Congressional Republicans Move to Block Independent Contractor Rule

A group of House and Senate Republicans introduced legislation to block the Department of Labor’s recently finalized independent contractor rule. The rule would create significant confusion regarding worker classification determinations and its recission would be a major win for the business community. 

Background: The Department of Labor issued its final rule on worker classification in January. The rule adds to the ongoing confusion regarding whether a worker is an employee under federal wage and hour law and could significantly increase employers’ potential legal liability for misclassification as a result. The Association submitted comments in opposition to the rule which is set to go into effect March 11. 

Blocking bid: This week, a group of Congressional Republicans, led by Sen. Bill Cassidy (R-LA) and Rep. Kevin Kiley (R-CA), introduced a Congressional Review Act (CRA) resolution to rescind the worker classification rule. HR Policy, along with several other business groups, submitted a letter to Congress supporting recission. CRA resolutions require only simple majorities to pass and, if enacted, both rescind the regulation in question and prevent similar rules from being promulgated in the future. 

Will it pass, and will it matter if it does? A similar push to rescind the NLRB’s recent joint employer rule passed the House and is likely to pass in the Senate given the support of Sens. Manchin and Sinema. While this effort could see similar success, it would almost certainly be vetoed by President Biden, and the two-thirds majority required to override such a veto is extremely unlikely. 

What now? The bid by Congress is not the only path to blocking the rule. There are currently four different lawsuits challenging the rule in federal court; three from freelance groups and one from a coalition of business groups. Whether such lawsuits succeed remains to be seen, but it appears the chances in court are better than in Congress. 

Takeaways for employers:

• Get ready for compliance. Action on the CRA resolution will not be complete before the rule goes into effect next week. While a judge in one of the lawsuits could temporarily block the rule before the effective date, employers should not count on such a result.
  
  
• Audit your use of independent contractors and evaluate their relationship to your business. The DOL has repeatedly emphasized its desire to act on misclassification enforcement.
  
  
• Keep an eye on the pending CRA resolution and, more importantly, the pending lawsuits.