Freelancers Challenge New Independent Contractor Rule in Court

Four freelance writers and editors are asking a Georgia federal court to toss out the US Department of Labor’s new independent contractor rule, arguing that the change is an abuse of discretion and would force them to lose business.

The rule finalized last week violates the Administrative Procedure Act and the US Constitution for being overly vague and conflicting with the Fair Labor Standards Act, according to their lawsuit filed Tuesday in the US District Court for the Northern District of Georgia.

The complaint marks the second legal challenge to the rule, which would generally make it harder for businesses to classify their workers as independent contractors who don’t enjoy the same protections as employees under federal labor laws.

On Jan. 12, three business groups asked a federal court to revive their litigation against an earlier effort by the Biden administration to update its standards on independent contractor status.

The latest lawsuit argues that the “freewheeling” rule “embraces a multiplicity of factors and deliberately refuses to state what is important to the inquiry.”

“Stakeholders are effectively being told that anything about their business could be relevant, and the Department or a court are the only ones who can properly weigh the factors,” it said.

While the Biden administration maintains that the rule won’t result in a broad-scale reclassification of contractors into employees, businesses and some independent contractors are still wary that it could give the department ammunition to crack down on such arrangements.

Businesses utilize independent contractors in nearly every industry, but app-based demand companies like Uber Technologies Inc. and Lyft Inc., as well as construction and trucking companies, heavily rely on such workers to provide their services.

“The Department’s vague, new standard provides no objective direction to anyone,” the freelancers’ lawsuit states. “It enables the Department’s enforcement officers and trial lawyers to label anyone performing services for another company to be deemed an ‘employee’ under essentially any circumstance.”

It added that entrepreneurs and their clients “must be able to understand the rules so they can structure their affairs to comply with the law.”

“The Department’s new rule makes this impossible,” it said.

The case is Warren v. US Dep’t of Labor, N.D. Ga., No. 2:24-cv-00007, complaint filed 1/16/24.