Call to Action: Tell Your State Senator to OPPOSE California-Style Contractor Restrictions

The Senate Labor Committee recently took testimony on bills that would put severe restrictions on independent contractors in Michigan.

If passed, these bills would:

Tell your legislator to OPPOSE Senate Bill 6 & Senate Bill 7 by using our simple call-to-action email system.

The Small Business Association of Michigan wishes to express strong opposition to Senate Bills 6 and 7 and urges the committee to oppose both. As advocates for the welfare and growth of small businesses in Michigan, we believe the implementation of strict contractor rules (like the California-style ABC test) would have detrimental effects on Michigan’s small business community and overall economy.

According to the recently released 2025 Small Business Score Card,

Despite this, one of the significant bright spots of our findings indicates that self-employment has grown by 33% in the last 20 years and now accounts for 17.7% of all private sector employment, while their income growth has mostly exceeded national trends. These early-stage operations take many forms, including gig, full time, part-time, and includes incalculable amounts of independent contractor work.

A 2024 study from the Mercatus Center at George Mason University finds that implementation of California’s ABC test led to significant declines of employment in nonexempt occupations, with self-employment falling by 10.5 percent on average and overall employment falling by 4.4%.

These sole proprietorships are the seeds of small businesses and stifling their ability to operate everyday business would effectively snuff out one of the most dynamic, growing sectors of our state’s economy.

In addition to the observed declines in self-employment following adoption of the ABC test, states like California have been forced to issue over 100 exemptions for various industries, whose advocates have effectively convinced lawmakers that the ABC test is too harsh for their specific industry. Strict classification tests like California’s ABC test are too harsh for all industries and using exemptions and carveouts to excuse preferred groups from bad policy still leaves everyone else stuck with the policy. Forcing this one-size-fits-all approach on all employers and workers would have wide-ranging implications that are felt across the entire economy.

This policy has also been tremendously unpopular with contractors, who have been forced to reconsider their freelance or consulting businesses to align with the strict conditions of classification. Senate Bill 6 creates a presumption of employee status unless all of these conditions are met, regardless of whether the worker wishes to be an employee or a contractor. Many independent contractors prefer flexible hours, the ability to work with multiple clients, and the freedom to be their own boss, which are often lost in traditional employment relationships.

Compared to Michigan’s current classification rules, implementation of Senate Bill 6 would make it unequivocally more difficult for employers to hire independent contractors. Due to the increased costs of the employer/worker relationship, many businesses would be incapable of affording to retain existing contractors as employees.

Small businesses do not always grow in full-time-employee increments. Not every problem that arises in the regular course of business calls for hiring a full-time employee. Employers will not simply be compelled to hire all of their contractors as full-time employees due to a change in rules, because many of them cannot afford it – they will instead be forced to end their relationship with these workers all together, and both parties will be worse off as result.

SB 6 also imposes harsh penalties for violations related to misclassification, including significant fines and even imprisonment for varying levels of violations. The scale of these penalties, especially for small businesses that may inadvertently misclassify an employee, is disproportionate and could result in severe financial and operational distress. The bill also includes an adversarial ‘finder’s fee’ that would encourage lawsuits against small businesses. Small businesses often operate with limited resources, and the threat of such severe penalties would doubtlessly discourage growth and hiring.

Moreover, the requirement in Senate Bill 6 for businesses to disclose three years of context-free wage information for “similarly situated employees” is an overly burdensome mandate that simply does not fit with the culture of most small businesses.