In a complaint filed on March 26, 2021, business groups challenged a U.S. Department of Labor March 4, 2021 final rule to delay the effective date of the Trump-era regulation on independent contractor classification. As we previously reported, that Trump-era rule, which was finalized two weeks before President Biden took office, was initially scheduled to take effect on March 8, 2021 but was then delayed until May 7, 2021.
The business groups argue that the DOL, in violation of the Administrative Procedure Act’s notice and comment rulemaking requirements, failed to provide a meaningful comment period before enacting the March 4, 2021 final rule to delay the rule’s effective date. The business groups also allege that the DOL failed to offer substantive justification in enacting the final rule to delay and acted arbitrarily and capriciously. The lawsuit seeks a declaratory judgment declaring the March 4, 2021 final rule to delay invalid, a permanent injunction against the final rule to delay, and a declaration that the rule went into effect on March 8, 2021.
The business groups further argue that the DOL Wage and Hour Division’s March 11, 2021 Notice of Proposed Rulemaking (“NPRM”), which subsequently withdrew the delayed Trump-era independent contractor rule, should be withdrawn. The business groups assert that because the NPRM seeking to withdraw the independent contractor rule relies upon the improper March 4, 2021 final rule to delay, the NPRM itself is invalid.
It’s certainly not uncommon for an incoming Presidential administration to freeze lame-duck regulatory activity initiated by an outgoing administration from another political party; for an incoming administration to revoke and revise legacy rulemaking; and for stakeholders to challenge rulemaking through litigation. We’ll continue to monitor the activity around the federal independent contractor rule, which many businesses across the country are following with keen interest.