When United States Labor Secretary Marty Walsh exits the Biden administration for greener pastures at the NHL Players’ Association, Deputy Secretary of Labor Julie Su appears likely to be named the agency’s next leader. Were Su to take the helm at the U.S. Department of Labor, she would become yet another failed bureaucrat from California rewarded with a higher office in Washington.
Appointed by Gov. Gavin Newsom in 2019, Su led California’s Labor and Workforce Development Agency until July 2021, when she joined the Biden administration to serve under Walsh. She also previously wielded extensive power over businesses as California’s labor commissioner from 2011 to 2018.
Her troubled legacy in California includes a series of certifiable fiascos at the state’s dysfunctional Employment Development Department, which paid an astonishing $40 billion in fraudulent unemployment insurance claims to criminals, inmates, and cartels during the pandemic.
The fraud could have been curtailed in 2019 had Su heeded warnings from the state auditor, who implored her to shore up privacy safeguards within the EDD’s unemployment insurance program after millions of form letters with exposed social security numbers were sent to wrong addresses. Inexplicably, Su ignored the scathing report, and 38 million more unsecured mailings were sent out, creating a scenario ripe for identity theft when the pandemic hit.
As the unprecedented fraud unfolded, Su froze 1.4 million unemployment accounts in the state, leaving desperate Californians without their rightful unemployment benefits at the height of the shutdown.
Prior to the pandemic, Su did not attempt to modernize the EDD’s woefully outdated technology, even though California had allocated $30 million for the effort four years prior. Overwhelmed by a flood of unemployment claims during the pandemic, the antiquated system imploded, and millions of desperate Californians scrambled to make ends meet while waiting months for their unemployment checks.
Coinciding with Su’s tenure in California, the draconian ABC worker classification test was established by the California Supreme Court in 2018. The following year, with the help of Su, the crafting of AB 5 began, codifying and expanding the ABC test that severely restricts independent contracting across a vast range of professions. Newsom signed AB 5 into law in September 2019, outlawing all kinds of independent contract work in order to force independent business owners back into traditional employment relationships they didn’t want.
Su heralded the destructive policy but had nothing to say about the hundreds of thousands of hardworking Californians who lost their livelihoods overnight when AB 5 took effect in January 2020.
Su also stonewalled the implementation of the federal Pandemic Unemployment Assistance that provided emergency benefits to independent contractors. She and cohort Lorena Gonzalez (former assemblywoman and author of AB 5) tweeted multiple times that independent contractors should ignore PUA and instead apply for traditional unemployment insurance despite not their lack of eligibility. This required independent contractors to erroneously name their clients as their employers, thereby ensnaring thousands of unsuspecting businesses with onerous misclassification audits by EDD, leading to massive fines and penalties.
In the midst of EDD’s ongoing disasters, Democratic allies repeatedly canceled hearings for the auditing of EDD itself. Yet the debacles at EDD did not deter Su’s agency from pursuing aggressive classification audits on struggling small businesses already dead in the water due to the pandemic.
An open letter signed by 153 Ph.D. economists and political scientists called for the suspension of AB 5 during the economic crisis, but Newsom and Su turned a deaf ear to the outcry. Additionally, a self-inflicted scandal ensued when EDD hired independent contractors in California to work at makeshift call centers during the pandemic — a violation of AB 5.
When asked during her Senate confirmation hearing in 2021 about the fraud she oversaw in California, Su blamed the Pandemic Unemployment Assistance program for 95% of the fraud losses, essentially scapegoating independent contracting. Recently released numbers from USDOL, however, prove that her 95% figure is mathematically impossible. New estimates also reveal that California accounted for 22% of fraud and improper payments made in the entire U.S. during the pandemic, even though California comprises only 12% of the nation’s residents.
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For these and other reasons, Julie Su’s promotion at USDOL will ensure that California’s failures become the nation’s failures. Whether touting the PRO Act, the disastrous AB 5, or USDOL’s pending new rule that will affect 60 million independent contractors nationwide, Julie Su will surely double down on destructive policies that would bring California’s nightmare to the entire country.
Karen Anderson is the founder of Freelancers Against AB5 and a fellow with the Independent Women’s Forum.
