Free-enterprise think tanks are siding with the New Orleans-based Pelican Institute’s litigation challenging the U.S. Department of Labor’s recently published rule making it more difficult to classify workers as independent contractors.
The Ohio-based Buckeye Institute filed an amicus brief with the Fifth Circuit Court of Appeals, arguing the federal rule that became effective March 11 will take away the ability of many Americans to participate in the gig economy and work how and when they want to.
The final rule revises previous guidance on whether a worker should be categorized as an employee, who is subject to hourly limitations and certain benefits, or as an independent contractor. The new rule provides directions that are more consistent with the federal Fair Labor Standards Act and judicial precedent, according to the Department of Labor.
The new rule was drawn up amid concerns that the misclassification of employees as independent contractors could deny workers protections regarding minimum-wage and overtime-pay mandates.
The litigation against the new rule advanced by the Pelican Institute and the Liberty Justice Center was initially filed in the Eastern District of Louisiana but is now at the Fifth District. The two nonprofits have expressed concerns that the reclassification of independent contractors as employees would harm the livelihoods of millions of Americans.
David Tryon, director of litigation for the Buckeye Institute, told the Louisiana Record that the institute filed its amicus brief in the case – Frisard’s Transportation LLC et al. v. U.S. Department of Labor – to focus the court’s attention on the practical impact of the new rule on individual workers.
“The spirit of liberty and independence has always been important to Americans,” Tryon said. “... We don’t want government bureaucracy requiring us to work in their designated way.”
About 95% of U.S. workers are now employed by small businesses, based on the definition of a small business employing fewer than 500 workers, he said. And a big chunk of those workers operate as sole proprietors, according to Tryon.
“This is the way they want to work,” he said. “... Sixty-three percent of them say they want to work on their own. They don’t want a boss.”
The Department of Labor’s new rule is likely to have unintended consequences that are more likely to cause harm to workers, even though the department’s mission is supposed to expand opportunities for profitable employment, according to the Buckeye Institute’s amicus brief.
“Many companies will simply cancel their contracts with independents – as happened in California when it tried to force independent workers into an employment relationship,” the amicus brief says. “In addition, some independent workers have chosen independence because they are disabled, have family situations or some other similar factor that precludes their full-time employment. Those vulnerable workers will be left out too.”
The promulgation of the rule will lead to more unemployment as jobs are lost and contractors’ independence is reduced, critics of the rule contend.
The other amicus briefs supporting the litigation challenging the rule argue it is capricious, arbitrary and a violation of the federal Administrative Procedure Act.
“By enacting this new rule, the Department of Labor is not just overstepping its authority – it’s also putting the independence, livelihoods and dreams of millions of Americans in jeopardy,” Buck Dougherty, senior counsel at the Chicago-based Liberty Justice Center, said in a prepared statement.