Feds, employers spar in court as independent contractor changes loom

The Biden administration is in a procedural row with business groups over how the 5th U.S. Circuit Court of Appeals should handle challenges to the U.S. Department of Labor’s new independent contractor regulations, filings from both sides within the past week show.

DOL’s final rule to revise its interpretation of the Fair Labor Standards Act’s classification provision is set to take effect March 11, but the business groups’ lawsuit dates further back to 2021, when the Biden administration delayed, and eventually withdrew, an earlier Trump-era independent contractor rule.

In the case, now titled Coalition for Workforce Innovation v. Su, a district court found that DOL had violated the Administrative Procedure Act and that the agency’s attempt to withdraw the Trump rule was arbitrary and capricious. The Biden administration appealed this decision to the 5th Circuit, which issued a stay in 2022 pending DOL’s issuance of a new final rule. The agency did so earlier this month.

Things now turn back to the 5th Circuit where, two days after the final rule’s announcement, business groups asked the court to remove its stay and remand the case to the district court for further proceedings. The groups argued that the U.S. Supreme Court’s decision in Biden v. Texas, which involved a regulatory action by the U.S. Department of Homeland Security, “is instructive here, given the similarity of the procedural posture of that case and this case.”

Meanwhile, the Biden administration issued its own motion Jan. 12, invoking a separate Supreme Court precedent to motion for vacatur of the district court’s judgment finding that the government overstepped the APA.

The government argued that its publication of a new final rule “rendered moot the question whether the prior independent contractor rule was properly delayed and withdrawn” and that, subsequently, the district court decision should be vacated in accordance with Supreme Court precedent in United States v. Munsingwear, Inc.

Back-and-forth over motion for vacatur ensues

On Jan. 18, the business groups filed a response opposing the government’s motion, arguing that the case is not moot and that the motion for Munsingwear vacatur is flawed.

Aside from the point of mootness, “vacatur is an extraordinary remedy that the Supreme Court has been clear should not be wielded lightly,” the business groups wrote. “In particular, vacatur is inappropriate because the case did not become moot through ‘happenstance’ or for reasons outside [DOL]’s control […] Rather, any claimed mootness is the direct result of [DOL]’s own concerted, voluntary action, precluding vacatur as contrary to the public interest.”

Then on Monday, U.S. Department of Justice attorneys submitted a reply in support of the motion for vacatur, countering that the business groups’ response “rests on a misunderstanding of Supreme Court precedent.”

The back-and-forth continued later the same day, when the business groups submitted yet another reply to the Biden administration that argued for a remand to the district court. Among other points, the groups argued that the 5th Circuit’s ruling on the government’s motion to vacate “should have no bearing on the Associations’ motion to remand, which [DOL] does not seriously contest.”

While employers await further holdings from the 5th Circuit, the final rule is also being contested in a Georgia federal district court, where a group of freelance writers and editors sued to enjoin the rule. Employers may still opt to plan to comply with the rule despite the possibility that it could be put on hold, an attorney previously told HR Dive.