On January 24, the 5th Circuit Court of Appeals granted the Department of Labor's (DOL) request to postpone oral arguments in a case challenging the agency's 2024 worker classification rule. This rule, which was set to take effect in March 2024, reinstated the broader "economic realities" test for determining employer-employee relationships, replacing the 2021 rule's narrower interpretation in Frisard’s Transp., LLC v. United States DOL, No. 24-30223, January 24, 2025.
The 2021 rule focused on two "core factors" to determine worker classification: the nature and degree of the worker's control over the work, and the worker's opportunity for profit or loss.
The 2024 rule returned to a multi-factor test considering six factors, all equally important, based on U.S. Supreme Court cases from the 1940s.
The case, Frisard's Transportation, LLC v. United States DOL, was filed on February 8, 2024, in a Louisiana district court. The plaintiffs claim that the 2024 rule oversteps the DOL's statutory authority and threatens the business model of independent contractors.
The DOL's Request To Delay Oral Arguments May
Signal The New Administration's Intent To Review
And Potentially Revert To The More
Employer-Friendly 2021 Worker Classification Test.
If the DOL withdraws the 2024 rule and reinstates the 2021 rule, the two primary factors (worker's control and opportunity for profit/loss) would become more significant in determining worker classification, though other factors would still be considered with less weight.
The 5th Circuit Court of Appeals granted the DOL's motion on January 24, 2025, allowing the new leadership at the DOL to review the rule and decide on next steps.
This development highlights the ongoing debate and legal challenges surrounding worker classification rules, which have significant implications for businesses and workers in the gig economy and other industries relying on independent contractors.
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