Less than two months remain before the March 11 effective date of the U.S. Department of Labor’s independent contractor final rule, and legal challenges are mounting. The rule, which institutes a “totality-of-the-circumstances” framework for analyzing independent contractor status based upon six nonexhaustive factors, has faced criticism and pushback from various groups. These challenges highlight potential financial implications for workers and raise concerns over the rule’s compliance with the Administrative Procedure Act.
Background of the rule
The independent contractor final rule, set to take effect on March 11, aims to provide clarity on determining independent contractor status by establishing a “totality-of-the-circumstances” framework. This framework assesses six factors, including the nature and degree of control over the work, the worker’s opportunity for profit or loss, and the level of skill required. By using these factors, the goal is to establish a consistent approach to determine whether a worker should be classified as an independent contractor or an employee.
However, groups like the Economic Policy Institute have expressed concerns that this rule could result in workers losing potential earnings. Their estimations indicate that workers transitioning from employee status to independent contractor status may face significant financial losses.
Legal challenges
On January 12, plaintiffs including the Coalition for Workforce Innovation and Associated Builders and Contractors sought to lift a federal court’s stay on an existing lawsuit against the Biden administration. This move aims to challenge the independent contractor final rule. Interestingly, a district court judge ruled in favor of the business groups, acknowledging that the Trump-era rule had already taken effect.
In response to the request made by the business groups, they have asked the 5th Circuit to remand the case to the district court to assess whether the new final rule complies with the Administrative Procedure Act. Their hope is to secure a fair evaluation of the rule’s compliance with legal requirements.
However, the Biden administration swiftly filed a motion with the 5th Circuit, requesting the court to vacate the district court’s previous judgment as moot. This move by the administration indicates its intention to challenge and overturn the Trump-era rule, effectively rendering the case irrelevant.
Additional lawsuit
Following the revival of the 5th Circuit case, a group of freelance writers and editors filed a lawsuit against the U.S. Department of Labor on January 16. The suit was lodged in the U.S. District Court of the Northern District of Georgia. The writers and editors alleged that the final rule “obscures the line between contractor and employee in an impenetrable fog” and enables the Department’s enforcement officers and trial lawyers to classify anyone performing services for another company as an employee under almost any circumstance. This suit further adds to the mounting legal challenges against the independent contractor final rule.
With less than two months remaining until the March 11 effective date of the U.S. Department of Labor’s independent contractor final rule, legal challenges continue to cast shadows over its implementation. Business groups, represented by the Coalition for Workforce Innovation and Associated Builders and Contractors, are seeking to lift the stay on an existing lawsuit, while the Biden administration is actively working to vacate previous judgments and challenge the Trump-era rule. Additionally, freelance writers and editors have filed a separate suit, raising concerns about the ambiguity and potential consequences of the final rule.
In a press call ahead of the Department of Labor’s announcement of the rule, Solicitor of Labor Seema Nanda expressed great confidence in the final rule and assured that the department is fully prepared to defend it against any challenges. As the clock ticks closer to the effective date, the outcome of these legal battles will determine the fate of the independent contractor final rule and its impact on workers and businesses alike.