Several major U.S. business groups, including the U.S. Chamber of Commerce, have initiated a legal challenge against a new Biden administration rule aimed at altering the classification of workers as independent contractors or employees.
Filed in federal court in Beaumont, Texas, the lawsuit asserts that the U.S. Department of Labor’s regulation violates federal wage law by expanding the definition of employee status too broadly.
The rule, set to take effect on March 11, is poised to have a significant impact across various industries, particularly those reliant on gig workers. It seeks to redefine worker classification, affecting minimum wage, overtime pay, and other labor protections.
Companies fear increased costs associated with treating workers as employees rather than contractors, potentially up to 30%.
Notably, this lawsuit is one of several challenges to the rule, with pending legal actions by freelance writers, trade groups, and a trucking company treating drivers as independent contractors. The complaint also alleges that the Labor Department violated federal rulemaking laws by reversing a Trump-era rule without sufficient justification.
This legal action follows a prior lawsuit against the Labor Department’s attempted repeal of the Trump-era rule in 2021, which was blocked by a judge due to inadequate explanation. The Department has yet to respond to the recent lawsuit.
The Biden administration has defended the rule as necessary to clarify worker classification standards and combat common misclassification practices, particularly in industries like construction, healthcare, and retail.
However, Republican lawmakers are concurrently pursuing efforts to repeal the regulation through the Congressional Review Act, although overcoming a potential presidential veto poses a challenge.
