, so-called benefit plans hurt app-based labor 
platforms like ShiftMed and Gale that play by the rules and 
rightly pay into social security and employment insurance and 
paid family leave. ShiftMed and Gale offer their healthcare 
workers both the flexibility to choose their shifts on an app 
and the protections they deserve as American workers.
    It is unfair and impractical for these companies to have to 
compete with companies like ShiftKey that shirk their 
responsibilities to workers like Ashley. Thank you.
    [The Statement of Ms. Wells follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Kiley. Thank you. Our final witness is Dr. Liya 
Palagashvili, you are now recognized for 5 minutes.

     STATEMENT OF DR. LIYA PALAGASHVILI, SENIOR RESEARCH
       FELLOW,  MERCATUS CENTER AT  GEORGE MASON UNIVER-
       SITY, EPHRATA, PENNSYLVANIA

    Ms. Palagashvili. Good morning, Chairman Kiley, and members 
of the Subcommittee on Workforce Protections. It is an honor to 
testify before you. My name is Liya Palagashvili, and I am a 
Labor Economist at the Mercatus Center at George Mason 
University.
    I study the independent workforce, and the changing nature 
of work. My research on flexible benefits for independent 
workers has motivated State legislative reforms over the past 
year, as we heard in Utah, and I would like to share some of 
those insights with all of you.
    My testimony today focuses on legalizing independent 
contractor's access to fringe benefits, and this is beyond what 
the gig economies are doing with portable benefit solutions 
across states. My three key points are one, independent 
contractor lives would be enhanced if they had access to 
benefits.
    Two, states are experimenting with various portable 
benefits models so that workers are not forced to choose 
between structured employment with benefits on the one side, 
and flexible work without benefits on the other side. Three, a 
Federal policy can provide a safe harbor for State and local 
experimentation with these portable benefit systems.
    On my first point, it is a rare change when your research 
so closely connects to your personal life, so before I dive 
into the subject matter, I would like to share a brief story. 
In January 2020, my father who is sitting right behind me 
actually, lost his work. He had been a driver his whole life, 
even before coming to the United States.
    The U.S. company he had been contracting with told them 
they are moving away from an independent contractor model to an 
employment based model. My father was offered a position to 
become a full-time employee of the company. Now, what did he 
do? He actually turned it down.
    He continued to remain without work until he found an 
opportunity to be an independent contractor again. What my 
father's story illustrates is that regardless of worker 
classification policies that may tip the scale in one direction 
or the other like the Department of Labor's recent Independent 
Contracting Rule, or what happened in California with Assembly 
Bill 5.
    There will still be millions of U.S. workers who will 
continue to engage in independent contracting, or self-employed 
work just because they want to. For some, like my father, being 
a contractor rather than an employee gives him some freedom to 
work on side projects and side businesses. For others it is out 
of necessity. Some workers have disabilities or life 
circumstances that hinder their participation in the labor 
market.
    For the vast majority of independent contractors, as found 
by the IRS tax records on this, and especially those on app-
based delivery and transportation platforms, being a contractor 
rather than an employee is simple about the opportunity to make 
side income, or engage in side hustling.
    The question before us is how to address the challenges 
confronting millions of independent contractors who will choose 
to remain self-employed regardless of the broader worker 
classification debates. This brings me to my second point, 
where portable or flexible benefits reforms can be monumental.
    One of the key challenges today is that regulations 
restrict organizations from providing independent contractors 
with benefits. If an organization were to provide benefits to 
their independent contractors, it would risk that worker being 
reclassified as an employee. This discourages companies from 
providing benefits to independent contractors.
    That means our current regulatory framework does not 
provide an option for workers to have access to both 
independent jobs, and to benefits. This is why states are now 
beginning to experiment with various portable benefits models. 
Last year, Utah passed a bill that removes the presence of 
benefits as a factor in worker classification tests, as we 
heard already.
    Other states are experimenting with other solutions like 
tax credits for independent contractors and so forth. As we 
heard again just last week, with the backing of Pennsylvania 
Governor, the platform company DoorDash launched a first of its 
kind portable benefits program, making contributions to workers 
flexible savings account managed by the benefits company 
Stride.
    These are just a few ideas of how states are implementing 
reforms to help all workers, not just employees, better step 
into the future. Now my third point is the vital role that 
Federal policy can play to help legalize access to benefits for 
independent contractors.
    This past year I co-led the Utah Flexible Benefits Working 
Group under the leadership of Utah Senator John Johnson. One of 
the key takeaways was that the biggest barrier to flexible 
benefits implementation in Utah was fear from the Federal 
level.
    Companies were discouraged from providing benefits to 
independent contractors in Utah, regardless of the new State 
law because they could still be penalized by agencies like the 
IRS and the Department of Labor.
    Therefore, Federal policymakers should create a safe 
harbor. A policy would need to explicitly State that no Federal 
agency can use the presence of benefits to determine whether a 
worker is an independent contractor or an employee. Thank you.
    [The Statement of Ms. Palagashvili follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Kiley. Thank you very much for your testimony. 
Under Committee Rule 9, we will now question witnesses under 
the 5-minute rule. I will recognize the Representative from 
Illinois, Ms. Miller for 5 minutes.
    Mrs. Miller. Thank you, Chair Kiley, and thank you to all 
of our witnesses for being here today. Ms. Hoffman, as noted in 
your written testimony half of the U.S. workforce is expected 
to be freelancing by 2027. As an independent contractor 
yourself, can you explain what is so attractive about 
independent work?
    Ms. Hoffman. I would be happy to, Representative Miller, 
and thank you for your support of the independent contracting 
lifestyle. Independent contracting, freelancing, however you 
call it, contingent worker, kind of work relationships, they 
have been around for a long time. It is not just a new mode of 
work. They have actually been around for, I think, since the 
inception of the country.
    People have worked independently. I learned about 
independent contracting from my father, who is a general 
contractor, and he runs his own business. I am from California 
originally; we saw what California policies did. In Virginia, 
where I live, it is much more attractive.
    I started to do freelancing seven and a half years ago, 
almost 8 years ago, because I was partly interested in doing 
it, and then I took a job I did not like, and I figured I have 
to dig myself out of a bad opportunity, work my way up, and 
within 3 years of starting independent contracting, I was able 
to really make it.
    They say women usually take about 3 years to achieve some 
modicum of success in freelancing, and once you do, you can 
charge forward. For me, I saw a lot of success being a full-
time freelancer. It has changed a little bit. I do it more on a 
part-time basis now these days. You are empowered, you have 
control of your work.
    You can work with multiple people. You can make a lot of 
money. You can work with--for me it is about working with 
incredible clients. I get to travel the country. I get to film 
and speak and do stuff in conservation, hunting, fishing, 
wildlife, lots of different issues as well.
    You are just empowered. To lose that ability to not have 
flexibility to choose who you work with, how to work and your 
earnings, could be very detrimental to the future of this 
workforce, and especially as you mentioned. In my testimony, 
the fact that the economy is naturally the markets are 
dictating this shift to a flexible work arrangement.
    For the government to not welcome that, but rather to 
inhibit that, would stifle so many people's livelihoods as we 
see not only in California, but all across the country. I like 
to extol the benefits because I have personally been on the 
receiving end of it.
    I have encouraged people to go into freelancing when they 
have really been on some kinds of the sorts of being displaced 
from the workforce. It is an alternative. If you do not like 
your W-2 arrangement, you would want hybrid. More and more 
people, young people especially. I am a millennial and I talk 
to Gen Z'ers, millennials, and for them, this is the way that 
they want to work.
    Having a portable benefits option could compel more and 
more of them to consider this, especially if they are unsure of 
the kind of safety net, or the kind of opportunities to have 
some security from a W-2.
    A lot of people do not like working traditional jobs these 
days, and having flexibility through IC work, or even gig work 
is going to really just revolutionize the workforce more, and 
keep young people happy and wanting to work, instead of being 
displaced or having unemployment.
    Mrs. Miller. I agree. Ms. Hoffman, also we have heard today 
that workers are misclassified as independent contractors 
instead of employees. Are efforts to reclassify self-employed 
individuals as employees, is that helpful to these workers, 
especially when survey after survey shows the vast majority do 
not wish to lose the flexibility that working as an independent 
contractor provides?
    Ms. Hoffman. You are absolutely correct, Representative 
Miller, and efforts to forcibly reclassify independent 
contractors who self-identify, but also Americans also perceive 
to be truly independent contractors. It is a losing issue. It 
does not matter how you vote, where you lean politically.
    More and more people have recognized that if you force 
people out of these arrangements, that they voluntarily, 
happily, and would be more than willing to maintain and 
protect. If you force those people out of work arrangements, 
they will be completely distraught, and they do not want to 
move back to something that is more constricting, or something 
that is not so desirable for their lifestyle.
    At Independent Women's Forum, we work with a lot of women 
who are caretakers, they have you know, health needs. 
Personally, I have a friend in Virginia who is a fishing 
industry influencer, and she has health issues. She said if she 
was still in a traditional W-2 employee work relationship, she 
would not be able to set aside time for her health needs.
    I have seen first-hand through my friend's circle. We 
talked to a lot of women, and personally speaking too, you rid 
of that flexibility option by forcing people back into this 
under the guise of fighting misclassification. That would 
totally upend the economy and people's freewill.
    The cost of forced classification is tenfold sometimes, and 
depending upon the State that you look into. Rhode Island, I 
did some inquiry into that, their efforts to forcibly 
reclassify Rhode Island independent contractors, gig workers, 
back into W-2 employees could be twelvefold the cost of 
fighting so-called misclassification, so I do not think these 
efforts are worthwhile.
    Mrs. Miller. Thank you, Ms. Hoffman. Thank you for your 
testimony. It is very helpful.
    Chairman Kiley. I will now recognize the Ranking Member, 
Ms. Adams for 5 minutes.
    Ms. Adams. Thank you, Mr. Chairman. I do want to ask some 
questions. Thank you all for your testimony. Dr. Wells, you 
testified that Uber and other platform companies treat their 
workers as independent contractors, yet they continue to 
exercise employer-like control over them.
    Can you speak to some of the ways that the on-demand 
platform companies exert this kind of control?
    Dr. Wells. Sure. Thank you. Gig companies across the 
spectrum continue to dictate how and when work is done, despite 
touting the flexibility of their industry. Gig-based companies 
direct workers' interactions with customers, detail even what 
vehicles might be appropriate for the job, supervise and 
evaluate their workers basic driving habits in ride-based 
economies, like how fast they brake, how often they speed.
    These industries, apart from Uber and its focus on driving, 
exert significant control over termination and promotion. The 
worker I described, Ashley, if she canceled a shift she was 
less likely to get good bids for the next week. This industry 
sets all fair rates, they penalize workers for refusal of work, 
and most importantly they hide the details of pay, so workers 
really struggle to figure out what exactly they will be 
compensated.
    Ms. Adams. Okay. I was going to ask you about the income, 
and how they described the conditions of their work and their 
ability to earn a decent income.
    Dr. Wells. Yes. One worker said to me it is a system of 
smoke and mirrors. Another said it was a mirage that they were 
ever able to achieve financial stability. I think what is 
important for us to know about gig work is that it includes 
opaque pay structures, with things like tip baiting and 
promotion baiting, and most importantly, this thing called 
personalized pay.
    On the same day at the same hour in the same workplace, two 
workers can be paid vastly different amounts for the exact same 
work, so that old adage of equal pay for equal work, it goes 
out the window.
    Ms. Adams. All right. Let me move on and ask you, you 
mentioned a legislative strategy that you say Uber developed in 
Washington and took on the road to communities across the 
country. What is that strategy and the high investment of these 
companies in this strategy? For example, gig platforms invested 
more than 200 million dollars in the California Prop 22 
campaign, and they have invested even more in Massachusetts.
    Uber has only reported an annual profit once in 15 years of 
existence.
    Dr. Wells. Yes, after a 31 billion dollar loss with Saudi 
and Soft Bank money. The legislative strategy that Uber has 
taken on the road and then exported to these other industries 
is to break the law, convince customers that the law is unjust, 
and then change the law.
    Ms. Adams. Wow. How is it that these companies have the 
resources for this investment when according to what is 
publicly reported about their finances, it sounds like they are 
mostly money losing enterprises?
    Dr. Wells. They may well be. I think it has been undecided 
whether they are profit creating, but what is important to keep 
in mind is if they do create a profit, it has been created 
through the unfair system of misclassification, which does not 
pay for the real cost of labor.
    Ms. Adams. Wow. Okay. Well, thank you very much for 
answering those questions, and thank you for your work. I 
appreciate it. Mr. Chairman, I yield back.
    Chairman Kiley. The Representative from Wisconsin, Mr. 
Grothman is recognized for 5 minutes.
    Mr. Grothman. Okay. First question for Ms. Sharp. If we 
reclassify, and this is clearly the goal of some people. 
Reclassifying independent contractors as employees, what affect 
will that have on them? What things will they perhaps not like 
about that reclassification?
    Ms. Sharp. Yes. Thank you very much for your question, 
Congressman. I think first and foremost, it is important to 
recognize that there are fundamental differences between being 
an independent contractor and having control of your own time, 
and being a traditional employee.
    Unlike a traditional employee, an app-based worker, and any 
independent contractor can decide how long they want to work, 
whether or not they want to work. The frequency with which they 
work, and whether or not they work for a competitor, or another 
income source at the same time. None of those things are true 
in traditional employer/employee relationship.
    I think that it is also really critical to recognize that 
90 percent of app-based workers say that one of the key reasons 
they do the work is for flexibility. They like the fact that 
they have that kind of entrepreneurial control over their time 
and the scalability of their income that can go up and down at 
their discretion.
    Mr. Grothman. Or for people who like freedom, right, a 
little more freedom, that sort of person.
    Ms. Sharp. It is an industry of people who are pursuing 
their financial goals, who are working around their personal 
obligations, and who are overwhelmingly opting into this 
industry, even when there are 9 million traditional jobs 
available.
    Mr. Grothman. Yes. If we switch to some of these more 
portable benefits we are talking about today, what would the 
millions who work for the type of area which independent 
contractors are the norm, DoorDash, Lyft, Uber, that sort of 
thing, how would they view the ability to get portable 
benefits?
    Ms. Sharp. Well, I think they view it as the best of both 
worlds, sir. They would be able to maintain their flexibility 
and freedom and independence, and they would be able to at the 
same time accrue benefits of their choosing from more than one 
income source.
    Mr. Grothman. Okay. Ms. Palagashvili, let us see if we get 
that right. Probably not. In your testimony you say that most 
independent contractors are already W-2 employees somewhere 
else, but they choose to work as independent contractors on the 
side. First of all I didn't know, is that true?
    Ms. Palagashvili. Yes. According to IRS tax records, which 
is on the IRS website, a study that they did, most independent 
contractors in the U.S. have full-time W-2 jobs, and they use 
independent contracting as a side income. This is especially 
true in the app-based world where almost all, I should say or a 
vast majority, of app-based workers use the app-based economy 
and for side income side hustles.
    Mr. Grothman. I could really see why somebody who already 
had one job, would really desire flexibility in that second 
job, so really if they had a traditional W-2 sort of job, that 
would probably be almost impossible, huh?
    Ms. Palagashvili. That is correct, and that is part of the 
problem, right? If you survey these workers, most of them say 
well, I already have a W-2 job, or I already have something 
else that I am doing. I want this as side income or a side 
hustles. For those workers being employees, either as part-time 
or full-time employees doesn't make sense.
    Again, for those who are making it a side income. There 
might be some workers who you know are full-time working 
independent contractors who want to be employees, but that is 
not the case for the majority of the workforce. That is the key 
emphasis. The majority of the workforce, especially in the app-
based world are supplemental earners who have full-time jobs 
elsewhere.
    Again and this is, by the way, IRS tax records, Economic 
Policy Institute, Progressive Leaning also found that when you 
think social security data, that these self-employment 
opportunities tend to be side income, not part of the main 
jobs. Thank you.
    Mr. Grothman. Okay. One more quick thing for Ms. Hoffman. I 
want to get all three of you in here. California's AB5 reduced 
self-employment by about 11 percent in California. Despite the 
law's intent to push more people into traditional employment, 
AB5 led to a four and a half percent drop in overall 
employment.
    Is the administration's Independent Contractor Rule likely 
to have similar effects here or nationwide?
    Ms. Hoffman. Congressman Grothman, yes. IWF believes that 
the Independent Contractor Rule, which was just finalized could 
have a similar deleterious effect, and we are going to be 
studying those effects very shortly.
    Mr. Grothman. Okay. Thank you.
    Chairman Kiley. The Chairwoman of the Full Committee, Dr. 
Foxx is recognized for 5 minutes.
    Mrs. Foxx. Thank you Mr. Chairman. Dr. Palagashvili, 
according to your written testimony our current regulatory 
framework does not provide an option for workers to ``have 
access to both independent jobs and to benefits.'' Could you 
discuss State efforts to remove barriers for workers to access 
flexible or portable benefits?
    Ms. Palagashvili. Thank you for your question, 
Representative. As I mentioned, the key thing is that 
independent contractors cannot legally access benefits without 
there being a tax or reclassification risk. What states are 
doing, like Utah for example passed this last year, is they are 
removing the presence of benefits as an indicator, as a factor, 
for whether a worker should be classified as an independent 
contractor, or an employee.
    I want to mention again that states are doing this, and 
despite them doing this, there still needs to be a Federal 
policy to allow the sort of growth of portable benefit 
solutions at the State level, precisely because companies and 
workers are still under IRS and DOL determinations.
    The IRS explicitly states this on their website. If we see 
the presence of benefits to independent contractors, that is a 
little checkmark for the employee side, so that exists. These 
sort of policies like what states are doing in Utah, are 
removing that presence of benefits for determining whether a 
worker is an employee or an independent contractor.
    Mrs. Foxx. Thank you. What more could be done at the State 
level to encourage companies to offer portable benefits?
    Ms. Palagashvili. That would be the first. It is a small 
step, but it is necessary because again it is about legalizing 
access to benefits for independent contractors. States could 
also work on different tax credits, or tax incentives, both for 
independent contractors, and companies. Things like this can be 
done at the Federal level as well.
    Other things that states are thinking about are association 
health plans, so that independent contractors can band together 
and buy health insurance. At lower risk pool, and therefore 
lower pay premiums that they would have to pay for health 
insurance. Again, the key thing is kind of this barrier that 
exists, both at the State level and at the Federal level.
    As I mentioned in my testimony, this is regardless of the 
broader worker classification debates. All it says is if 
Federal policy can remove the presence of the benefits factor, 
that would at least help unleash access to benefits for 
independent contractors, thank you.
    Mrs. Foxx. Thank you. Ms. Sharp, as has been discussed here 
today, app-based delivery and transportation platforms offer 
maximum flexibility and allow individuals to work on their own 
schedule. What do app-based independent contractors value more, 
flexible work schedule, or having access to benefits?
    Ms. Sharp. Thank you for the question, Dr. Foxx. I think 
that in truth as we have discussed, flexibility is a key and 
critical reason that people are doing this work, and it is one 
of the things that motivates people to do the work. We have so 
many stories of people who have personal health issues, 
children with cancer, children with autism, and they need to 
work around doctor's appointments.
    We have talked a little bit already about the fact that 
many, many workers are doing this to supplement a full-time 
job, to combat inflation, or to earn extra income and get ahead 
on their financial goals. To clarify a little bit, some of the 
points that have come up earlier, 80 percent of workers in the 
app-based industry work fewer than 20 hours a week, and 60 
percent work fewer than 10 hours per week, doing app-based 
earning.
    It is a tool that people use to get ahead in their 
financial goals. That said, if they can keep that flexibility 
and also have an opportunity for benefits that accrue to them 
based on that earning, that is the best of both worlds.
    Mrs. Foxx. Do you think Congress should keep these workers 
preferences in mind when considering changes affecting 
independent contractors?
    Ms. Palagashvili. Absolutely.
    Mrs. Foxx. Thank you. Ms. Hoffman, some estimates put the 
total number of American independent workers at over 70 
million. Speaking as someone who performed independent work 
yourself, will you discuss why flexible benefits might be 
attractive to those currently working as independent 
contractors?
    Ms. Hoffman. Thank you, Representative Foxx. Yes. As 
independent contractors when you are, let us say, maybe facing 
some health issues, or you just want to have more security 
portable benefits could be a feasible option for you. Having 
gone through the Obamacare Marketplace, which I do not find to 
be very portable, personally speaking, having limited options.
    A truly portable benefit system would allow more choice, 
more offerings, lead to cheaper healthcare options, and plans 
that are more customizable.
    Mrs. Foxx. Thank you. I yield back, Mr. Chairman.
    Chairman Kiley. Mr. Burlison is recognized for 5 minutes.
    Mr. Burlison. Thank you. I yield my time to you, Mr. 
Chairman.
    Chairman Kiley. Dr. Wells, do you support reclassifying 
independent contractors as employees against their will?
    Dr. Wells. I support independent contractors for the gig 
economy being reclassified. Not all independent contractors 
everywhere are misclassified, certainly not. Absolutely we know 
that in the gig economy, companies like Uber, Lyft, ShiftKey, 
ShiftMed, CareRev, a whole host of companies are not treating 
their workers fairly.
    Chairman Kiley. Okay. Let is just return to the question. 
Do you support reclassifying independent contractors as 
employees against their will?
    Dr. Wells. For those workers that work in the gig economy, 
absolutely.
    Chairman Kiley. You do? You support reclassifying them 
against their will?
    Dr. Wells. Well, we do not have evidence to show that it is 
against their will. We know workers choose----
    Chairman Kiley. We do not. Okay. You have a couple living, 
breathing independent contractors right here, Ms. Hoffman, 
Dr.----
    Dr. Wells. Not for the gig economy. She does not work for 
the gig economy.
    Chairman Kiley. Excuse me, excuse me. Thank you. Dr. 
Palagashvili's father, right behind you there, they say they 
prefer being independent contractors. Do you think you should 
be able to--the government should force them into the 
employment of someone else against their will. You support 
that?
    Dr. Wells. I believe that Uber drivers, I believe that 
ShiftKey nurses, I believe that a whole host of Papa, elderly 
care workers, should be given both the flexibility to pick 
their own shifts, as well as the protections they deserve. We 
know that those two things are not incompatible.
    Chairman Kiley. Okay. You just told us on the record that 
you support reclassifying them against their will, so I guess 
that you know, raises the question why do you think you know 
what is best for someone like Ms. Hoffman, or Dr. 
Palagashvili's father who is sitting behind you, better than 
they know what is best for themselves?
    Dr. Wells. We know that the gig economy has a turnover rate 
of about 6 months because, though workers are attracted to the 
flexibility it offers, it does not deliver. Workers end up 
leaving this because they choose stability over the promise of 
flexible scheduling. If workers could have both flexible 
scheduling and stability in financial earnings, they choose it.
    Chairman Kile. Do you have any response to that, Ms. Sharp, 
this idea that Dr. Wells believes she knows what is best for an 
independent contractor like Ms. Hoffman, more than she knows 
what is best for herself?
    Ms. Sharp. 83 percent of people who work in the app-based 
industry would recommend the work to friends and family. To me 
that says that this is work that is satisfactory and is 
something that people want to do. 77 percent of people in our 
10,000 person study, not a 41 person study, say that they 
prefer being an independent contractor.
    More than that, there are particular stories of people who 
do this because it works for them and their families. I have a 
story from Maryland. I am a single father raising my daughter 
with cerebral palsy completely by myself. These jobs allow me 
time for my child and help me be financially secure and pay my 
bills.
    How can we say that we want to take away that kind of 
choice and flexibility from people who have looked at the cost 
benefits themselves, and opted into this kind of work?
    Chairman Kiley. Not only that, but now that we are trying 
to pursue policy solutions that will in fact make sure the 
benefits are available as well for folks who choose to make 
that choice, suddenly there is opposition to that as well, 
which kind of goes to show you what was this really about to 
begin with.
    I wanted to touch on another topic because you testified 
earlier that we need a safe harbor because currently Federal 
law can look at the provision of benefits to independent 
contractors and use that as a basis for forcibly reclassify 
them as employees.
    Just to make sure I understand your testimony correctly, 
you are saying that employers who choose to extend benefits to 
independent contractors, or states that put programs or 
incentives in place to do that, can effectively be punished and 
held liable for doing that. Is that right?
    Ms. Sharp. Well, potentially. There is a rather ambiguous 
six factor test that is not limited to just those six factors 
at the Federal level. Because of the lack of certainty, there 
is not clarity for workers or companies in what it would look 
like if they were to take pilot programs, or experiment with 
new approaches to benefits.
    Chairman Kiley. Sure. The solution there is to say okay, 
you choose to extend benefits to those who are independent 
contractors. That is not going to factor into the analysis. 
That would be the solution?
    Ms. Sharp. Well sir, I think you rightly pointed out in 
your opening statement that we are in a new world, and we are 
looking at how to help people who are working in a different 
way than the traditional way do it. Because of that we are 
experimenting with what that could look like.
    Having more certainty, and more ability to do that kind of 
experimentation and get those lessons learned is really 
critical in helping support these entrepreneurs.
    Chairman Kiley. Great. Thank you very much, and I now 
recognize the Ranking Member of the full Committee, Mr. Scott, 
for 5 minutes.
    Mr. Scott. Thank you, Mr. Chairman. First, I just want to 
go through what is at stake here. There is a difference between 
independent contractors and an employee. Dr. Wells, does an 
independent contractor get the minimum wage that employees get?
    Dr. Wells. No.
    Mr. Scott. Overtime?
    Dr. Wells. No.
    Mr. Scott. Unemployment insurance?
    Dr. Wells. No.
    Mr. Scott. Worker's comp?
    Dr. Wells. No.
    Mr. Scott. If the State has mandatory sick leave, if you 
are not an employee, do you get that?
    Dr. Wells. No.
    Mr. Scott. Do you get OSHA protection?
    Dr. Wells. No.
    Mr. Scott. Get the right to join a union?
    Ms. Wells. No.
    Mr. Scott. If somebody wanted to work, do you support 
forcing someone to take the minimum wage if they wanted to work 
for less than the minimum wage. Would you allow the employer to 
pay less than the minimum wage if the employee wanted to?
    Ms. Wells. No.
    Mr. Scott. Okay. Just checking. Now, some of this seems 
like we are talking theory and not really something that would 
take place because it seems like this portable benefits would 
only work if you have got a misclassified employee, who is 
actually an employee, and the employer is trying to get him 
some health insurance, notwithstanding the fact that they are 
really an employee and should be getting it anyway.
    I mean, if I called an independent contractor, like a 
plumber, how would the portable benefits work?
    Dr. Wells. Like a plumber?
    Mr. Scott. Yes. If I called a plumber, do I get to add to 
pay 1 day's health insurance?
    Dr. Wells. Pardon me?
    Mr. Scott. Would I get--could I pay 1 day of his health 
insurance?
    Dr. Wells. That is a great question.
    Mr. Scott. If he is really an independent contractor, I 
mean the price that I pay, he is on his own because he is 
independent. Now, we have heard a lot about flexible benefits. 
Is there any barrier right now to an employee working flexible 
benefits, like telework and setting their own schedule. You can 
still be an employee. Is that right?
    Dr. Wells. Absolutely. Increasingly, we see evidence of it.
    Mr. Scott. That would depend on if the employer said no, 9 
to 5 and you have got to show up. If you insist on more 
flexibility, then you find somewhere else to work. Is that how 
it works? Okay. Now, we have heard about this checkmark about 
if you get health insurance, that little checkmark for getting 
health insurance does not determine that you are an employee, 
does it?
    OK. Now, are there any barriers to providing health 
insurance to independent contractors? Right now, if you are an 
employee, you get health insurance and it is an expense to the 
business, but it is not income, taxable income, to the 
employee. If you are an independent contractor and the employer 
paid the independent contractor health insurance, would the 
employee get the income exclusion?
    Dr. Wells. I am not a labor lawyer, and I am not sure about 
that answer.
    Mr. Scott. That is not within this jurisdiction. That is 
over in Ways and Means, but I think the answer is no. If you 
are not an employee, you do not get that benefit. How would you 
get health insurance if it is really an independent contractor 
and you are paying a contract price. Where is the health 
insurance? That is the problem that I see with this thing.
    If they are really independent contractors, they are 
independent and they are on their own. You set a contract price 
for the job, you pay the price, they get their own health 
insurance. If they are an employee, and if this thing only 
works if you are working with the same employer like an 
employee, they are trying to get you health insurance, and they 
cannot keep you without providing health insurance because you 
will go somewhere else and get health insurance.
    Now, if you are misclassified as an independent contractor, 
compared to a business that is playing by the rules and 
classifies somebody correctly as an employee, what would the 
employer save?
    Dr. Wells. The employer would save 20 to 40 percent of the 
cost.
    Mr. Scott. By misclassifying someone as an independent 
contractor?
    Dr. Wells. Yes. It is highly profitable for companies to do 
so.
    Mr. Scott. They do not have to pay minimum wage. They do 
not have to pay overtime. They do not have to pay unemployment 
compensation. They do not have worker's comp. They do not have 
to pay any of that. They save a lot of money by misclassifying 
people. Thank you, Mr. Chairman, I yield back.
    Chairman Kiley. Ms. Hoffman, yes, you are a former 
Californian I think, correct? An independent contractor. You 
are very familiar with the law AB5 that was passed in 
California. Is that right?
    Ms. Hoffman. Yes.
    Chairman Kiley. You probably remember as this was being 
debated the basic argument was sort of the one that the Ranking 
Member just presented, saying well, independent contractors are 
only going to get this benefit and that benefit. We need this 
new law to force them into an employer/employee relationship, 
and then suddenly they will have those benefits.
    Is that the way it worked out in your experience, studying 
what happened in California? Did this law suddenly just deliver 
a windfall to all independent contractors in the State? Is that 
what happened?
    Ms. Hoffman. You are absolutely correct, Chairman Kiley. It 
was intended to specifically go after gig workers, and then it 
eventually encompassed all independent contractors, those who 
identify as contingent workers, regardless of if they are self-
employed or part-time, or occasional freelancers. That was the 
intention. It was to find an easy target, and then with 
unintended or perhaps intended consequences, it was wide 
sweeping, and it reached all different kinds of professions, 
journalists, florists, so many different, too many professions 
to list.
    You saw that a lot of people. A sizable share of 
California's workforce, independent workforce was displaced 
because of AB5's implementation. California's economy is still 
suffering as a result of that law to this day, and we will not 
know the full effects.
    Liya has done exceptional research on that, but we will see 
some catastrophic effects from that still following in the 
years to come.
    Chairman Kiley. I mean we saw hundreds of professions 
right? Where right away, as soon as the law was signed even 
before it even took effect. Not only did they not suddenly 
receive a whole menu of benefits, they lost their ability to 
work entirely. Dr. Palagashvili, did you yourself write the 
study?
    Ms. Palagashvili. Yes. That was me. I published the AB5 
study that--yes.
    Chairman Kiley. Can you tell us about that?
    Ms. Palagashvili. Yes.
    Chairman Kiley. Your study really documented in an 
empirical way everything that we have been observing.
    Ms. Palagashvili. Yes. I just wanted to clear up a 
misconception, so we tend to assume that when we pass these 
laws, like California's AB5, or greater regulations that make 
it more difficult to be an independent contractor, that 
companies will automatically reclassify all those contractors 
into employees. That is a misconception because companies have 
three options, right, under our new regulation.
    Option No. 1, reclassify contractors as an employee, right? 
That is the one that everyone seems to want. Option No. 2, they 
determine that I am a magazine, and I do not want to hire Ms. 
Wells as a photographer, hypothetically speaking here, Dr. 
Wells, excuse me, as a photographer for the magazine.
    They might decide that I do not want to work with this 
contractor because it is no longer legal under the new 
regulation. Then option No. 3 is they redefine the agreement, 
so that it is now legal under the new law.
    Everyone is assuming that all companies will do option No. 
1, reclassify all independent contractors as employees. Now we 
studied this using the Bureau of Labor statistics, and the 
Census Bureau's current population survey, and looked up what 
happened in California post AB5, because it is a natural and 
curious question to see did more workers become traditional W-2 
employees post AB5.
    What we found is that for affected occupations, we do not 
find consistent evidence that those workers became W-2, 
traditional W-2 employees. What we find instead is significant 
drops in self-employment, again for affected occupations. What 
that means in the story between the photographer and the 
contractor company is that many organizations looked at their 
relationship with the contractor, realized it is a sporadic or 
regular contract.
    It does not make sense to bring them on as a full-time or a 
part-time employee, or in some cases maybe they asked the 
worker, like my father's situation, do you want to be an 
employee? He said no. As a result, what we see is drops in 
self-employment for affected occupations, but we do not find 
consistent or robust evidence of increases in traditional W-2 
employment for affected occupations.
    That goes contrary to the wishes of lawmakers, and again, 
it goes back to the scenario that there are three options, 
right, that companies, organizations can do with contractors 
that they work with. We--by assuming that they are going to do 
the best intended option, that is just one, that is not a 
realistic situation or scenario.
    As an economist, we have to analyze all considerations, all 
scenarios, and that is what we did with the study, looked at 
what actually happened in California post AB5. Thank you.
    Chairman Kiley. Even if we accept every premise of the 
argument we have on the other side, that there is a tradeoff 
here, and that we, the government, needs to fiat the decision 
for workers, it still does not--our actual experience with it 
does not vindicate that argument because workers are not 
receiving benefits in many cases, they are losing the 
livelihoods entirely. Is that right?
    Ms. Palagashvili. That is right. We do not find consistent 
evidence that traditional W-2 employment increased in 
California post AB5, which means that the workers did not get 
those intended benefits that they were supposed to.
    Chairman Kiley. Thank you very much. I will now recognize 
the Ranking Member for a closing statement. It looks like we 
have Ms. Stevens. Are you ready to go?
    Ms. Stevens. The gentlelady from Michigan is ready to go. 
Here we find ourselves at another Education and Workforce 
Subcommittee hearing talking about the plight of independent 
contractors. I will just say this, and certainly want to get 
the folks chiming in. Appreciate the expertise, the research, 
that is represented on this panel, as well frankly, as the 
lived experience of some of you.
    Americans are all just trying to get by. Right? Trying to 
live the American dream. Trying to live to fight another day, 
put food on the table. We know that credit card debt is over a 
trillion dollars, that going to the grocery store is oftentimes 
a frightening experience for individuals. Just as it has been 
to fill a prescription.
    When I think about the responsibility that all of us have 
here as Members of Congress to create a fair and equal society 
that delivers day in and day out for the American people, I 
think about the role that our agencies play in helping to 
achieve some of the guarantees of retirement, of being able to 
pay for medical bills, and have affordable insurance.
    Dr. Wells, I particularly love for you to just re-chime in 
here, chime in yet again, on some of your research in terms of 
the gig economy and gig workers because I get it. A lot of 
people who are participating in the gig economy, they need that 
flexibility, and we have legislation now in the Congress that 
is focusing on a 32-hour work week.
    I have yet to talk to my former Chair, Ranking Member here, 
Mr. Scott, about that legislation. That legislation represents 
people who want flexibility, who need flexibility. We had a 40-
hour work week, grinding it out because it was one income 
households, now it is dual income households, and you add in 
children to the mix, and you add in some of those doctor's 
appointments.
    That flexibility to earn extra wages is, I believe, really 
important and that is something that we see with the gig 
economy. Then we start to look at it, and where did the pay 
force go in terms of being able to pay into social security, 
pay, you know, into your future. I just wonder who is holding 
the bag because we all know that in addition to the over a 
trillion dollars of credit card debt that Americans are 
holding, the staggering lack of savings for retirement is so 
real.
    I was just wondering if you could kind of speak to some of 
these realities that your research has uncovered, and how the 
system that we have right now might not be benefiting people 
for their future that's oftentimes arriving faster than we 
realize. Thank you.
    Dr. Wells. Thank you. Yes. I would like to say that workers 
do want benefits, before I answer this, they want benefits and 
they also want flexibility, and those two are not incompatible. 
The issue of scheduling flexibility is often held up as a red 
herring. Employees can have scheduling flexibility, but they do 
not have to trade in worker protections to have it.
    We know that shift workers in hotels and manufacturing 
plant workers, manufacturing plants, in hospitals, all of these 
cases they have shown us, and warehouses, that workers can both 
choose the flexibility to take their dad to dialysis, their kid 
to its IEP meeting, you know, and take care of themselves, 
while also not giving up the worker protections that we have 
built as a country together.
    The problems of wage stagnation, credit card debt, student 
debt, underemployment are real, and I think it is no 
coincidence that since the Great Recession we have seen the 
rise of associations like Flex, that have taken advantage of 
this real need on the part of Americans who do not have savings 
to try to avoid financial disaster.
    Workers need extra income because of wage stagnation. They 
need it because they have taken on staggering amounts of human 
debt. These jobs are not the answer, and the $80.00 portable 
benefit plan that would be offered to a gig worker in 
Pennsylvania who earns $2,000.00 a month on DoorDash, is not 
going to prevent that worker from any kind of financial 
disaster.
    Ms. Stevens. Thank you, and I yield back.
    Chairman Kiley. Thank you very much, and I will now 
recognize the Ranking Member for a closing statement.
    Mr. Scott. Thank you, Mr. Chairman, and thank our witnesses 
for being with us today. A priority on the Workforce Protection 
Subcommittee must always be protecting workers. This seems to 
somehow be lost as a majority of the hearings we have had on 
this Subcommittee so far focused on ways to continue to squeeze 
workers in favor of helping unscrupulous employers' bottom 
lines.
    As more and more companies look for ways to save money, 
there is a troubling trend of shifting away from direct 
employer-employee relationships, where you have all of the 
protections of the employee relationship, to outsourcing with 
subcontractors and using what are claimed to be independent 
contractors.
    Workers should not be forced to choose between voluntary 
portable benefits and guaranteed benefits, which employees are 
entitled to, such as minimum wage, overtime, worker's comp, 
unemployment compensation, OSHA protections, and the right to 
join a union.
    It is possible that workers can be protected by fundamental 
labor standards and still have flexibility. Now providing some 
of the benefits of being an employee to compensate for the 
damage done by a worker being misclassified is not enough. We 
of course, the determination of when someone is an employee or 
an independent contractor, is-always going to be complicated. 
There are going to be people close to the line.
    it is not solved by promoting a plan that really does not 
work for really true independent contractors. Furthermore, 
there is really no barrier under present law to provide health, 
pension, and other benefits to people, independent contractors, 
except if they are really independent, it is logistically 
complicated.
    Policy choices shape worker's rights and conditions of 
employment. We should be strengthening and modernizing 
protections for American workers, while also promoting 
innovation. I hope we can do this in our next hearing, and I 
yield back.
    Chairman Kiley. Thank you very much. I want to thank all of 
our witnesses for your testimony. I think the basic question 
here is are we going to look backward, or are we going to look 
forwards? The Department of Labor in this administration seems 
intent on moving us backward and trying to force millions of 
American workers against their will, into an arrangement that 
they have chosen to forego, and that is out of step with their 
line of work, and the nature of the modern economy.
    On this Committee, we are trying to look forward. We are 
recognizing that you know within a few years we could well have 
half of the American workforce doing independent work of some 
kind. We are asking how can we support those choices? What 
policy levers are available to provide those workers with a 
greater sense of personal security? Access to portable benefits 
I think is a really important step in helping to usher in that 
future.
    We had a really startling admission today from the witness 
designated by the minority, who is essentially offering the 
line of the radical Biden labor department when she testified 
on the record that she supports forcing independent contractors 
to become employees, forcing them to work for someone else 
against their will, even if that is not what they want.
    Nothing could be further from what we are trying to do and 
accomplish on this Committee. We believe in supporting workers. 
We believe in empowering workers. That is why we respect the 
decision of workers to be an independent contractor, or to be 
an employee, and it is also why we want to assure that if they 
make the decision to be independent contractors, they have 
access to benefits to support themselves and their family as 
well.
    As a matter of fact, when you shift that paradigm to where 
the benefits follow the worker as opposed to being attached to 
a particular employer, you empower them in a further way 
because then they can make career decisions in a way that best 
suits their needs, their talents, as opposed to you know, 
having their entire benefits tied to one particular employer.
    I think this has been a really helpful hearing. Maybe the 
most important one we have had so far this Congress. I think we 
have some great steps to take moving forward. I am going to be 
working on legislation related to the issue that several 
witnesses have discussed, to make sure that we can support 
State efforts to provide portable benefits by assuring that 
there is not a perverse effect then of that being used to kind 
of punish hiring entities who extend such benefits by saying 
that now they are going to be held liable for misclassifying 
their workers.
    This sort of safe harbor provision I think is a really 
important, it is a modest, but important step. Then more 
broadly, I am looking forward to working with colleagues on 
both sides of the aisle on the larger questions of how we can 
help to usher in access to portable benefits for every 
independent contractor in America.
    I think we had supportive comments to an extent from one of 
our colleagues on the other side of the dais today. We have 
bipartisan legislation actually, that started in the Senate 
that is along those lines.
    I think there is a lot of common ground to work on here, to 
work with here, and I am excited about the opportunity we have 
to support both the freedom of workers to direct their own 
career paths, and the security to be able to support themselves 
and their family.
    Without objection, there being no further business.
    Mr. Scott. Mr. Chairman?
    Chairman Kiley. Yes.
    Mr. Scott. I ask unanimous consent to enter into the record 
two letters, one from the National Employment Law Project, 
NELP, on the need for caution regarding the development of 
portable benefits. The second is a comment letter from the AARP 
in support of the Biden administration's Independent Contractor 
Rule, which elaborates on the importance of protecting older 
Americans from misclassification.
    Chairman Kiley. Without objection.
    [The information of Mr. Scott follows:]
    
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    Chairman Kiley. There being no further business, the 
Subcommittee stands adjourned.

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    [Whereupon, at 10:16 a.m., the Subcommittee was adjourned.]

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