The Next Labor Secretary Shouldn't Be an Adversary of Freelancers

As Labor Secretary Marty Walsh departs his post for a high-paying job with the National Hockey League Players’ Association, his position at the U.S. Department of Labor (USDOL) will likely be filled by the current U.S. Deputy Secretary of Labor, Julie Su, appointed by Biden in 2021, and nominated yesterday for the top position.

Su previously led California’s Labor and Workforce Development Agency from 2019 to 2021, which includes the state’s Employment Development Department (EDD). Under her watch, Su oversaw a veritable dumpster fire of debacles and failures prior to, and during, the pandemic.

Most disturbingly, Su has been an adversary to independent contractors in California and nationwide. Americans who value being their own boss will find an antagonist in Julie Su, whose focus has always been on enforcement against independent contracting. She will no doubt pursue destructive policies like the Protect the Right to Organize (PRO) Act — which may be reintroduced in the Senate in the near future — and USDOL’s impending new rule regarding independent contractors. Both efforts will severely limit self-employment, freelancing, and the gig economy, especially for women, and both are based on failed policies straight out of California during Su’s tenure as the state’s labor commissioner and secretary of labor.

Here are some lowlights of Julie Su’s time in California.

First, Su failed to take fraud seriously and implement measures to prevent it. As a result, she paid up to $40 billion in fraudulent unemployment insurance claims to criminals, cartels, and convicts during the pandemic. This astounding number was thoroughly preventable. According to the state auditor’s scathing 2021 report: “EDD did not take action to identify these claims as potentially fraudulent or stop payment to them until December 2020—almost eight months into the pandemic and four months after EDD asserts it observed an increase in fraudulent PUA claims.”

Su also ignored repeated requests from the state auditor to shore up identity-theft vulnerabilities at EDD. In 2019, the state auditor told Su’s EDD to stop mailing millions of documents with fully exposed social security numbers that put Californians at high risk for identity theft. Su ignored the plea and allowed 38 million more unsecured mailings to be sent out, many to incorrect addresses. The scenario led to the largest case of unemployment fraud in U.S. history during the pandemic, most of which was avoidable had Su heeded the auditor’s warnings.

Su failed to modernize EDD’s outdated inadequate technology. When the pandemic hit, the antiquated system collapsed and left millions of desperate Californians waiting for months for their first unemployment benefits to arrive, if at all, and unable to reach anyone at EDD. Bipartisan outrage ensued. According to the state auditor’s report in 2021, the agency’s “poor planning and ineffective management left it unprepared to assist Californians unemployed by the COVID-19 Shutdowns.”

Su’s mistreatment of independent contractors deserves special attention. She served as an architect behind the scenes of the disastrous AB5 (Assembly Bill 5). This law has destroyed hundreds of thousands of independent careers in California since it went into effect in January 2020. As the state’s labor commissioner from 2011 to 2018, Su had been the “top cop” actively pursuing aggressive worker classification audits on businesses that engage with independent contractors.

With the arrival of AB5 in late 2019, Su doubled down on audits against businesses large and small, including mom-and-pops and single entrepreneurs. During the pandemic, Su’s EDD refused to suspend these destructive audits despite the economic crisis when many businesses were either already shut down or struggling to survive.

In addition, Su stonewalled pandemic unemployment aid to independent contractors. Not eligible for traditional unemployment benefits, self-employed Americans were allowed to receive emergency financial assistance from the federal government during the pandemic. Known as Pandemic Unemployment Assistance (PUA), the benefits were distributed by the states. Su, however, publicly encouraged independent contractors in California to apply for UI instead, telling them to erroneously list their clients as employers and thereby triggering automatic EDD worker classification audits on thousands of unsuspecting small businesses and entrepreneurs.

To this day, Su continues to blame PUA — and by extension, independent contracting — for 95% of the state’s unemployment fraud during the pandemic, but according to new figures from USDOL released in February 2023, her assertion is demonstrably false.

Ironically, Su violated AB5 by hiring independent contractors to staff makeshift call centers through no-bid contracts with staffing companies in direct violation of the very labor laws that EDD ruthlessly enforced on small businesses during the pandemic. Despite costing more than $16 million, the makeshift call centers did little to improve the backlog of calls at the agency helpline.

The above examples are just the tip of the iceberg of preventable calamities in California under Julie Su’s leadership. Should Julie Su take the helm at USDOL, those in D.C. who support her promotion will have turned a blind eye to the unprecedented fiascos she oversaw in California.

Karen Anderson is the founder of Freelancers Against AB5 and is a fellow with Independent Women’s Forum.