House subcommittee debates independent-contractor classification and portable benefits; no votes taken

At a hearing of the House Education and Labor Subcommittee on Workforce Protections, members and four expert witnesses debated whether federal and state rules are properly balancing protections for misclassified workers with flexibility for people who say they prefer independent contracting.

The issue matters because worker classification determines access to minimum wage, overtime, unemployment insurance, employer Social Security contributions and other workplace protections, and because both sides tied the question to the development of portable benefits and to proposed federal legislation: the Modern Worker Empowerment Act and the Modern Worker Security Act (supported by Republican members) and the PRO Act (cited by Democrats as addressing misclassification).

Chair McKenzie opened the hearing by saying, “The way people are doing work in America is changing,” and described the committee's focus on freelance writers, app-based drivers and self-employed consultants. Committee Republicans stressed legislative solutions to provide clarity and to allow portable benefits without triggering reclassification; Committee Democrats and worker advocates argued misclassification remains widespread and that some industry “portable benefits” are inadequate substitutes for insurance-based programs.

Four witnesses testified in three- to five-minute summaries. Nathan Marins, vice president of workforce policy at the American Trucking Associations, said many truck drivers choose the independent-contractor model for entrepreneurial opportunity and schedule flexibility and urged Congress to adopt a statutory standard similar to the 2021 DOL framework that emphasizes “level of control and entrepreneurial opportunity.” Marins told members that regulatory “whiplash” between administrations creates planning and compliance challenges for carriers and drivers.

Kim Kaven, a freelance writer and co‑founder of Fight for Freelancers, said state laws such as California’s Assembly Bill 5 (AB 5) and proposed rulemaking in New Jersey have led to what she described as “freelance busting,” and urged Congress to protect the right of people who choose independent contracting. Kaven told the panel her group formed after AB 5 and said many freelancers prefer self‑employment because of business opportunities and flexibility.

Laura Padine, director of work structures at the National Employment Law Project, said companies routinely misclassify workers to shift costs and avoid employer obligations. Padine testified that misclassification denies workers core protections including minimum wage, overtime, employer Social Security contributions and workers’ compensation. On industry portable‑benefits pilots she said they often amount to savings accounts. “DoorDash implemented what it calls a portable benefits savings pilot in Pennsylvania…This savings account…does not replace the benefits of employment,” Padine said, adding that DoorDash’s 4% contribution amounts to about $31 a month for many drivers.

Labor economist Dr. Leah Palagashvili (Mercatus Center at George Mason University) presented empirical findings on state ABC tests (the “ABC test” used in some states and embodied in California’s AB 5). She said her nationwide study found ABC tests caused a 6.4% decline in self‑employment and a 4.7% drop in W‑2 jobs in the affected states and argued states and the federal government should avoid overly broad tests that eliminate legitimate freelance work while targeting bad‑faith misclassification. Palagashvili and other witnesses noted state experiments with portable benefits (Maryland, Pennsylvania, Georgia, Utah, Tennessee and Alabama) and early pilots such as DoorDash’s.

On costs and scale, members cited different studies during questioning. Chair McKenzie quoted estimates of large national costs associated with broad reclassification scenarios; Ranking Member Casar cited a 2025 Economic Policy Institute finding that misclassification can cost individual workers thousands of dollars a year (Casar referenced figures of about $10,000 a year for a custodial worker and about $21,000 a year for some truck drivers) and said misclassification also reduces public revenue by shifting payroll tax obligations.

Members pressed witnesses on tradeoffs: Republicans argued legislation that codifies a narrower, two‑factor approach (control and entrepreneurial opportunity) would protect independent contractors’ flexibility while giving businesses clarity. Democrats warned that loosening classification tests or creating loopholes for employers would reduce workers’ access to minimum protections and called portable savings accounts an inadequate substitute for insurance‑style benefits like Medicaid, Social Security and unemployment insurance. Several members also warned that many independent contractors rely on Medicaid and other public programs; witnesses cited state surveys and task‑force audits showing high rates of misclassification in certain low‑wage industries.

No formal motions or votes were taken at the hearing. Members on both sides said they expect further legislative and regulatory activity: Republicans signaled intent to pursue the Modern Worker Empowerment Act and Modern Worker Security Act to clarify classification and to create a federal safe harbor for portable benefits; Democrats and worker advocates urged stronger enforcement against bad‑faith misclassification and protection of insurance‑based programs.

The committee kept the hearing record open for 14 days for written statements and additional materials under committee rules. The subcommittee did not adopt or refer legislation at the session and adjourned without formal action.