The U.S. Department of Labor is considering a new rule that would narrow the definition of “independent contractor” under federal wage-and-hour law. The Department published a preliminary version of the rule last fall, and it is expected to post a final version this spring. But even though the proposal has been public for months, there is still widespread confusion about how far it would go. For example, in recent comments to the media, former National Labor Relations Board Chairman William Gould IV suggested that the proposal would “preempt” certain state laws, including California’s laws for app-based drivers.

Though he may not know it, Gould is both right and wrong. While the proposed rule would not “preempt” state laws per se, it would interfere with states’ ability to experiment with new work rules. And in that way, it would undermine democratic decision making and bedrock principles of federalism.

To understand the nuance, some background is necessary. When Gould mentioned preemption, he was talking about Proposition 22. Prop 22 was approved by California voters in 2020 by a nearly 6-to-4 margin. The law created a new, comprehensive system for the state’s app-based workers. It guaranteed the workers a minimum hourly rate, offered them new benefits, and required certain safety precautions. It also guaranteed that the workers could continue to operate as independent contractors. That last guarantee was necessary because California has some of the strictest worker-classification laws in the country. Without Prop 22, there was a risk that app-based workers would have had to become employees—a result most of them said they didn’t want.

Prop 22 was vehemently opposed by the state’s biggest labor unions, including the SEIU, which immediately sued to block the law. A trial judge initially declared the law unconstitutional. But last month, an appellate panel reversed the trial judge’s order. The panel held that Prop 22 was constitutional except for two provisions dealing with amendments. It carved those provisions out and upheld the law’s core features.

It was this decision that prompted Gould’s statement. Gould said that he expected the California Supreme Court to weigh in and reverse the appellate court. But even if it didn’t, he said that the Department of Labor’s new rule would “preempt” Prop 22.

That statement was both right and wrong. It was wrong because, formally speaking, the rule won’t preempt anything. The FLSA explicitly allows states to adopt their own wage-and-hour standards. Nothing about the FLSA preempts those standards or forces states to follow federal rules. So technically speaking, the rule would not “preempt” Prop 22. Prop 22 will set a standard for California law, and the Department’s rule will set one for federal law.

But practically speaking, the rule will complicate things in California. When the Department proposed the rule, it said that it would consider certain kinds of control as evidence of an employment relationship for federal purposes. Those kinds of control could include, for example, mandatory training. So mandatory training could be evidence of employment even if companies are required to provide the training under state law.

That result implicates Prop 22. Among other things, Prop 22 requires drivers to take certain safety and harassment training. So according to the rule, mere compliance with Prop 22 could be evidence of employment under federal law. And if workers are employees under federal law, they might not be able to work as independent contractors under state law. Companies and workers have to arrange their relationships to meet minimum legal requirements. And those arrangements could get quite complicated if the workers have different statuses under different laws.

The result, then, is that the Department’s rule could make it more difficult to adopt creative programs like Prop 22. Prop 22 represents a voter-initiated experiment in worker classification and benefits. It’s an effort to preserve flexibility while also offering workers new benefits and guarantees. Reasonable people can disagree about whether it’s the best way to handle new kinds of work, such as work in the “gig economy.” But most people would say that states should at least be able to try new approaches.

After all, that kind of experimentation undergirds our federal system. The founders wanted most policy to get made at the state level. They knew different states would try different solutions. And by studying those solutions, other states could make informed decisions about their own policies. Every state could run its own experiments, and those experiments would power the laboratory of democracy.

The Department’s proposal would subvert the federal system without saying so. Without any notice or public debate, it would lock workers nationwide into a single kind of work arrangement. State governments would have less room to experiment and design creative programs. Likewise, voters would have less freedom to express their own preferences. They would be left with one top-down model—a model workers, businesses, and voters have already rejected.

At bottom, then, Gould is more right than he knows. The Department of Labor’s rule would pose a threat to state flexibility and independence—just not in the way Gould thinks.

Note from the Editor: The Federalist Society takes no positions on particular legal and public policy matters. Any expressions of opinion are those of the author. We welcome responses to the views presented here. To join the debate, please email us at [email protected].