MBO Partners released a policy proposal Tuesday for the institution of a new “worker certification” called Certified Self-Employed (CSE). The proposal lays out a certification program through which workers who meet certain program criteria and comply with program requirements would be designated self-employed. The certification, proposed to be administered and governed by the federal government’s Small Business Administration, would be valid nationally and preempt state and local classification laws.
The clash between government regulations (especially worker classification) and the growth in a population of people working outside of traditional employment relationships (whether full-time or moonlighting, whether high skill or low skill) has been well documented. The MBO proposal, not specifically focused to the sometimes precariously “employed” gig workers, is aimed at a specific population of workers who could be viably self-employed but are today subject to classification ambiguity. This classification ambiguity drives a wedge between these workers and the businesses that would engage them, creating friction and a dead-weight loss in the labor economy, as well as dampening the rate of new business formation and exacerbating talent shortages for businesses large and small.
“The independent workforce is a powerful, innovative, and rapidly growing economic force in America,” Gene Zaino, founder and CEO of MBO Partners, said in the press release. As work can be digitally managed and performed on a global basis, businesses have many new ways to get work done independent of location. In contrast, Zaino said, U.S. businesses encounter growing regulatory complexities when seeking to engage a growing U.S. population of independent (self-employed) talent. Zaino asserted that we must create a safe harbor and level playing field for self-employed American workers to globally compete for work and keep valuable jobs from going off-shore.
A Modest Proposal
MBO’s proposal to create a certification program for workers who can be viably self-employed is covered in detail in the recently published document “Certified Self-Employed (CSE): A New Vision for America’s Workforce.” Some of the highlights of what is being proposed include:
- Only workers charging their clients above an equivalent of $50 per hour would be eligible. This threshold is intended to “prevent workers who cannot handle the costs tied to self-employment from taking an ill-advised risk.”
- Certified workers would pay themselves as employees of their own business entities. But they would be required to use an “approved" payroll provider that would be responsible for collection and submission of taxes. The approved provider would ensure the processing of applicable tax withholdings (e.g., worker’s compensation) and enforce a limitation of non-payroll distributions (to avoid payroll tax) — all within the framework of “a verifiable and auditable system.”
- Certified workers would have to:
- Hold themselves out to the public as offering services, not only offering services to a single client
- Bear the risk of loss and opportunity for profit and bear the bulk of their own business expenses.
- Remain “free of more than de minimis direction/control from clients concerning the details of their work.”
- Workers would waive protections of employment laws, but certification would “bar classification of the worker as an ‘employee’ under any federal, state or local law and would preempt contrary laws” — thus eliminating the current classification ambiguity for this class of workers and for the businesses that would engage them.
- Uncertified workers, and the businesses that engage them (or that intermediate that engagement), would be subject to existing laws and regulations that favor employee status and reinforce employer–employee responsibilities.
- Finally, provisions are proposed for administering new applications for certification and for recertification every three years.
As noted previously, MBO proposed the certification program would be administered by the Small Business Administration.
MBO’s proposal comes in the midst of an emergent policy debate that has attracted attention of and provoked responses from former administration officials, members of Congress and even presidential candidates. Some federal agencies have also begun to enter into this debate — for example, recently the Bureau of Labor Statistics’ “Contingent Work Supplement” — defunded and halted in 2005 — has been refunded and will resume.
There has also been discussion, especially in the media, about potential models, such as a “Dependent Contractor,” that could resolve classification ambiguity and strike a balance between employee protections and independent contractor flexibility.
It is within this context that MBO’s proposal emerges as a new model for potentially eliminating classification ambiguity for a specific class of workers who are vital to the health of the U.S. economy. It is not a one-size-fits-all solution, which proponents of the MBO proposal think would be very problematic.
The MBO proposal also liberally confers employee status (and privileges) on all uncertified workers with respect to the businesses they work for. Finally, proponents believe that this proposal is more politically tractable, because it does not require jiggering and reorganizing the skein of state and local regulations but only requires the assent of those jurisdictions.
Surely time will tell how this proposal is vetted in the public square and within the policy-making establishment, as well as what complications may arise along a sanctioned path to realization. If nothing else, this proposal will add another perspective and provide some additional fuel to the policy debate that has recently been kindled. At best, it may become a way to untie part of the Gordian knot of ambiguous worker classification that may be choking the robustness, innovativeness and competitiveness of the U.S. economy.