Congress Introduces Resolution to Overturn Independent Contractor Final Rule

Rep. Kevin Kiley, R-Calif., and Sen. Bill Cassidy, R-La., introduced Congressional Review Act (CRA) resolutions to overturn the U.S. Department of Labor’s (DOL’s) final rule making it harder for employers to classify workers as independent contractors.

Several business organizations are challenging the rule in court;  it’s slated to take effect March 11.

The new rule replaces a 2021 rule’s framework, which designated two core factors—control over work and opportunity for profit or loss—with a more indeterminate six-factor test to assess whether a worker is an employee or an independent contractor, according to the U.S. Chamber of Commerce, which has joined a lawsuit challenging the rule. 

“SHRM stands in firm support of the CRA's initiative to repeal the recently published worker classification rule under the FLSA [Fair Labor Standards Act] and return to the 2021 rule,” said SHRM Chief of Staff and Head of Public Affairs Emily M. Dickens. “We believe that the current rule fosters ambiguity, deterring businesses from extending essential training to independent workers, a detrimental scenario for both parties involved. The 2021 rule struck a balanced approach, promoting business flexibility while curbing misclassification risks.”

We’ve gathered articles on the news from SHRM Online and other outlets.

Restrictive Rule

Independent contractors make their own hours to fit their schedule and decide where and how they want to work. Kiley criticized the Biden administration rule as attempting to restrict the ability of U.S. workers to be independent contractors. The rule casts as large a net as possible, according to Kiley, who said the rule will “cost millions of independent professionals across the country their livelihoods while restricting the freedom of many millions more to have flexible work arrangements.”
(House Committee on Education and the Workforce)

Confusion May Result

Under the new test, businesses and employers—especially small businesses—will face confusion when trying to determine whether they have properly classified their workers. The rule also threatens the independent contractor model, which lets companies scale operations up or down, and to retain expertise as needed while providing workers with flexibility and control of their work activities.

(U.S. Chamber of Commerce)

Rule’s Six Factors

Six factors to be considered under the new test are:

• The degree to which the employer controls how the work is done.
• The worker’s opportunity for profit or loss.
• The amount of skill and initiative required for the work.
• The degree of permanence of the working relationship.
• The worker’s investment in equipment or materials required for the task.
• The extent to which the service rendered is an integral part of the employer’s business.

Other relevant factors also can be considered.

(SHRM Online)

Clarification of Test Sought

Kiley urged withdrawal of the independent contractor rule at a Feb. 14 hearing of the House Committee on Education and the Workforce. He also asked for specific guidance from the DOL’s Wage and Hour Division Administrator Jessica Looman on who would be an employee and who would be an independent contractor under the rule. “How can anyone make heads or tails of this?” he asked.

(SHRM Online)

Odds of Successful Challenge

It will be challenging to get the CRA through the Democrat-controlled Senate and muster the two-thirds majority needed to overcome a likely veto from President Joe Biden.

The rule faces at least four lawsuits alleging the regulation is illegal. The growing pile of lawsuits threatens to disrupt the Biden administration’s implementation of the new rule. The lawsuits allege that the rule violates the Administrative Procedure Act and strays from the text of the FLSA.

(Reuters and Bloomberg)