Courts Consider Independent Contractor and Joint Employer Rules

United States District Courts will be ruling on challenges to the independent contractor rule issued by the Department of Labor (DOL) and the joint employer rule finalized by the National Labor Relations Board (NLRB). Both rules have effective dates of March 11^th. A bill that would block the FLSA salary basis threshold rule has been introduced in the House of Representatives. A House of Representatives bipartisan paid family leave group has issued a policy framework. 

Fifth Circuit Resets Independent Contractor Rule Litigation – The United States Court of Appeals for the Fifth Circuit, in the case of Coalition for Workforce Innovation v. Julie Su, Acting Secretary of Labor that challenges the independent contract rule has granted motions filed by the parties lifting the stay of the proceedings and vacating and declaring moot the decision of the United States District Court for the Eastern District of Texas. The Fifth Circuit’s ruling sends the case back to the District Court for its consideration in light of the issuance of a final rule by the Department of Labor (DOL) concerning independent contractors, which is slated to become effective on March 11^th.

The litigation began in 2021 when business groups challenged the DOL’s withdrawal of the   independent contractor rule finalized by the previous administration. The District Court ruled in favor of the business groups finding that the Administrative Procedure Act had been violated and the rule should be reinstated. The case was appealed to the Fifth Circuit, which issued a stay at the request of the DOL pending the issuance of a new independent contractor rule.

A lawsuit also has been filed in the US District Court for the Northern District of Georgia by a group of freelance writers and editors challenging the revised independent contractor rule. The lawsuit, Karon Warren v. US Department of Labor asks the court to set aside the revised rule since it violates the Administrative Procedure Act.

Court Delays Effective Date of Joint Employer Rule – The United States District Court for the Eastern District of Texas has delayed the effective date of the joint employer rule issued by the National Labor Relations Board (NLRB) from February 26^th until March 11^th. In the case, United States Chamber of Commerce v. National Labor Relations Board, the District Court held a hearing in February to consider the motions by the Chamber of Commerce and other business organizations for a permanent injunction blocking the rule and by the NLRB seeking summary judgment or the transfer of the case to the United States Court of Appeals for the District of Columbia Circuit, which is reviewing the rule due to a petition seeking review of the joint employer rule filed by the Service Employees International Union. Due to this litigation, the NLRB had previously delayed the effective date of the joint employer rule from December 26, 2023, until February 26^th. The Chamber of Commerce believes that the joint employer rule violates the Administrative Procedure Act.

The House of Representatives passed a resolution (H.J. Res 98) brought under the Congressional Review Act that would repeal the joint employer rule. The resolution is pending in the Senate. President Biden has advised that if the resolution is passed by Congress, he would veto it.

Bill Would Block FLSA Overtime Rule – Representative Eric Burlison (R-MO) has introduced the Overtime Pay Flexibility Act (H.R. 7367) that would prohibit the Department of Labor (DOL) from finalizing or enforcing the Fair Labor Standards Act (FLSA) overtime rule that was proposed in September 2023. The proposed rule would increase the salary basis threshold for determining overtime eligibility from $35,568 to $55,068 and would provide for automatic adjustments every three years. The DOL plans to finalize the rule in April. According to Representative Burlison, the last modification to the salary basis threshold was implemented in 2019 and “A new rule coming less than four years after the prior increase is unnecessary and irresponsible and will lead to harm felt by millions of American workers and businesses.” The bill has been referred to the House Committee on Education and the Workforce.

Bipartisan Paid Family Leave Group Releases Legislative Framework – The mission of the House bipartisan Paid Family Leave Working Group is to provide more families with more paid leave. The group is chaired jointly by Representatives Chrissy Houlahan (D-PA) and Stephanie Bice (R-OK) and includes four other members evenly split between Democrats and Republicans.

Following a year-long fact finding effort, the group released a possible legislative framework that includes four components:

1. A public private partnership targeted at states that might want to establish a paid leave program.
2. Coordination and harmonization of paid leave benefits among states by creating an “Interstate Paid Leave Action Network” that would seek to improve the coordination and harmonization of benefits among the growing number of states with their own paid leave programs.
3. Small employer pooling for paid leave insurance that would be achieved by authorizing small employers to join association-style insurance pooling plans, with the goal of pooling risk and lowering the cost of providing paid family leave.
4. Improving paid tax leave credits for small businesses and working families. Internal Revenue Code Section 45S provides a tax credit for employers who provide paid family and medical leave to their employees with eligible employers being able to claim the credit, which equals a percentage of the wages paid to qualifying employees while they are on family and medical leave. The group proposes considering making the tax credit, which expires at the end of 2025 permanent, increasing the tax credit, especially for small businesses, and increasing the awareness of this credit among employers and HR professionals.

Congressional Democrats had previously introduced the FAMILY Act (S. 1714, H.R. 3481) that would amend the Family and Medical Leave Act (FMLA) to provide up to 12 weeks of paid leave for any FMLA qualifying reason. The paid leave would be capped at no more than $4,000 per month, which would be adjusted for inflation. The program would be paid through a payroll tax of 0.2% paid by employers and employees. Republican Senators have introduced the New Parents Act (S. 35) that would provide paid parental leave following the birth or adoption of a child. The bill would be funded by allowing parents to receive an advance payment of between 1 – 3 months of their Social Security benefits.

Neil Reichenberg is the former executive director of the International Public Management Association for Human Resources. He is an attorney, a frequent writer and speaker on public policy and human resource issues and was an adjunct faculty member at George Mason University. For questions or additional information, contact Reichenberg at neilreichenberg@yahoo.com.