A victory in the legal realm of the independent contractor rule to Uber Technologies Inc., Lyft Inc., and other gig economy firms could lead to a regulatory defeat as the Biden administration adopts a different strategy.
Judge Marcia Crone of the U.S. District Court for the Eastern District of Texas ruled on March 14 that the Department of Labor’s decision to repeal the Trump-era rule that favored business worker classification violated government rules-making procedures. While the ruling favors companies, it might also spur the agency to develop an independent contractor rule that will establish a more favorable worker norm.
“The district court’s decision is both awe-inspiring and disappointing,” Solicitor of Labor Seema Nanda stated in an announcement. “When employers mistakenly classify employees in the category of independent contractors, they are denied rights and protections, affecting all standards of labor and making it more difficult for employers who can legally compete on an equal game.”
“The Department is evaluating all legal alternatives, including the necessity of rulemaking,” Nanda said.
The Trump administration’s rule set an easier method for employers to categorize individuals as freelance contractors who don’t have the same overtime or minimum wages as full-time workers under the Fair Labor Standards Act. Biden’s administration later canceled the rule. Biden administration.
It’s not known if the agency would change its rules to determine the status of an independent contractor in the course of rulemaking or try to repeal the Trump-era rule. It’s likely to take the stricter approach to the definition of independent contractors if the pick of President Joe Biden to head his Wage and Hour Division, David Weil, is confirmed.
“It can be a bit of a push to the department into taking action immediately,” said Glenn Spencer, the senior vice president for the Employment Policy Division at the U.S. Chamber of Commerce regarding the court’s decision. “So even though we love the Trump ruling, will this rule suddenly steer this department into a negative direction?”
The ruling of Judge Crone on Monday gave new life to the famous Trump administration workplace rule, which was heavily backed by gig-economy companies like Uber and Lyft and other companies that want to cut down on the cost of labor by using an independent contractor.
The court stated in its ruling that any new agency rulemaking would need to include more input from the public and the weighing of alternative options as opposed to the earlier efforts.
“Now you’ve got your decision, and you are aware of what the judge will say. And it gives some guidelines as to how rulemaking was going to take place. Therefore, from a viewpoint, it’s extremely beneficial. Does it speed up the process of establishing rules? It might,” said Michael Lotito, Littler Mendelson P.C.’s Workplace Policy Institute co-chairman.
Catherine Ruckelshaus, general counsel and director of legal for The National Employment Law Project, an organization for worker advocacy and legal director at the National Employment Law Project, said the ruling on a certain degree “gives Department of Labor a plan for how to reverse or modify the Trump ruling that the judge is now reinstated.”
Agency’s Wage and Hour Division will promulgate the new rule and has already begun two major rulemakings in the past year. One of them is to broaden overtime protections. The second is to change how the agency calculates the number of wages paid to construction workers in federally-funded projects. It’s unclear if it will begin making new rules for independent contractors before Weil gets its approval.
Well, who was the head of the division under the Obama administration, published an interpretation of an administrator in the year 2015. He argued that the vast majority of employees should be considered employees in the FLSA. In the FLSA, employees are entitled to overtime minimum wage, overtime, and other workplace protections as opposed to independent contractors.
“If David Weil were to be confirmed, there’s not much doubt about what David Weil is feeling regarding the independent contractor issue about the AI he issued,” Lotito said.
Although the agency’s day-to-day activities under interim director Jessica Looman don’t depend on a confirmed Senate leader, being without a permanent leader may limit the agency’s ability to make major policy adjustments.
“I am sure that the Biden administration to make their own rules that will set the norm” in the field of independent contractors, according to Ed Egee, the National Retail Federation’s vice-president of workforce development and government relations. “At all times, this division will be working in these stakeholder gatherings about overtime. Therefore, I believe Jessica has a lot of work on her plan in the present.”