June 16, 2023

Labor Department’s independent contractor rule not likely anytime soon


The proposed Department of Labor rule defining independent contractor (IC) status now looks like it won’t be appearing until August or September.

On two separate fronts, the DOL recently has signaled that earlier hopes the rule might make its appearance before the end of the second quarter were not going to happen.

The most recent development comes in the appeal of a lawsuit related to the rule that ultimately will probably die because of irrelevance, its primary work having been accomplished in 2022. 

That is the lawsuit that was brought by a coalition of interest groups against the Biden administration that resulted in the U.S. District Court for the Eastern District of Texas ordering the reinstatement of the Trump-era definition of an IC that was yanked by the DOL after the Biden administration took office. The court found that the withdrawal of the Trump-era rule did not follow proper procedure.

That decision was appealed by the DOL, which was a defendant in the case. The appeal may ultimately be moot because the DOL has undertaken the process to create its own rule in compliance with federal regulations, and a full resolution in the appeals process before the U.S. Court of Appeals for the 5th Circuit may prove to be unnecessary.

But it goes on anyway. And in a development from earlier this month, the DOL has tipped its hand on the schedule for the new IC rule it is seeking to implement. 

Resolution of the lawsuit is currently stayed, with the DOL required to adhere to a schedule of updates to be filed with the court. The latest stay was to expire Monday, but the government asked for another stay, this one for 120 days rather than the previous 180-day length.

“The Department is continuing to review and consider the comments received during the comment period on the proposed rule and is considering whether to adopt the proposed rule,” said a joint filing by the DOL and the groups that comprise the plaintiffs. “Issuance of a final rule should make it unnecessary to pursue this appeal.”

In order to “avoid an unnecessary expenditure of resources by the parties and the Court,” the government asked that the next stay be only 120 days rather than 180. 

The request was granted by the court and was not opposed by the plaintiffs.

Separately, the DOL’s webpage on the status of the rule lists August as the date for the final rule to be published, though it does not give a date. 

The joint filing notes that the DOL received about 54,000 comments on the new rule.

DOL’s proposed new rule would be implemented in deliberations of the department’s Wage and Hour Division. With the reinstatement of the Trump-era rule ordered by the court last year, it means that the Biden administration’s DOL must use a rule published in the waning days of the Trump administration that governs the definition of an IC. 

The DOL IC rule is being viewed by the IC community as a highly significant development. Its proposal has even spurred the creation of a trucking interest group devoted solely to stopping its implementation.

The proposed rule is viewed as far more likely to lead to a decision by the Wage and Hour Division in a classification dispute that the worker or workers in question are employees and not ICs. 

Both the Trump rule and the proposed Biden rule rely on the “economic realities test” to provide guidance to the Wage and Hour Division in its deliberations. 

The proposed Biden rule says all six points of the economic realities test must be weighed equally in determining whether a worker, like a truck driver, is an employee or independent. 

By contrast, the Trump rule that is in place now raises two points above the other six: the question of control and the opportunity for a worker to profit from his or her own initiative. 

Coincidentally, that question of the ability to profit from effort is at the heart of a decision this week by the National Labor Relations Board that overturned an earlier precedent that also focused on worker initiative as a key determinant in whether a worker is an employee or an IC.

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