Providing Developments & Insight on Trending Topics in Employment Law

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Providing Developments &amp; Insight on Trending Topics in Employment Law

A few weeks ago, <a href="https://www.bakerlaw.com/insights/the-dols-new-independent-contractor-test-just-dropped-now-what/">we brought you news</a> that the Department of Labor (DOL) dropped a new independent contractor rule under the Fair Labor Standards Act (FLSA) that arguably leans in favor of employees. And, as we predicted, the rule has already been challenged from multiple angles. But whether these efforts will succeed is not as clear.

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So far there have been two federal court challenges. The first involves a lawsuit, originally filed in March 2021 by a coalition of business groups, challenging an independent contractor rule promulgated by the Biden administration that withdrew a previous Trump administration rule. As a result, a federal court in Texas temporarily reinstated the Trump-era rule—only for that ruling to be stayed pending the DOL’s appeal to the U.S. Court of Appeals for the Fifth Circuit. Now, the coalition has opted to try lifting the stay and reviving its 2021 challenge—rather than filing a fresh challenge to the DOL’s new rule—likely in the hopes of retaining a friendly trial court venue that sided with them once before.

The second challenge involves a group of freelance writers arguing that the new rule forces them into “employment relationships they neither want nor need.” The writers argue that they may lose business due to uncertainty over the new rule and the risk of liability for would-be employers. They also claim the new rule would force them to alter their business practices and incur more costs to remain independent. This challenge may seem counterintuitive at first blush, but it should come as no surprise. After all, surveys have shown that independent contractors overwhelmingly prefer their work arrangements over traditional jobs. (<a href="https://www.bls.gov/news.release/pdf/conemp.pdf">According to the U.S. Bureau of Labor Statistics</a>, 79 percent of independent contractors prefer their work arrangement to a traditional job and fewer than one in ten independent contractors would prefer a traditional work arrangement.) But while this argument may be persuasive in the court of public opinion, litigants should be aware that a worker’s classification preference is of minimal value. It has long been established that the economic reality of the working relationship controls workers’ classification under the FLSA—not their subjective beliefs.

If either of these challenges is successful, the DOL’s new rule-drop might end up being more of a flop. Only time will tell. In the meantime, businesses should continue focusing on the policy decisions reflected in the final rule when evaluating whether their independent contractors are properly classified. And BakerHostetler’s dedicated team of experienced labor and employment attorneys stands ready to help them do so.

The coalition’s challenge is <em>Coalition for Workforce Innovation, et al. v. Walsh, et al.</em>, No. 1:21-cv-00130 (E.D. Tex. Mar. 26, 2021), No. 22-40316 (5th Cir. May 16, 2022).

The freelance writers’ challenge is <em>Warren, et al. v. U.S. Dep’t of Labor, et al.</em>, No. 2:24-cv-00007 (N.D. Ga. Jan. 16, 2024).

Lawsuits Aim to Void DOL’s New Independent Contractor Test