Financial Services Institute Inc., Associated Builders and Contractors Inc., the Associated Builders and Contractors of Southeast Texas, and the Coalition for Workforce Innovation filed a lawsuit May 13 against the US Department of Labor for withdrawing the independent contractor rule finalized in the waning days of the Trump administration, Think Advisor reported.

The Trump IC rule, published Jan. 6, would have reaffirmed an “economic reality” test to determine whether an individual is in business for him or herself (independent contractor) or is economically dependent on a potential employer for work (FLSA employee). It identified the nature and degree of control over the work and the worker’s opportunity for profit or loss based on initiative and/or investment as the most probative to whether a worker is economically dependent on someone else’s business or is in business for him or herself. The rule also identified three other factors that may serve as additional guideposts in proper classification analysis: The amount of skill required for the work; the degree of permanence of the working relationship between the worker and the potential employer; and whether the work is part of an integrated unit of production.

The rule was initially scheduled to become effective March 8, though it was expected to be blocked by the incoming Biden administration. A delay until May 7 was announced on March 2.

The department repealed the rule May 6, saying doing so would “help preserve essential worker rights and stop the erosion of worker protections that would have occurred had the rule gone into effect. Legitimate business owners play an important role in our economy but, too often, workers lose important wage and related protections when employers misclassify them as independent contractors.”

The lawsuit, filed in the US District Court for the Eastern District of Texas, contends the delay was “issued arbitrarily, capriciously, and contrary to procedures required by law” because the DOL failed to provide a meaningful comment period or offer substantive justification for enacting the delay.

“The DOL’s hasty and arbitrary delay and subsequent withdrawal of its well-reasoned independent contractor rule puts it in violation of the Administrative Procedures Act,” said Financial Services Institute president and CEO Dale Brown in a statement. “The rule must be restored so that independent financial advisors and other independent workers can operate confidently knowing their independent contractor status is secure.”