A federal judge in Texas delayed until March a US National Labor Relations Board rule change for determining joint-employer status, highlighting challenges the regulation faces from lawsuits and legislators.
US District Judge J. Campbell Barker on Feb. 21 issued a brief order pushing back the rule’s effective date to March 11 from Feb. 26, Reuters reported. Barker, an appointee of former President Donald Trump, said “an opinion with the court’s reasoning will be issued forthwith.”
The rule dictates when two companies that conduct business together can be considered joint employers and thus liable for one another’s — or their contractors’ and franchisees’ — labor law violations.
The NLRB finalized the rule in October to replace a joint-employer rule that took effect in April 2020. The standard was originally scheduled to take effect Dec. 26, 2023; however, the NLRB in November delayed the date until Feb. 26 of this year to address legal challenges after the US Chamber of Commerce and a coalition of business groups in November 2023 sued the NLRB over the rule.
This new order delaying the measure’s effective date suggests the judge needs more time to pen an opinion that addresses the complex legal issues at play in the case, Bloomberg Law reported. Barker expressed skepticism about the rule during a Feb. 13 hearing.
The NLRB’s new joint-employer rule “seems to create a lot more uncertainty, or at least opportunity for disagreement in practice” than the narrower Trump-era measure that it’s replacing, Barker said at the hearing.
“To me, it seems like by removing some bright lines in the 2020 rule, it’s only going to increase uncertainty and litigation over the basic parameters of joint-employer status,” Barker said.
Tennessee Free-Market Group Files Suit
A Tennessee free-market nonprofit group on Feb. 21 also filed a lawsuit challenging the new Biden administration labor rule.
The Beacon Center of Tennessee filed its federal lawsuit in Nashville on behalf of two freelance journalists, Margaret Littman and Jennifer Chesak, ABC News reported. The lawsuit against the US Department of Labor, its wage division and two top officials claims the new rule will “force freelancers to enter undesirable employment relationships or to refrain from working at all.”
“With its bustling music industry, Nashville is home to many freelancers and independent contractors,” Beacon wrote in a blog post. “Many of these individuals choose to be independent contractors because they enjoy the flexibility that freelancing provides and the control that it gives them to shape their careers.”
The lawsuit argues the new rule violates fundamental separation-of-powers principles:
“First, the independent Contractor Rule is arbitrary and capricious,” Beacon states. “The Administrative Procedure Act requires agencies to provide a good reason for reversing course on policy. Yet the Department of Labor failed to provide a sound explanation for its shift to a vague multi-factor test in its 2024 Rule, and the switch threatens to confuse companies and disrupt the freelance industry.
“Second, the independent contractor rule was promulgated in excess of the DOL’s authority delegated to it by Congress in enacting the FLSA. As originally understood, the Department of Labor had no authority to issue binding rules at all under the FLSA — and that is perhaps why it did not do so for over 80 years. If it were otherwise, the FLSA would raise significant nondelegation concerns. The definition of “employee” has significant consequences for the economy. It’s difficult to imagine that, in enacting the FLSA, Congress sought to have that important question decided on an administration-by-administration basis.”
The Beacon lawsuit follows a similar suit filed against the Department of Labor in January by four freelance writers and editors. That suit claims the Biden administration’s new rule on when workers can be classified as independent contractors is vague and uncertain and should be struck down because it violates the US Constitution.
“The Labor Department’s new classification rule makes it harder to be an independent contractor by muddying the waters between who is an independent contractor and who is an employee. These rules chill Americans’ ability to work by threatening businesses with ruinous civil and criminal liability,” attorney Wilson Freeman of Pacific Legal Foundation, which is representing the freelancers, said in a press release.
GOP Challenge
Republican lawmakers are also gearing up to halt the new rule.
Rep. Kevin Kiley (R-Calif.), chairman of the House Education and the Workforce Subcommittee on Workforce Protections, has stated he will introduce legislation under the Congressional Review Act to nullify the regulation when the Department of Labor submits the rule to Congress.
In a Feb. 14 hearing of the House Committee on Education and the Workforce, Kiley questioned Jessica Looman, administrator of the DOL’s Wage and Hour Division, on lack of specific guidelines and the difficulty of determining worker status — including truckers, writers and real estate agents — under the new six-factor guidelines.
