Thursday, May 13th: The Wheel Continues to Turn as to Fate of Independent Contractor Rule Under the Fair Labor Standards Act
As readers may recall, last week while discussing the Biden Administration’s Final Rule (the “May 6, 2021 Final Rule”) withdrawing the Trump Administration’s January 7, 2021 independent contractor Rule (the “Trump Rule”), we discussed the March 26, 2021 suit the Coalition for Workforce Innovation and the Associated Builders and Contractors, Inc. filed in the U.S. District Court for the Eastern District of Texas seeking a declaratory judgment enforcing the Trump independent contractor rule. Specifically, the plaintiffs allege the Biden Administration DOL’s delay of the March 8, 2021 effective date of the Trump rule was “arbitrary and capricious” and in violation of the Administrative Procedure Act (“APA”).
Following the issuance of the May 6, 2021 Final Rule last week, the plaintiffs amended their Complaint to now include allegations seeking declaratory judgment invalidating the May 6, 2021 Final Rule as well. Just as plaintiffs contend the rule delaying the effective date of the Trump Rule was arbitrary and capricious, similarly they now claim the May 6, 2021 Final Rule is also procedurally and substantively flawed. Plaintiffs’ claims of procedural deficiency are based on their assertion the Biden Administration’s DOL acted arbitrarily in exercising its political power in violation of the APA. Plaintiffs’ claims of substantive deficiency rest on the claim the DOL failed to give substantive consideration to the important interests of businesses in obtaining clear guidance as to independent contractor relationships that the Trump Rule offered, as well as the DOL’s failure to address the substantive data in the Trump Rule.
As litigation proceeds in this suit, employers should continue to keep an eye on any further developments that outline the arguments the court will need to consider in deciding whether the Biden Administration’s actions should be invalidated and putting the Trump Rule into effect. Given the length of time this case will take, as well as any subsequent appeals by either plaintiffs or the Biden Administration, employers may not see final clarification as to the independent contractor rule until a year or more in the future.