On May 14, the Coalition for Workforce Innovation, ABC, ABC Southeast Texas Chapter and the Financial Services Institute filed an amended complaint challenging the U.S. Department of Labor’s unlawful withdrawal of the independent contractor rule. The Department’s hasty and unjustified action violates the Administrative Procedure Act, compounding a violation that began when the department improperly delayed the effective date of the rule in March.

“The Independent Contractor Rule is an important and necessary action by the previous administration that brought much needed clarity and guidance to the proper classification of contractors under the Fair Labor Standards Act,” said Ben Brubeck, Associated Builders and Contractors vice president of regulatory, labor and state affairs, in a joint statement released by the coalition. “For too long, businesses and contractors who want to remain independent have been subjected to burdensome lawsuits and inconsistent court rulings under the FLSA. The department’s improper delay and withdrawal of the rule walks us backwards and does nothing to address the very real problems confronting millions of contractors who have made the choice to remain independent.”

On May 5, the U.S. Department of Labor announced the withdrawal—effective May 6—of the Trump-era independent contractor final rule. ABC strongly supported the Trump DOL final rule, which would have clarified the department’s interpretation of independent contractor status under the Fair Labor Standards Act and promoted certainty for employers, independent contractors and employees.

“While we certainly saw this coming, it is still disappointing to see the Department of Labor chose to rescind the independent contractor final rule, which would have provided much needed clarity for the independent contracting community, employers and employees,” said Associated Builders and Contractors Vice President of Regulatory, Labor and State Affairs Ben Brubeck in a statement. “The withdrawal will harm small businesses and the entire construction industry. This move is not only in apparent violation of the Administrative Procedure Act, but also brings independent contractors—an essential lifeline to the construction industry—back to the inadequate standards previously in place, which could damage the U.S. economy and deprive many independent workers of opportunities to succeed.”

“ABC has already filed a federal court complaint challenging the Department of Labor’s unlawful delay of the rule’s effective date beyond March 8. We intend to amend our complaint to contest the department’s claimed authority to withdraw the rule, which compounds the department’s violation of APA requirements.”

According to the DOL press release, the agency is withdrawing the Trump DOL final rule for several reasons, including:

• The independent contractor rule was in tension with the FLSA’s text and purpose, as well as relevant judicial precedent.
• The rule’s prioritization of two “core factors” for determining employee status under the FLSA would have undermined the longstanding balancing approach of the economic realities test and court decisions requiring a review of the totality of the circumstances related to the employment relationship.
• The rule would have narrowed the facts and considerations comprising the analysis of whether a worker is an employee or an independent contractor, resulting in workers losing FLSA protections.

Background and ABC Actions:

On Feb. 5, the WHD proposed to delay the effective date of the final independent contractor rule from March 8 to May 7. On Feb. 22, ABC filed a request for extension of time to file comments on the delay proposal and further protested the department’s restriction on the nature of comments that could be filed.  The department denied the extension request on Feb. 24.

On Feb. 24, ABC submitted comments arguing that the WHD’s hasty and unsupported attempt to delay the effective date of the independent contractor final rule was arbitrary, capricious and in violation of the Administrative Procedure Act. ABC therefore urged the WHD to maintain the final rule’s effective date of March 8.

On March 4, the WHD issued a final rule that delays the Trump DOL’s independent contractor final rule’s effective date from March 8 to May 7, 2021. Soon after, on March 12, DOL issued a proposal to withdraw the independent contractor final rule.

On March 26, ABC, ABC Southeast Texas Chapter and the Coalition for Workforce Innovation filed suit against DOL for delaying the effective date of the independent contractor final rule and proposing to withdraw it. The filed complaint asserts that the steps taken by DOL to negate the independent contractor final rule are in violation of the Administrative Procurement Act.  ABC’s general counsel, Littler Mendelson P.C., is representing the plaintiffs in the legal challenge.

On April 12, ABC submitted comments in opposition to the DOL’s proposal to withdraw the independent contractor final rule. ABC argued that the final delay rule was unlawfully promulgated and because the department’s subsequent proposal to withdraw the independent contractor final rule relied on the unlawfully promulgated rule for the assertion that the independent contractor final rule had not already gone into effect, the subsequent proposal itself must be ordered withdrawn.

ABC will continue to monitor this important issue and provide any updates in Newsline.