The U.S. Chamber of Commerce and other major business groups have asked a Texas federal judge to permanently block a Biden administration rule that would make it more difficult for companies to treat certain workers as independent contractors rather than their employees.
The groups late Wednesday asked U.S. District Judge Marcia Crone in Beaumont, Texas to rule in their favor in their March lawsuit, arguing the U.S. Department of Labor failed to adequately explain why it was abandoning a Trump-era regulation that drew clearer lines for determining how to classify workers under federal wage laws.
The failure to rebut the findings of the Trump-era Labor Department violates the federal Administrative Procedure Act, the groups said in the filing. The department also underestimated the costs of the rule to businesses and workers, they said.
"DOL overlooks that reclassification will harm many independent contractors and may drive some out of the workforce altogether," the groups said. The plaintiffs include the Chamber, the National Federation of Independent Business and groups representing the construction, retail, trucking and financial services industries.
The Labor Department and the U.S. Department of Justice did not immediately respond to requests for comment.
The business groups are represented by lawyers from the Chamber, Littler Mendelson and Gibson Dunn & Crutcher including Eugene Scalia, who was secretary of labor under Republican former President Donald Trump.
Employees are entitled to the minimum wage, overtime pay and other legal protections not afforded to contractors, and studies suggest that they can cost companies up to 30% more than contract workers.
The Trump-era rule said the key factors in determining worker classification were the degree of control a company exercises over a worker and the worker's opportunity for profit or loss. The new rule looks at several additional factors including the permanence of a job, the degree of skill and initiative required, and whether work performed is integral to a company's business.
The rule, which took effect March 11, is expected to have a broad impact on an array of industries including app-based services that rely heavily on "gig" workers to contain costs.
At least four other challenges to the rule are pending, including lawsuits by freelance writers, trade groups and a trucking company that treats driver as independent contractors, and Republicans in Congress are pushing a resolution that would repeal it.
The business groups had sued the department in 2021 when it first attempted to repeal the Trump-era rule. Crone, an appointee of Republican former President George W. Bush, blocked the repeal, saying the agency had not explained its decision.
The challenge to the new rule came as an amended complaint in that case. The groups on Wednesday said the rule suffers from the same flaws that led Crone to side with them in her earlier decision.
Crone has not scheduled a hearing to consider the motion.
The case is Coalition for Workforce Innovation et al v. Walsh, U.S. District Court for the Eastern District of Texas, No. 1:21-cv-0130.
For the groups: Robert Friedman of Littler Mendelson
For the Department of Labor: Alexis Echols of the U.S. Department of Justice
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