Trump Pause on DOL’s Gig Worker Rule Has Industry Wanting More

The US Department of Labor faces pressure to resurrect a business-friendly independent contractor standard from Trump’s first administration after loosening enforcement around who is and isn’t considered an employee.

Earlier this month, the Trump-led DOL announced its inspectors would no longer follow the Biden-era independent contractor rule, which broadened the factors the agency used to determine a worker’s status under the Fair Labor Standards Act. The distinction can have major consequences for employers, as workers who are deemed “employees” would be owed minimum wages and overtime, while independent contractors are not.

The enforcement freeze was welcomed by companies that rely on contractors, like gig economy giants Uber Technologies Inc. and Lyft Inc., and the Associated Builders and Contractors, as well as some freelancers, who said the policy chilled their business relationships.

Some of those groups are urging the DOL to go farther and bring back Trump 1.0’s simpler approach to worker classification that would provide more security around their contractor arrangements.

“ABC continues to support reinstatement of the Trump administration’s 2021 final rule, which simplified and clarified the factors for determining when a worker is an independent contractor versus an employee,” said Kristen Swearingen, ABC’s vice president of government affairs.

The Biden Rule

The decision to stop enforcing the rule followed weeks of pressure to pause the rule in court filings from the the Coalition for Workforce Innovation, whose ranks include Uber and Lyft.

The group, which sued the Biden administration over changes to the independent contractor standard, was straightforward about what the DOL needed to do to resolve the legal dispute.

“If the Department ultimately does not fully rescind the 2024 Rule and reinstate the 2021 Rule, this litigation will resume,” the group said in a filingin Texas federal court late last month before the DOL announced its enforcement pause.

Attorneys representing the DOL had initially requested to freeze litigation while new leadership was installed at the agency in response to CWI’s requests. DOL eventually ended enforcement of the rule on May 1.

The previous Trump-era test set out a similar multi-factor analysis to the 2024 rule they oppose, but it put a greater weight on how much control workers have over their job duties and their opportunities for profit or loss when determining a worker’s status. That approach was simpler, business groups said, and allowed companies to largely continue treating their staff as contractors.

At least one worker advocate said efforts to end the Biden rule are a “waste of resources,” and would result in legal challenges.

“It’s wrong because the rule is soundly grounded in the purpose of the FLSA, and then decades of Supreme Court and Circuit Court precedent on the scope of the FLSA,” said Laura Padin, director of work structures at the National Employment Law Project.

Whether the agency outright scraps the rule, or makes changes to the regulation during the process is yet to be seen.

“It would be a safe bet, but it is just a bet for businesses to prepare for the administration to take that pro-business view,” Mike Elkins, founder and partner of Florida-based MLE Law. “They’d have to do that by revoking the current rule, and they very well may implement something new.”

Business Reaction

The expanded factors under the now-paused Biden rule made it easier to find an employment relationship, but didn’t necessarily mean that all businesses utilizing contractors would have to reclassify them.

The test expanded the tools DOL wage investigators could use to find that a contractor was misclassified and should be treated as an employee. The agency considered six non-exhaustive factors that looked at multiple aspects of the working relationship, like who controls scheduling and opportunities for profit or loss.

Trucking firms, business groups, and individual freelancers filed a handful of lawsuits challenging the rule, arguing that the policy gave the agency leeway to deem all workers as employees, creating risk that would drive down business. Several of those cases were tossed out on standing grounds, after federal judges found that the plaintiffs couldn’t establish that they had been harmed by the Biden rule.

The DOL’s pause in enforcement, without a re-write of the regulation, won’t spur a sea change in how businesses classify their staffers, said James Looby, a shareholder at Vedder Price.

That’s because of the similarities between the classification tests used from administration to administration, he said. Many businesses are also subject to stricter state laws on worker status.