Freelancers file first lawsuit challenging Biden independent contractor rule

By Daniel Wiessner

(Reuters) -A group of freelance writers and editors has sued the U.S. Department of Labor, claiming the Biden administration’s new rule making it more difficult for companies to treat some workers as independent contractors is illegal and should be struck down.

The four freelance workers filed the lawsuit in Georgia federal court late Tuesday, alleging that the rule unveiled last week is so vague that it violates the U.S. Constitution.

The lawsuit is the first to challenge the rule, which is scheduled to take effect March 11, but more legal challenges are expected and the U.S. Chamber of Commerce, the largest U.S. business lobby, has said it is considering suing. Republicans in Congress have also said they will move to repeal the rule through legislation.

The freelancers said in their complaint that they would seek an order temporarily blocking the rule while their lawsuit plays out.

The rule is widely expected to increase labor costs for businesses in industries that rely on contract labor or freelancers, including trucking, manufacturing, healthcare and app-based “gig” services.

The Labor Department referred a request for comment to the U.S. Department of Justice, which declined to comment.

When it issued the rule, the Labor Department said it was meant to clarify the test for determining whether workers are independent contractors or employees, who are entitled to legal protections such as a minimum wage and overtime pay.

But the freelancers in their lawsuit said the department failed to explain why it was abandoning a simpler Trump-era rule that was favored by business groups.

That 2021 rule said the key factors in determining worker classification were the degree of control a company exercises over a worker and the worker’s opportunity for profit or loss. The new rule looks at several additional factors including the permanence of a job, the degree of skill and initiative required, and whether work performed is integral to a company’s business.

“Businesses are given no useful guidance on the scope of the statute and cannot structure their conduct to comply with its demands,” the freelancers said in the lawsuit.

The workers said they have “a reasonable fear that they will lose business due to uncertainty or fear of liability risks under the Department’s new rule.” They are represented by the Pacific Legal Foundation, a libertarian group.

On Friday, construction trade group Associated Builders and Contractors (ABC) said in a court filing that it also planned to challenge the new rule on behalf of businesses in the industry.

The group had sued the Labor Department in 2021 when it first moved to rescind the Trump-era regulation, and a federal judge held that the agency did not adequately explain why it was scrapping that rule. The department appealed, and a New Orleans-based U.S. appeals court paused the case pending the release of the new rule.

ABC last week asked the appeals court to send the case back to the lower court to decide whether the new rule is valid.

(Reporting by Daniel Wiessner in Albany, New York, Editing by Alexia Garamfalvi and Nick Zieminski)