Businesses Cry Foul on DOL Messaging for Trump Gig Worker Rule

Republicans and management-side attorneys are alleging the US Department of Labor is ignoring a Trump-era independent contractor standard that’s more favorable to businesses, despite a court saying the rule takes precedence.

The DOL’s Wage and Hour subagency’s website describes how it approaches worker misclassification, but some say that language doesn’t make clear that the agency’s current regulations say businesses should use a five-factor test to determine who is an employee protected under federal wage laws.

The DOL’s website does link to a federal register notice of the Trump rule, but provides guidance and graphics that outline a seven-part test to determine a worker’s status. In response to a request for comment, the DOL said it has no guidance for businesses on how to apply the Trump standard.

That conflicting guidance forces employers to rely on a handful of past court precedents and worker classification tests, according to management side attorneys and a former official. Trucking, construction, and on-demand app services that depend on contractors to run their operations say their business models would be destroyed if they were on the hook for the tax and legal liabilities that come with hiring employees.

“What employers are really looking for right now is certainty,” said Carolyn Pellegrini, a partner at Saul Ewing’s Philadelphia practice. “The DOL’s website seems to suggest there’s a disconnect between what is currently in place and being enforced.”

Hidden Explanation?

The issue was highlighted during a House hearing on independent contractors April 19 when Tammy McCutchen, a former administrator of DOL’s Wage and Hour Division during the George W. Bush administration, testified that the agency was misleading the public on the current law by failing to provide guidance or instructions on how to comply with the Trump rule.

“If I can’t find it, and I used to be freakin’ in charge of this website, no small business owner could find it,” McCutchen said in a recent interview with Bloomberg Law.

In the wake of the hearing, the committee’s Republican leadership in a letter to acting Labor Secretary Julie Su demanded details about whether the agency has trained its enforcement staff on the Trump standard and independent contractor cases it has investigated since March 2021.

“While it is clear that the Biden administration does not agree with the Trump independent contractor rule, the administration can not ignore the law as written. DOL’s alleged abuse of discretion and arbitrary enforcement of the independent contractor rule raises troubling questions about your leadership,” Reps. Virginia Foxx (N.C.) and Kevin Kiley (Calif.) wrote in the May 4 letter.

Court Surprise

One of the earliest moves by the Biden DOL was issuing a rule to delay and repeal the independent contractor regulation finalized by the outgoing Trump administration.

The Trump rule outlines a five-part test to determine a worker’s status under the Fair Labor Standards Act. In particular, it gives greater weight to an individual’s control over their work, and the worker’s opportunity for profit or loss based on personal initiative or investment.

The Biden administration argued that the Trump rule’s approach is inconsistent with the law, and that no court has applied a test that emphasized certain factors over others in the analysis of whether a worker is a contractor or an employee.

But that effort was thwarted when business groups got a federal court to reinstate the Trump rule in March 2022. A Texas judge agreed with the groups’ argument that the Biden administration failed to properly seek public input when delaying the Trump rule, and didn’t consider other regulatory alternatives when rescinding it.

In response to the decision, the Biden DOL restarted the regulatory process, proposing a broader test last year that business groups say would make it harder to classify workers as contractors. The administration is due to finalize that rule this month.

No Change

Despite the Texas court ruling, those who support the Trump standard say the DOL hasn’t actually changed its approach to independent contractor status.

“My discussions with DOL investigators and the solicitor’s office out of Atlanta was exactly the same before the Trump regulations and after the Trump regulations,” McCutchen said.

In her interactions with the agency, WHD investigators mentioned and recognized the agency was bound by the Trump rule, but didn’t follow the structure of the Trump test when analyzing whether one of her clients was a contractor or an employee, she said.

“They didn’t say, ‘Let’s look at the two core factors,’” she explained, “or, ‘Now we’re going to look at the three additional factors,’ which is the structure of the Trump regulations. They didn’t do that.”

The Trump rule has been in place for over two years, and given how it diverged from the Obama-era approach to worker classification, the department should be reaching out to field officers and offering training and guidance, said Michael Lotito, co-chair of Littler Mendelson PC’s Workplace Policy Institute. Simply acknowledging the rule isn’t enough, he added.

“It appears at a minimum that the department has done as little as they can to publicize that the Trump rule is in effect, the standards of the rule, and how it should be applied,” he said. “There’s a big difference between accepting the law of the land and implementing the law of land.”

Compliance Concerns Overblown

Others say the Biden administration’s failure to provide guidance on how to apply the Trump rule makes sense, given the expected changes coming from the DOL’s forthcoming rule.

Former Wage and Hour Administrator Paul DeCamp noted that it wouldn’t be unusual, as a matter of agency operations and resource allocation, for the department to not invest heavily in training on the Trump standard “given the expectation at the department that that standard is going to be short lived and will be replaced by something else.”

The approach “is perhaps irritating to the business community,” said DeCamp, now a management-side attorney with Epstein Becker & Green PC. “But beyond that, I don’t think it has much significance.”

Rep. Bobby Scott (D-Va.) also noted that the Trump regulation is an interpretive rule, meaning it simply describes the agency’s interpretation of the law and may not get the same deference in court as other formal rules.

“The Trump IC rule was an interpretative rule—rather than a standard with the force of law—so the Biden DOL may not be implementing it since it conflicts with federal courts’ decades of interpretation of the law,” Scott’s office said in a statement.