A new rule issued by the Department of Labor earlier this year is making some freelancers nervous, so much so that a few are challenging it with lawsuits. The rule offers new guidance on how the agency will determine if a worker is an employee or an independent contractor under the Fair Labor Standards Act. Businesses rely on this guidance to make their own determinations as well.
Going into effect this past March, the rule upends a previous classification rule, issued in 2021, that identified five factors to distinguish employees from independent contractors, but placed a much larger emphasis on two “core factors” — how much workers can choose and control their work, and the extent to which they can gain or lose profits from it.
The rule, which is not a law but does influence how courts and businesses interpret independent contractor classification, replaces this methodology with an evaluation system that includes six factors — the same five from the 2021 rule along with the additional metric of whether the work is essential to the employer’s business. It does not, however, place more weight on any specific factors.
The new guidance aims to reduce misclassification, which can prevent workers from accessing minimum wages, overtime pay, unemployment insurance, and other benefits and protections. While legal proponents assert that freelancers by and large will not be affected by the recently issued rule, a handful of new lawsuits, some led by freelance writers and media producers, claim that the new rule is vague, creates uncertainty, and threatens their work.
“It really coerces a lot of companies to try to put people, put workers in the employee box just so that they can be sure that they have their bases covered,” says Wen Fa, an attorney and vice president of legal affairs at the Beacon Center of Tennessee, a nonprofit think tank that advocates for individual rights and free market public policies. “Ultimately, what we’re fighting for is the right to freelance.”
Fa is representing Margaret Littman and Jennifer Chesak — Nashville-based freelance writers and authors whose bylines collectively include The Washington Post, Men’s Health, National Geographic, and Condé Nast Traveler. Littman and Chesak filed a lawsuit against the Department of Labor in February before the new rule went into effect. The suit contends that without clearly identifying how employers should weigh and consider each factor, the new rule creates confusion about what constitutes an independent contractor and provides incentive for employers to eliminate freelance work. Chesak asserts that since the rule was announced, one of her clients restricted Chesak’s working hours, another required her to spend unpaid time documenting tasks, and a third required her to sign an agreement indemnifying the company if it were found liable for misclassification.
“Being a freelance journalist allows me many freedoms, including deciding which stories I want to pursue and on which I’ll pass. Depending on the contract, I own my research, drafts, and revisions. Plus, there is the security of not being subject to layoffs,” Littman said in a statement emailed to her attorney. “I’m fighting Labor Department’s rule, not just for myself, but for all freelancers in Tennessee because it threatens to destroy our livelihood and right to earn a living as freelancers.”
A separate lawsuit filed in January by four freelance writers and editors in Georgia — all cofounders of the grassroots group Fight for Freelancers USA — makes similar contentions, arguing that the new rule “obscures the line between contractor and employee in an impenetrable fog” and is so deliberately vague, it allows the government to grant employee status to anyone doing any work for an outside company.
Like the Littman/Chesak suit, it also asserts that a provision in the new rule that allows consideration of “additional factors” that are “relevant to the overall question of economic dependence,” further adds to the murkiness as it does not stipulate what those factors could be. Other lawsuits opposing the rule have also been filed by a family-owned trucking company in Louisiana and a coalition of business organizations that include Uber, Lyft, and the newspaper industry advocacy group America’s Newspapers. When asked about the organization’s stance on the new rule and the rule’s relevance to the newspaper industry, America’s Newspapers CEO Dean Ridings sent a statement that the group is “concerned about the unintended consequences” the rule would have on freelance writers, photographers, graphic artists, and others. He added that “the newspaper industry is facing significant revenue challenges and reclassification of freelancers as employees would likely lead to less usage of these contractors as the industry is not in a position to increase its costs.”
The Department of Labor’s guidelines aren’t the only independent contractor classification system. In addition to the federal guidelines, state statutes, like California’s controversial Assembly Bill 5 and so-called ABC tests, which are used in a broad array of states, also determine classification status.
As critics contend that the new rule inappropriately broadens the definition of an employee, proponents say that the 2021 guidance was too narrow and left many workers — often those in low-paid professions — without wages and protections they’re owed. Though workers in fields like construction, trucking, janitorial, and home health and cleaning services are among the most likely to be misclassified, over the last few years, journalists and content producers have launched misclassification suits against Vox Media, which paid $4 million to settle three lawsuits in 2020, and Prometheus Global Media, which publishes The Hollywood Reporter and Billboard among other titles and paid $900,000 in a class action settlement in 2017.
Fighting misclassification is tough, says Sally Dworak-Fisher, a senior staff attorney at the National Employment Law Project who specializes in protecting and expanding worker rights.
“There’s a lot of forced arbitration clauses that prohibit people from going to court to enforce [misclassification] claims,” she says. “The Department of Labor is underresourced in terms of going after actors that are violating the Fair Labor Standards Act and workers generally have a hard time finding attorneys to take their case.”
Dworak-Fisher, two other employment attorneys interviewed for this story, and the Department of Labor all say that the new rule doesn’t actually change much for freelancers.
“It’s a restoration, not a revolution,” Dworak-Fisher says, pointing out that the new rule closely mirrors the classification guidance in place prior to 2021. “If you’re running your own business, you don’t really have anything to worry about. It’s simply a reiteration of what courts have been doing for decades and so I think ultimately those lawsuits won’t be successful.”
Adam Pulver, an attorney at Public Citizen Litigation Group, a law firm that specializes in administrative law and consumers and workers’ rights, agrees with Dworak-Fisher.
“I don’t see any evidence that all of a sudden no freelancers are going to get hired to do stories because companies will be afraid that they are going to have to provide benefits or overtime,” he says. “There’s no reason to believe the Department of Labor is suddenly going to be targeting news organizations under this rule…if there was no problem before 2021, there’s no reason why there’d be a problem now.”
Pulver points to information specifically for freelancers issued by the Department of Labor that outlines scenarios in which media producers should be considered independent contractors versus employees. In one scenario, a science and tech journalist who pitches their own stories, writes for multiple publications, and negotiates their rates is classified as an independent contractor since they appear “to be in business for themself.” In another, a graphic designer who gets all of their work from a single company, relies on company equipment and software, and needs written permission to seek outside work is classified as an employee.
Pulver adds that the new rule isn’t a law: Courts make legal decisions, not the Department of Labor, and while courts take administrative guidance and interpretations of the law into consideration, they have the final word on how specific guidance and statutes apply to particular workers.
Based on previous cases that applied the pre-2021 classification method, Pulver believes that the recent spate of lawsuits challenging the new rule should fail, but, he says, “we’ll have to see.”
Source: Freelancers sue over new rules on independent contractors
