Trey Price: PA worker classification bill would repeat California’s mistakes
Pennsylvania legislators are busy working to pass House Bill 2411 (HB 2411) to expand worker benefits by reclassifying independent contractors as company employees. While well-intentioned, this kind of law has already been tried once before in California where proponents hoped to increase employment numbers and enhance worker protections. Unfortunately, that measure ended up driving up the cost of labor and reducing overall employment. Pennsylvania’s proposal is likely to have the same result.
Pennsylvania’s HB 2411 aims to reclassify independent contractors as employees unless they meet certain criteria, such as possessing a written contract for a specific project, and flexibility to decide how to complete that project. The bill narrows the definition of independent contractors to expand the population of workers entitled to benefits. To enforce HB 2411, the state would have the power to impose fines and bar offending companies from contract eligibility for state and local public work projects.
While Pennsylvania’s HB 2411 was likely crafted with good intentions – extending benefits to more workers – the results from previous attempts at reclassification suggest the bill’s outcome will hurt the very people lawmakers intend to help.
HB 2411 is not the first worker classification law of its kind. In 2019, California passed a similar law called California Assembly Bill 5 (AB-5), which required companies hiring independent contractors to reclassify them as employees unless they met certain narrow conditions. Proponents believed the legislation was necessary to extend benefits to all workers.
A recent paper by the Mercatus Center analyzing employment outcomes post California’s AB-5 found that rather than helping facilitate the growth of traditional employment across the state, AB-5 led to a 4.4 percent decrease in overall employment, in addition to a 10.5 percent drop in self-employment. AB-5’s impact on employment would have likely been even worse had it not been for the success of Proposition 22, a voter initiative that classified app-based gig economy workers as independent contractors.
The best evidence to date suggests that government worker reclassification mandates do not help workers, but rather harm them.
Taking a failed policy from one state and hoping it will work better in another is not a good use of time or money. Pennsylvania’s HB 2411 will almost certainly produce unintended consequences, such as introducing new barriers for firms to hire workers, just as it did in California.
Trey Price is a policy analyst with the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit us at www.TheAmericanConsumer.Org or follow us on X @ConsumerPal.