Independent Contractor Rule Challenged in Numerous Lawsuits
Posted by [email protected] on Sep. 11, 2024 / Subscribe 0
Independent Contractor Rule Challenged in Numerous Lawsuits
By Trent Cotney
As you know, on January 9, 2024, the Department of Labor (DOL) issued a final independent contractor rule. It took effect on March 11, and since then, its requirements have significantly affected many industries. Businesses have had to overhaul hiring and payroll practices, and some independent contractors are concerned that reclassification will threaten their livelihoods.
Details of the Rule
This new DOL rule rescinded the 2021 Independent Contactor Rule and claims to protect workers’ rights as set in the Fair Labor Standards Act (FLSA). In addition, it follows judicial precedent for categorizing workers as either employees or independent contractors.
The final rule uses a multifactor analysis, rather than an ABC test, to determine worker classification. Those factors are listed on the DOL website and are related to the nature of the working relationship, the degree of control, and other issues.
Backlash to the Rule
Although many workers may welcome the reclassification, some are not so enthusiastic. Soon after the new rule was implemented, a coalition of independent workers and advocacy groups—called Save Independent Work—was created. It announced its intent to overturn the rule that would recategorize hundreds of thousands of independent workers as employees. The coalition asserts that the new rule will have a damaging impact on independent workers and small businesses. A number of lawmakers have also questioned the validity of the rule.
In addition, several lawsuits have been filed in reaction to the new rule, including the following:
Coalition for Workforce Innovation et al. v. Su et al.
The case, currently before the U.S. District Court for the Eastern District of Texas, was brought by business groups challenging the final rule. The case has been fully briefed, and a decision by the court on summary judgment, addressing the legality of the rule, is expected soon. The plaintiffs argue that the court should vacate the DOL’s withdrawal of the 2021 independent contractor rule, vacate the DOL’s promulgation of the 2024 rule, and enjoin the department from enforcing the 2024 rule as it fails to address the confusion over the proper classification of independent contractors. They say it will irreparably harm companies employing independent contractors nationwide and victimize the workers themselves.
The case revives a previous suit, Coalition for Workforce Innovation et al. v. Walsh et al., targeting the Biden administration’s 2021 rulemaking to withdraw the Trump-era independent contractor rule. In 2022, the Eastern District of Texas nullified the withdrawal rule and reinstated the Trump-era rule. The DOL appealed the decision to the 5th Circuit. The 5th Circuit then stayed the District Court decision while the case was litigated. After the new Biden final rule was issued, the 5th Circuit lifted its stay and remanded the case to the District Court to review the business groups’ challenges to the new rule.
Warren et al. v. DOL et al.
This case is currently before the U.S. District Court for the Northern District of Georgia and was brought by a group of freelance writers. It has been fully briefed and is now ripe for a decision by the court on summary judgment. The plaintiffs argued that the rule violates the Administrative Procedure Act and the Constitution for being overly vague and conflicting with the FLSA.
Littman et al. v. DOL et al.
The case, which is before the U.S. District Court for the Middle District of Tennessee, was brought by two freelance writers. It has been fully briefed, and the court’s decision on summary judgment is imminent. The plaintiffs argued that the regulation was arbitrary and capricious, exceeding the DOL’s statutory authority.
Frisard’s Transportation LLC v. DOL et al.
In March, the U.S. District Court for the Eastern District of Louisiana denied the request from Frisard’s Transportation for a preliminary injunction to prevent implementation of the rule. The family-owned trucking company appealed the decision to the 5th Circuit. The District Court stayed the litigation proceedings while the Circuit Court considered the injunction request. The parties are currently filing their respective briefs, and the case is scheduled to continue into early September.
Colt & Joe Trucking LLC v. DOL et al.
Colt & Joe Trucking filed its suit before the U.S. District Court for the District of New Mexico. The parties just began filing their briefs, and the briefing schedule is set to continue into October. This is the only case in which the plaintiffs argue that the rule was issued illegally under Acting Labor Secretary Julie Su because she has not been officially confirmed as head of the agency.
Final Thoughts
Clearly, the worker classification rule, while trying to protect workers, has resulted in opposition from both businesses and some independent contractors. It will be interesting to see if the final rule remains intact for the foreseeable future. But for now, all companies must ensure they are in compliance with their classification and payroll practices.
If you are unsure of your classification obligations, do not hesitate to consult legal counsel. An experienced employment attorney can review your company’s structure and advise you on proper designations for your workers.
The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.
About the Author: Trent Cotney serves as General Counsel for NRCA, Western States, and URCA. For more information, you can reach Trent Cotney at 866.303.5868 or [email protected].
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