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The dispute concerns one of the more significant regulatory actions taken by the Labor Department since President Biden took office, promising to reinvigorate worker rights. The government’s new rules, completed in January, spell out the process by which companies decide how to classify workers and, as a result, what benefits they should receive.
But many companies that rely on independent contractors, from delivery apps like DoorDash to lesser-known companies that employ things like janitors and truck drivers, are disappointed in the Biden administration’s approach. I strongly oppose it. They say the rules will put pressure on them to treat more workers as employees, which could come at high costs they can’t afford and could even force them to reduce their workforce. claims.
With new rules set to go into effect next week, these industries banded together Tuesday to file an expanded revised version of a previously pending lawsuit, with the Department of Labor warning that “only businesses that employ independent contractors nationwide “This will cause irreparable damage to workers.” “
At the forefront of this litigation is the Coalition for Workforce Innovation, a lobbying group whose members include major companies in retail, technology and transportation. Uber and Lyft. The U.S. Chamber of Commerce, National Retail Federation, National Federation of Independent Business and American Trucking Associations also signed on to the fight in hopes of overriding the Biden administration’s rules.
Together, these groups represent a large portion of the U.S. economy, and the Chamber alone has executives from Caterpillar, FedEx, Facebook, Hilton, and other major companies on its board. (In 2022, Amazon revealed that it had paid dues to the organization; its executive chairman, Jeff Bezos, owns the Washington Post.)
“This regulation makes it impossible, if not impossible, for employers to maintain the legal use of independent contractors under federal labor law,” said Mark Friedman, deputy director for workplace policy at the U.S. Chamber of Commerce. It will also be very difficult.”
The fierce opposition has greatly troubled labor advocates, many of whom are urging Biden to take more aggressive action to prevent companies from misclassifying workers as independent contractors simply to save money. and in the process denying workers better wages and other rights.
“Congress intended this law to be very broadly applicable,” says a 2020 analysis that found 10 to 30 percent of employers incorrectly classify employees as independent contractors. said Laura Padin, director of labor structures at the National Employment Law Project, an advocacy group. To save money.
“For decades, we have seen employers misclassify people as independent contractors as a way to avoid compliance with minimum wages and overtime pay, and to shift more risk and costs to workers. I’ve seen it,” she said.
It’s unclear how the new lawsuit will affect how Biden’s aides implement the rules starting March 11. The Department of Labor said in a statement that its approach “will help address the issue of misclassifying workers as independent contractors and ensure that workers receive the benefits and protections available to them.” Worth it. ” The agency added that it was “based on decades of case law.”
Spokespeople for Uber and Lyft did not respond to requests for comment.
This incident reflects the tremendous uncertainty surrounding one of the fastest growing aspects of the US economy. For decades, state and federal officials have tried to enact rules enumerating the rights of independent contractors, but they have run into stiff opposition from businesses, blocked Congress, and confusing legislation and court rulings. It was a patchwork situation.
The latest turmoil began under President Barack Obama. The Obama administration’s original goal was to crack down on companies that deny benefits to their employees. At the time, the government established legal tests to determine a worker’s status under the Fair Labor Standards Act. This is a New Deal-era law that created a state right to a minimum wage and overtime pay for employees.
Mr. Obama’s successor, President Donald Trump, later reversed policy, giving employers more latitude to classify workers as they see fit. But starting in 2021, the Biden administration sought to repeal President Trump’s approach, launching a long and controversial effort to eventually reinstate Obama-era standards.
“This rule protects workers, especially those who face the greatest risk of exploitation, by ensuring that workers are properly classified and receive the wages they earn. ,” Acting Secretary of Labor Julie Su said in a statement announcing the final plan for 2016. January.
Labor activists touted the rule as a significant development that could help the most economically precarious workers, including immigrants and people of color. Under this policy, the Ministry of Labor can take action against companies that misclassify employees.
Some advocates also see the government’s stance as an important legal and political indicator that can influence other state and federal laws, including It also includes the possibility of providing unemployment insurance and Social Security benefits to independent contractors who are ineligible to receive money.
But when the Biden administration’s plan was first announced, a wide range of industries vehemently opposed it, fearing implementation would be confusing and expensive. The American Trucking Associations called it “un-American” and vowed at the time to “defeat this reckless rule.” Meanwhile, relevant builders and contractors said construction workers would “lose job opportunities.”
Uber and Lyft each said at the time that they did not expect to be affected by the changes. However, both companies are still lobbying against the new rules. In a 2022 letter to the Labor Department, the ride-hailing giants each argued that many independent contractors do not want to be treated as employees and prefer to maintain flexibility in working hours and pay. .
Uber even estimated that it would have to reduce the number of drivers on its platform if it were forced to employ drivers rather than treat them as independent contractors. It shared with the government a 2020 analysis that estimated that “two-thirds of people who currently drive for Uber would be denied the ability to work” if classified as employees.
Many of these opponents quickly launched an attack in January, essentially reviving a dormant federal lawsuit they first filed against the Biden administration over an earlier version of the worker classification rules.In a petition to the U.S. Court of Appeals for the Firth Circuit, lobbying groups including the Workforce Innovation Coalition reaffirmed their conviction. It alleged that the Department of Labor once again violated federal law in the way it handled public comments.
“We are comparing this to the policies finalized under the previous government with broad support from the business community,” Coalition Chairman Evan Armstrong said of the Labor Department’s efforts. He said so. This rule will apply. ”
The court ultimately agreed, sending the case back to the Eastern District of Texas, which is considered a friendly venue for companies challenging federal regulations. The U.S. Chamber of Commerce and other groups then intervened, arguing that the government’s rules were confusing and biased toward finding workers to become employees.
In a new complaint filed Tuesday, the companies say the Biden administration’s directive “imposes significant costs on businesses and workers” and classifies them differently than they thought they would. It warned that if workers were classified, the consequences could be “wage reductions, benefits reductions, and terminations.” That’s how it should be. They also argued that the Labor Department acted “arbitrarily and capriciously” in issuing this year’s rules.
Lauren Kaori Gurley contributed to this report.
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