A couple dozen workers and activists stood outside the Texas Workforce Commission’s office at the Capitol complex Tuesday morning holding signs, including one reading, “Ruth Hughs got caught with her Handy in the Cookie Jar.”
The sign was a reference to Commission Chair Ruth Hughs, who worked closely with Handy, an app that provides home cleaning and maintenance services, to rewrite the rules of the gig economy in Texas.
The protestors called on the commission to rescind the rule, saying it had been corrupted by industry influence and written without adequate public input. But less than two hours later, commissioners approved the final version of the rule by a 2-1 vote. The rule unilaterally sets a new standard declaring that “marketplace contractors” — workers for app-based services like Handy, Postmates and Instacart — are not eligible for unemployment insurance.
It’s a major coup for Handy, a burgeoning Silicon Valley empire that’s worth more than a half-billion dollars and has become known as the “Uber for Home Services.” In recent years, the company has aggressively sought to overhaul labor laws in seven states through the legislative process. But Texas, which has the second-largest workforce in the country, is the first state where the company went around state lawmakers and successfully lobbied an agency to rewrite labor rules instead.
Hughes was appointed by Governor Greg Abbott and represents the interests of employers on the commission. As she claimed at the meeting, passing the rule was important to stay competitive with other states where Handy has altered labor law.
“The issue of marketplace contractors is aimed at helping Texas continue to have the best business climate in the nation,” Hughs said before a room filled with workers, “and with the speed of development of marketplace contractor initiatives around the nation, we want to make sure as a state that we provide stability and predictability in our rulemakings.”
Public records first reported by the Observer showed that Handy lobbyists had been working with Hughs going back to at least December 2017 to craft the rule. The initial proposal, records show, was taken almost verbatim from language provided by Handy. When commissioners first advanced the rule in January, the agency denied that there was any outside influence during the drafting process. The agency spokesperson changed her tune once records proved otherwise, saying that she was not aware of Handy’s involvement at the time. As the Observer reported last week, the two lobbyists who leaned on Hughs on behalf of Handy never disclosed the company as a client until after repeated inquiries.
Hughs did not respond to multiple interview requests.
The agency rejected concerns that it did not have the legal authority to advance such a rule and insisted that it would not create a loophole for traditional employers to get out of providing employee benefits.
But critics warn that the measure could further erode many more workers’ rights to overtime, workers compensation insurance and other long-standing benefits.
Unions and worker advocates in the construction industry are also concerned that the new rule could legitimize unscrupulous labor brokers that currently operate in an underground economy, essentially legalizing rampant misclassification. If these brokers start hiring workers through an app, advocates warn, they are free to treat them as contractors.
A public comment period followed the initial proposal of the rule. Of the 211 comments that the commission received, 196 expressed concerns about the rule. Almost all of the comments in favor of the rule came from companies that would stand to directly benefit, like HYR, NeighborFavor and AllWork.
Several people testified against the rule at the Tuesday meeting. “You’re creating a dangerous precedent that puts a thumb on the scale against vulnerable workers,” said Bill Beardall, executive director of the Equal Justice Center, which advocates for low-wage workers.
“Is it fair that a company can come to your doors and knock on it and say, ‘We need this special rule to help us out?’” asked David King, an Austin resident who showed up to voice his opposition. “And then behind those doors, you create these rules and then boom, say, ‘OK, you have five minutes, get up here and tell me what you think?’”
Robert Thomas, the commissioner representing the public, made a motion to vote on the measure and joined Hughs in support of the measure. He appeared to be unfazed by the controversy and scandal surrounding the rule. “This rulemaking process, in particular, has been an example of democracy at its best,” he said. “I’ve been deeply impressed by the ethics and values and morals that my colleagues on this dais have shown under less than ideal circumstances.”
It’s not clear what he meant by “less than ideal circumstances.”
Julian Alvarez, who represents labor, was the sole commissioner who voted against the rule. “Rules are meant to interpret statute where there is ambiguity,” he said. “There is no ambiguity in our statute.” Any further exemptions made to a statue should be done by the Legislature, not a state agency, Alvarez said.
State Representative Ramon Romero, a Fort Worth Democrat and the sole state lawmaker to speak out against the rule, said that Texans should be alarmed that agencies charged with protecting workers are doing the bidding of big business instead. “After an evasive process meant to circumvent the Legislature and its deliberative process, this vote has confirmed appointed officials in Texas feel this is within their rights given the direction they’ve clearly been given by the governor,” Romero said in a statement.
When the Observer approached the dais after the meeting adjourned, Hughs and Thomas quickly slipped out the back door.