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Back to the future. Health care relies on quite a number of workers classified as independent contractors for tax and benefit purposes. Those workers' statuses will require review:
Can US independent contractor rule survive legal challenges, Congress?
By Daniel Wiessner - January 10, 2024Jan 10 (Reuters) - A new Biden administration rule will likely prevent companies in a range of industries from treating some workers as independent contractors, who cost less than employees, and could create new legal headaches for app-based services that rely on gig workers.
But first, the U.S. Department of Labor rule, which takes effect March 11, will have to withstand expected court challenges by businesses and trade groups and the scrutiny of Republicans in Congress who will likely move to repeal it.
REVERSING TRUMP-ERA REGULATION
The rule unveiled on Tuesday adopts a test similar to the ones many courts have used for years to determine whether workers should be treated as independent contractors or employees under U.S. wage laws. The fact-based test looks at six main factors including the degree of control a company wields over a worker, whether work performed is integral to a company's business, and a worker's opportunity for profit or loss.
It replaces a Trump administration regulation favored by business groups that had made it easier to treat workers as contractors, who are not owed a minimum wage, overtime pay and other benefits reserved for employees. Studies suggest that employees can cost companies up to 30% more than contractors.
IMPACT BEYOND THE 'GIG ECONOMY'
The Labor Department has said that the rule is designed to clarify the standard for determining worker classification and crack down on low-paying industries where misclassification is common, including construction, healthcare, retail sales and security and janitorial services.
But much of the scrutiny of the rule has focused on its potential impact on the "gig economy," as app-based services rely heavily on contract labor to contain costs and gig work has become the main way that millions of Americans earn a living.
Companies including Uber Technologies, Lyft and DoorDash have said they do not expect the rule to result in their drivers and delivery workers being classified as employees. But it could spur a fresh round of lawsuits claiming app-based services are misclassifying workers as contractors, which the industry has already been battling for a decade.
LEGAL CHALLENGES
Business groups are widely expected to seek to block the rule in court, and the U.S. Chamber of Commerce, the largest U.S. business lobby, has already said it is considering a lawsuit. Individual businesses, freelancers and gig workers, and Republican-led states also could mount legal challenges.
Any lawsuit over the rule will likely attack both its merits and the Labor Department's process for adopting it, according to legal experts. Groups could argue that the rule's definition of who counts as an employee is too broad and violates federal wage law, and that it is so vague that compliance would be difficult.
At the same time, lawsuits could allege that the Labor Department failed to justify its sharp break from the Trump administration rule, as required by the federal law that governs rulemaking by agencies.
The Labor Department had previously moved to rescind the Trump-era regulation but a federal judge in Beaumont, Texas in 2022 agreed with business groups that the agency had not followed the proper administrative procedure. Trade groups and conservative lawyers have challenged many Biden administration regulations in Texas federal courts, and there is a good chance that lawsuits over the independent contractor rule could be brought in the state.
CONGRESSIONAL REVIEW
The federal Congressional Review Act gives Congress the ability to repeal agency rules within 60 days of their adoption, and business groups have said they will urge lawmakers to use that power to eliminate the Labor Department rule.
Senator Bill Cassidy, a Republican from Louisiana, said on Tuesday that he planned to introduce a resolution to repeal the rule. Any effort to do so will likely be backed by most Republicans and could pass the House of Representatives, where the party holds a slim majority.
But getting the measure through the Senate, where Democrats have a one-seat advantage, and mustering the two-thirds majority needed to overcome a likely veto from Democratic President Joe Biden would be a heavier lift.
https://blog.dol.gov/2024/01/10/employee-or-independent-contractor-a-guide-to-the-new-rule
Employee or Independent Contractor? A Guide to the New Rule
The Wage and Hour Division is committed to protecting employees’ rights across America. To do so effectively, we must help businesses and workers understand how to differentiate employees from independent contractors who are in business for themselves.
Today, the Department of Labor published a final rule, Employee or Independent Contractor Classification Under the Fair Labor Standards Act, to provide guidance on whether a worker is an employee or independent contractor under the FLSA. This rule will help to ensure that workers who are employees are paid the minimum wage and overtime due them, and that responsible employers that comply with the law are not placed at a competitive disadvantage when competing against employers that misclassify employees.
Importantly, the final rule rescinds the 2021 Independent Contractor Rule, which we believe is out of sync with longstanding judicial precedent and increased the likelihood of misclassification. The new rule’s realignment of the department’s guidance with judicial precedent will reduce confusion, improve compliance and better protect working people.
Specifically, the final rule revises the department’s guidance by:
- Returning to the multifactor, totality-of-the-circumstances analysis to assess whether a worker is an employee or an independent contractor under the FLSA.
- Explaining that all factors are analyzed without assigning a predetermined weight to a particular factor or set of factors.
- Using the longstanding interpretation of the economic reality factors. These factors include opportunity for profit or loss depending on managerial skill, investments by the worker and the potential employer, the degree of permanence of the work relationship, the nature and degree of control, the extent to which the work performed is an integral part of to the potential employer’s business, and the worker’s skill and initiative.
The economic reality test in our new regulations is nimble enough to continue to provide a useful analysis for the broad range of work arrangements that exist today. The final rule will help the Wage and Hour Division to continue addressing misclassification and prioritizing the most vulnerable workers who are being misclassified – because that’s what we must do. In addition, the rule will help to ensure that independent contractors, including freelancers, who are in business for themselves are properly classified. We recognize that independent contractors play an important role in our economy – and this rule won’t change that.
Proper classification of employees and independent contractors results in workers who are employees under the FLSA receiving the hard-earned wages and protections they’re legally entitled to, while also ensuring that independent businesses continue to thrive. Employees across industries and workplaces should have access to both flexibility and essential worker rights.
We urge workers and employers alike to check out our website to learn more about the new rule, which was published in the Federal Register on Jan. 10 and has an effective date of March 11.
Jessica Looman is the administrator of the Department of Labor's Wage and Hour Division.
The rule begs one question:
"Why are these workers choosing gig/contract work instead of employment???"
Struck down in the nick of time:
NLRB’s joint employer rule hits the rocks in court
By Nick Niedzwiadek - March 11, 2024A federal judge in Texas on Friday kneecapped the National Labor Relations Board from implementing its stricter joint-employment standard, a major blow to one of the agency’s biggest regulatory moves under the Biden administration.
The two-step test at the heart of the NLRB’s rule is inherently flawed, Judge J. Campbell Barker wrote in his 31-page decision. That framework involves determining whether a business qualifies as a “common-law employer” and then assessing whether it holds control over one or more “essential terms and conditions” of a worker’s job — even if that authority is indirect or not actually exercised.
“[T]he Board has not been able to come up with any example of an entity satisfying step one but not step two,” Barker, a Trump appointee who previously blocked the Biden administration’s Covid-era federal eviction ban.
The NLRB tried unsuccessfully to get Barker to transfer the case to Washington, D.C., where the agency is facing a separate challenge to the rule filed by the labor union SEIU.
Business groups brought the lawsuit, arguing that the NLRB’s expansive definition had the potential to expose broad swaths of employers to liability for labor law violations committed by contractors or franchisees.
The NLRB acknowledged that the rule was intended to be defined broadly.
But Barker sided with arguments that the agency went too far to that end, stating that the new test “would treat virtually every entity that contracts for a labor as a joint employer because virtually every contract for third-party labor has terms that impact, at least indirectly, at least one of the specified ‘essential terms and conditions of employment.’”
NLRB Chair Lauren McFerran “is reviewing the decision and actively considering next steps.”
“The District Court’s decision to vacate the Board’s rule is a disappointing setback, but is not the last word on our efforts to return our joint-employer standard to the common law principles that have been endorsed by other courts,” she said in a statement.
The International Franchise Association, whose membership includes big-name fast food sellers and has been one of the most vocal critics of the joint employer standard, called on the Senate to vote to permanently overturn the rule via the Congressional Review Act. The House did just that earlier this year, and the Senate companion has the backing of Sen. Joe Manchin (D-W.Va.), giving it a high chance of passing.
“Elected officials on both sides of the aisle talk a big game about standing up for small businesses, and now the U.S. Senate can act on those promises by putting the bipartisan CRA resolution on President Biden’s desk,” IFA President Matt Haller said in a statement.
The White House has nevertheless said that President Joe Biden would veto the measure if it reaches his desk, though that of course was before Barker’s decision complicated matters.
“This ruling is a major win for employers and workers who don’t want their business decisions micromanaged by the NLRB,” U.S. Chamber of Commerce President Suzanne Clark said in a release following the decision.
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