Independent Contractor Rule Heading Back to Court

Author: Michael Cardman, HR & Compliance Center Senior Legal Editor

February 23, 2024

A legal challenge against the new independent contractor rule has been given new life.

Earlier this week, the 5th Circuit Court of Appeals allowed a coalition of businesses to file an amended complaint, meaning they will get another crack at overturning the rule.

Although this development may revive employers' hopes that the rule will be struck down, they should still prepare to comply. The rule is scheduled to take effect in less than three weeks, on March 11, and it's unlikely that there will be a final ruling before then. And of course, there is no guarantee the challenge will be successful.

The court order marks the latest twist in a years-long legal saga that dates back to 2021, when the Trump administration put forth a rule establishing an employer-friendly five-factor test. Later that year, the Biden administration withdrew the rule one day before it was supposed to take effect.

In response, the Coalition for Workplace Innovation representing staffing agencies, direct sellers, gig economy platforms and others sued the US Department of Labor (DOL), seeking to have the rule reinstated. In 2022, a federal district court in Texas granted their wish and reinstated the Trump administration's five-factor test, which has remained in effect until today.

Immediately after the DOL published a new, more worker-friendly independent contractor rule in January, the coalition sought to overturn it on the grounds that it violated the Administrative Procedure Act.