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Business Groups Sue over Independent Contractor Rule

worker delivers groceries to home

Business groups and ride-booking platforms are taking legal action against the U.S. Department of Labor (DOL) in order to continue classifying their workers as independent contractors.

On Jan. 11, a coalition of business groups, called the Coalition for Workforce Innovation, sued in the 5th U.S. Circuit Court of Appeals to block the DOL’s independent contractor rule before it takes effect on March 11. The group includes Uber, Lyft, Mary Kay, the American Trucking Association, Associated Builders and Contractors, and the Financial Services Institute.

Meanwhile, U.S. Sen. Bill Cassidy, R-La., has pledged to introduce a resolution to stop the rule from taking effect.

We’ve gathered a group of articles on the news from SHRM Online and other news outlets.

Looking for Speedy Resolution

Instead of launching a new lawsuit, the business groups asked to revive their previous litigation involving a different Biden administration independent contractor rule that was issued in 2021. This move is intended to speed up the judicial process.

While the 2021 rule and the rule released this year are slightly different, they both would cancel a Trump-era standard that put in place a more business-friendly approach for determining whether a worker should be classified as an employee or contractor.

The DOL argued that the business groups must file a new lawsuit against the latest rule because the prior case focused solely on the 2021 rule, which is no longer in play.


Freelance Writers Sue

On Jan. 16, a group of freelance writers and editors sued the DOL over the independent contractor rule as well. They alleged the rule is so vague that it violates the U.S. Constitution. They said they have a reasonable fear that they will lose business due to client companies having uncertainty or fear of liability risks related to the independent contractor rule.

(Insurance Journal)

Congressional Action

The federal Congressional Review Act gives Congress the ability to repeal agency rules within 60 days of their adoption. Business groups have said they will urge lawmakers to use that power to eliminate the independent contractor rule. Any effort to do so will likely be backed by most Republicans and could pass the House of Representatives, where the party holds a slim majority.

But getting the measure through the Senate, where Democrats have a one-seat advantage, and mustering the two-thirds majority needed to overcome a likely veto from President Joe Biden would be a heavier lift.


Totality-of-the-Circumstances Standard

The DOL’s new rule rescinds a 2021 rule in which two core factors—control over the work and opportunity for profit or loss—carried greater weight in determining the status of independent contractors. Under the new rule, employers would use a totality-of-the-circumstances analysis, in which none of the factors carry greater weight.

In public comments to the DOL on the new rule when it was a proposal, SHRM said the rule would create uncertainty and confusion for employers, require more time and resources from businesses to apply, and undercut workers’ ability to work independently.

(SHRM Online and SHRM Online)

Impact on Staffing Agencies

The new rule could make businesses less likely to hire gig workers for fear of sparking misclassification lawsuits and instead use staffing firms that operate as employers. If the rule is upheld and enforced in a way that favors W-2 employment status, that will benefit the staffing industry.

(SHRM Online)


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