Trump DOL Pauses Biden Independent Contractor Rule Defense (1)

President Donald Trump’s executive branch is moving to end its legal defense of a Biden-era US Department of Labor rule on independent contractor status.

The US Court of Appeals for the Fifth Circuit granted a request from the DOL Friday to delay oral arguments scheduled for next month in a lawsuit challenging a 2024 rule clarifying the agency’s approach to independent contractor classification, due to the change in administration.

The rule generally makes it harder for employers to treat their workers as independent contractors, who don’t have the same protections under federal labor laws as employees.

US Department of Justice attorneys requested 60 days to provide new DOL leadership “with sufficient time to familiarize themselves with these issues and determine how they wish to proceed.” Oral argument had originally been scheduled for Feb. 5.

The move to delay the independent contractor hearing is the first step in an expected wave of DOL withdrawals from litigation involving Biden-era regulations. Several DOL rules issued within the last two years, including its independent contractor, prevailing wage, and overtime standards, are being challenged in federal court. There are five legal challenges in total pending against the independent contractor rule alone.

While the Trump DOJ’s filing didn’t clarify whether it plans to gut the Biden independent contractor rule, it’s facing competing pressure from business groups and worker advocacy groups over what to do with it.

Businesses and freelancers that filed suit want the Biden rule canceled, which would return the standard to one issued during Trump’s first term.

But, union and worker advocacy groups are urging the current administration to continue defending the rule in court, to make good on Trump’s promises to “grow wages and improve working conditions.”

The court granted the DOL’s request Jan. 24, but said it would decide on whether to hold the case in abeyance once it receives a status report from the DOL, which is due March 25.

Independent Contractor

Changes to how the DOL approaches independent contractor status impact nearly every sector of the economy. But the impacts are particularly large for the trucking and construction sectors, as well as tech companies like Uber Technologies Inc. and Lyft Inc., which rely on independent contractors for their core operations.

The independent contractor rule at issue was finalized by the Biden administration last year.

It outlines six non-exhaustive factors the DOL would consider when determining whether a worker is an employee or independent contractor for purposes of the Fair Labor Standards Act. The factors weighed by the DOL included the worker’s control over the work, their opportunity for profit or loss, and investments by the worker and the employer.

Employees, rather than contractors, are eligible for benefits like workers compensation, minimum wage, or overtime protections provided to employees under federal labor laws enforced by the DOL. A finding that a worker should be classified an employee can create new financial costs and legal consequences for an employer.

The Biden-era rule replaced a more business-friendly contractor standard finalized by the Trump administration in January 2021 that outlined a simpler classification test focusing more on how much control workers have over their duties and their opportunities for earnings.

The 2024 regulation has been largely opposed by businesses and some freelancers who say it would expand liability, chill business relationships, and destroy their livelihoods.

The Biden administration and worker advocacy groups say the rule is necessary to protect workers from misclassification as contractors.

In letters sent the Department of Justice on Friday, the legal organization Democracy Forward requested that the Trump administration clarify whether it plans to defend Biden-era rules on independent contractor statusand overtime pay protections in court, so that the group can determine whether it should intervene.

“These letters make clear that, on behalf of our clients and those representing working Americans, if the Trump administration will not uphold the prior administration’s commitment to defending workers, and that means vigorously defending the overtime and independent contractor rules against legal challenges, we will,” Skye Perryman, president and CEO of Democracy Forward, said in a statement.

Typical Procedure

One management-side attorney cautioned that the request for delay in arguments in the case doesn’t necessarily indicate the Trump administration wants to scrap the rule.

“We just don’t know that yet,” said Alex MacDonald, a shareholder at Littler Mendelson PC."And frankly, they don’t know that yet because they don’t have the people in place.”

Many labor and employment observers predict the Trump administration will address the Biden independent contractor rule in some way. The agency could request that the litigation be stayed while it pursues another rulemaking.

MacDonald said the move to request more time is normal when administrations change hands.

“Often, when an administration comes in, it will file these stay requests or extension requests, just to give new leadership more time to figure out what it is going to do with various cases that are pending,” he said. “In this case, there’s a really good rationale for it, because the administration still hasn’t even nominated some folks to really key positions within the Department of Labor.”