Court finds withdrawal of Independent Contractor Rule unlawful

It’s official. The Independent Contractor (IC) Final Rule goes into effect immediately.

Surprised?

In Coalition for Workforce Innovation et al. v. Walsh, a federal Texas court ruled that the U.S. Department of Labor (DOL) unlawfully delayed and withdrew the IC Final Rule.

When Trump was still in office, the IC Final Rule was set to go into effect March 8, 2021. But on Jan. 20, 2021, after the Biden Administration took its place in the White House, the rule was postponed. Then after more back and forth, the rule was withdrawn on May 6, 2021.

Now, thanks to the Texas court ruling, the withdrawal of the Final Rule is invalid.

Violated APA

The court determined that the DOL violated the Administrative Procedure Act (APA) because it did not meet certain standards in rulemaking. One of which was due to the substantive nature of the changes, the DOL was required to provide a longer notice-and-comment period. And the court also noted the DOL didn’t consider any alternatives which were on the table. So, the court ruled the delay and withdrawal of the rule invalid.

There’s always been an issue with what constitutes an “independent contractor” under the FLSA and how to distinguish an IC from an employee. The Final Rule was attempting to fix and clarify the definition of an IC.

As you know, ICs aren’t employees and, therefore, they aren’t provided the FLSA’s minimum wage and overtime protections.

No clarity

If you’re looking for clarity on what constitutes an IC, however, you’ll have to wait. This ruling doesn’t affect the tests that determine who’s an IC and who’s an employee. They’re still in flux.

Now, we wait to see if the Biden Administration will challenge or appeal the ruling. We could even possibly get a new rule. But for now, unfortunately, it’s more of the same.

We’ll let you know when and if anything else happens on this front.