A case seen as the trucking industry’s primary legal assault against the Biden administration’s new independent contractor (IC) rule is now before the U.S. Court of Appeals for the 5th Circuit.
A group of Louisiana trucking companies and the state’s primary trucking association filed the initial lawsuit in the U.S. District Court for the Eastern District of Louisiana. The lead plaintiff is family-owned Frisard’s Transportation; the others are A&B Group, Triple G Express and the Louisiana Motor Transport Association.
The defendants are the U.S. Department of Labor (DOL) and several named individuals. They include Acting Secretary of Labor Julie Su, a Californian who is viewed as something akin to public enemy No. 1 by those who are pushing back against state and local efforts to make it more likely that a legal process would find a worker to be an employee rather than an IC.
But the key indicator of the importance of the case is not the plaintiffs but the organizations that have filed friend-of-the-court briefs in support of Frisard’s and the other companies and associations. The lengthy list includes the American Trucking Associations, the National Retail Federation, the U.S. Chamber of Commerce and such free market advocacy groups as the Manhattan Institute.
The plaintiffs requested a preliminary injunction at the District Court level to block implementation of the DOL’s IC rule, which went into effect in March after its final wording was announced in January. The Frisard’s suit was filed in February. After the injunction was denied, the plaintiffs quickly filed an appeal with the 5th Circuit asking that it override the lower court and issue the injunction.
All action on hold in lower court
That led Judge Eldon Fallon of Louisiana’s Eastern District, who had refused the injunction request, to put a stay last week on any other proceedings in the case at the District Court level until the 5th Circuit rules on the injunction. While the stay is in place, the case is “administratively closed,” meaning there won’t be any required filings.
The filings in the Frisard’s case spell out the arguments that opponents of the IC rule are making not just in court but also in comments during the rulemaking process and in trying to sway public opinion.
The irony is that it is a great deal of effort and litigation for a rule on IC classification that could get dumped by an incoming Trump administration, just as the IC classification rule implemented by Trump’s DOL in its final days was dropped, albeit more than three years into the Biden administration.
The Biden administration tried to reverse the Trump rule almost immediately, but a court swatted down that attempt.
Under a new Trump administration, any attempt to swap out the Biden IC rule for the rule from the first Trump administration may also need a full rulemaking, which could mean the Biden rule would not necessarily expire near the start of a new Trump administration.
Differing views of “economic realities”
Both the Biden and Trump IC rules have at their root the “economic realities” test, which has been a part of independent contractor law for years.
The Biden administration rule has six tenets of its economic realities test, all echoing other aspects of IC law and case law.
The law firm of Carlile Patchen & Murphy summarized them in a blog post as “the opportunity for profit or loss depending on managerial skill; investments by the worker and the potential employer; degree of permanence of the work relationship; nature and degree of the potential employer’s control;’ extent to which the work performed is an integral part of the potential employer’s business; and skill and initiative of the potential independent contractor.”
Tthe Trump rule relied on five factors. Quoting from an earlier court precedent, the rule described them as ‘‘degrees of control, opportunities for profit or loss, investment in facilities, permanency of relation, and skill required in the claimed independent operation.’’
There are two obvious differences between the two rules. The Biden administration rule, on top of the five Trump rule factors, brings in the issue of the work being performed as an “integral part of the potential employer’s business.”
The second significant difference is that the Trump rule singled out the issue of control and the opportunity for profit or loss as being more “dispositive.” The Biden rule does not put any of the six above the other in setting the guidelines that the DOL’s Wage and Hour Division — which enforces the Fair Labor Standards Act — should use in determining whether a worker is an employee or a legitimate IC.
The brief filed by the ATA and other plaintiffs described the Biden administration approach as a “novel, multifactor standard that has never been applied by any court.” And in criticizing the test of whether a worker is “integral,” the plaintiffs’ brief cites a judge’s comments from an earlier precedent: “Everything the employer does is ‘integral’ to its business — why else do it?”
The government’s brief in the case makes several arguments, criticizing the Trump rule — which is referred to only as the 2021 rule — and its two “core factors” as reflecting “a departure from the analysis established by decades of judicial precedent.”
“The Department [in setting the Biden rule] determined that these changes would have a confusing and disruptive effect on workers and businesses alike and were contrary to longstanding precedent and the text of the [Fair Labor Standards] Act as interpreted by courts.”
These and other arguments are now sidelined while the 5th Circuit decides whether to grant the injunction.
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