A federal judge in New Mexico has rejected a trucking company's challenge to a Biden administration rule making it more difficult for businesses to treat workers as independent contractors rather than employees, who end up costing more.
U.S. District Judge Kea Riggs in Albuquerque said on Thursday that Colt & Joe Trucking lacked standing to sue because the company had not alleged any concrete injuries it had suffered as a result of the 2024 U.S. Department of Labor rule.
And even if Colt & Joe had standing, the company's arguments that the rule was arbitrary and the department lacked the power to adopt the rule failed, the judge said.
"Plaintiff’s arguments misunderstand basic premises of administrative law and when and why agencies may promulgate a rule," wrote Riggs, who was appointed by Republican President-elect Donald Trump in his first term.
The Department of Labor did not immediately respond to a request for comment on Friday.
Sheng Li of the conservative New Civil Liberties Alliance, which represents Colt & Joe, said "we believe the District Court erred and are considering our options."
The rule, which took effect in March, is expected to increase labor costs for businesses in industries which rely on contractual labor or freelancers, such as trucking, manufacturing, healthcare and app-based "gig" services. But the incoming Trump administration is likely to scrap the rule and replace it with a more business-friendly standard.
The rule requires a company to treat workers as employees when they are "economically dependent" on the company for work. The Labor Department said it would consider whether workers have an opportunity for profit or loss, the permanency of their jobs, and the degree of control a company exercises over a worker, among other factors to determine whether they should be classified as employees.
Employees are entitled to the minimum wage, overtime pay, unemployment insurance and other protections not afforded to contractors, and can cost businesses up to 30% more, according to several surveys.
The Labor Department has said the rule was designed to clarify the standard for determining worker classification and crack down on industries where misclassification is common, such as construction, healthcare, retail sales, and security and janitorial services.
At least four legal challenges to the rule were filed, including lawsuits by freelance writers and business groups. The freelancers are appealing the dismissal of their lawsuit at the Atlanta-based 11th U.S. Circuit Court of Appeals, and two cases brought by business groups are pending.
Rio Rancho, New Mexico-based Colt & Joe argued that the rule was confusing and made it impossible to know ahead of time whether a worker should be classified as an employee.
But Riggs on Thursday said the rule was a reasonable response to what the Labor Department believed to be a significant gap in the law, noting that the agency collected and responded to more than 50,000 public comments.
Riggs also said Colt & Joe had improperly relied on a 2023 U.S. Supreme Court ruling in Loper Bright Enterprises v. Raimondo that eliminated the longstanding requirement that courts defer to agencies' interpretations of ambiguous laws that they enforce.
Riggs said that federal wage law is not ambiguous, and that Loper Bright did not apply to claims that rules are "arbitrary and capricious" in violation of the federal Administrative Procedure Act.
"Loper Bright ... did not overturn the APA’s mandate that judicial review of agency policymaking and factfinding be deferential," Riggs wrote.
The case is Colt & Joe Trucking v. U.S. Department of Labor, U.S. District Court for the District of New Mexico, No. 1:24-cv-00391.
For Colt & Joe: Sheng Li and John Vecchione of the New Civil Liberties Alliance; Eric Burris and Debashree Nandy of Brownstein Hyatt Farber Schreck
For the Department of Labor: John Lewis and Lisa Olson of the U.S. Department of Justice
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