Business Groups Seek to Block DOL’s Gig Worker Status Rule (1)

A business coalition filed a legal challenge to the US Labor Department’s worker classification rule, seeking to block the agency from making it harder to classify workers as independent contractors across a range of industries including trucking, construction, and the gig economy.

The Coalition for Workforce Innovation, Associated Builders and Contractors, and the Financial Services Institute filed a motion to revive their previous litigation, in which a federal court in Texas blocked the Labor Department’s 2022 effort to revise classification standards, the groups announced Friday. As in 2022, they’re arguing the agency didn’t follow the required administrative procedures for passing new federal regulations.

The groups are asking the US Court of Appeals for the Fifth Circuit to send their previously stayed case back to the US District Court for the Eastern District of Texas to consider a fresh challenge to the rule, which the DOL published in final form Jan. 10.

The department’s development of the rule has been closely watched by major gig economy players, including Uber Technologies Inc. and DoorDash Inc. But it also will require a broad range of industries to reconsider—and potentially defend in court—their classification of millions of workers as independent contractors rather than employees.

Uber and Lyft Inc. are members of the Coalition for Workforce Innovation that’s challenging the new rule, although they’ve said publicly they don’t expect the regulation to change the way they classify their drivers. That group’s membership also includes the American Trucking Associations, National Home Delivery Association, and Retail Industry Leaders Association, as well as law firms Littler Mendelson PC and Seyfarth Shaw LLP.

Employees qualify for a wide range of protections under federal and state laws that independent contractors don’t get. In this case, the DOL rule covers classification under the Fair Labor Standards Act, which guarantees minimum wage and overtime pay. But gig economy and other industry groups say many workers prefer the schedule flexibility and autonomy that come with an independent status.

“It is unfortunate that the U.S. Department of Labor is replacing the commonsense 2021 final rule with an ambiguous and difficult-to-interpret standard for determining independent contractor status,” Ben Brubeck, a vice president at Associated Builders and Contractors, said in an emailed statement. “Regrettably, the confusion and uncertainty resulting from the final rule will cause workers who have long been properly classified as independent contractors in the construction industry to lose opportunities for work and the freedom to choose how they work.”

The new Labor Department rule, which is set to take effect March 11, calls for determining whether workers are employees or independent contractors by using the “economic realities” test. The regulation lays out six factors of equal weight to consider, including the degree of a person’s control over their own work, investment by the worker and the business, and how integral the work is to the company’s overall operations.

It rescinds a previous standard that the Trump administration finalized in its last days in January 2021 that used similar factors, but identified two of them as the core considerations: the nature and degree of control over the work, and the worker’s opportunity for profit or loss based on their personal initiative or investment.

A Labor Department spokesman didn’t immediately respond to a request for comment.

The case is Coalition for Workforce Innovation v. Su, 5th Cir., No. 22-40316, motion filed 1/11/24.