From Lexology, Mark Fijman discusses the United States Supreme Court’s decision to not review a case in which a claim alleging misclassification was dismissed. Mark explains the basis for the decision, discusses the uncertainty for employers and recommends that employers use caution when classifying workers as independent contractors. Mark writes:
The United States Supreme Court declined to review a case that could have shed light on when employees count as independent contractors. The case involved a Fifth Circuit decision affirming the dismissal of a welding inspector’s claim that he was actually an employee and not an independent contractor. The Fifth Circuit also rejected his claim he was entitled to unpaid overtime under the Fair Labor Standards Act (FLSA).
Meanwhile, the current administration’s Department of Labor (DOL) has not addressed the still on-the-books “Biden rule,” which made it harder for employers to classify workers as independent contractors and was strongly supported by organized labor groups.
In many ways, the rejection of the case is not surprising. In its opinion in Guillermo Gray v. Killick Group LLC, the Fifth Circuit followed its “economic-realities test”, which looks at multiple factors to determine if a worker is in business for themselves or a misclassified employee, opening the door to FLSA liability.
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However, employers face some uncertainty over how to make that call. In 2024, the Biden administration’s DOL made it harder to treat workers as independent contractors. The 2024 rule replaced a 2021 rule under the first Trump administration, that was considered more employer-friendly and more amenable to finding an independent contractor relationship.
After the election, commentators anticipated that the Trump DOL would quickly rescind the 2024 “Biden Rule.” But so far, that has not happened. While it is still widely expected to be eliminated, it is less clear what, if anything, will replace it. The DOL may reinstate the 2021 rule, or it may not replace the rule with anything. This would be in line with the U.S. Supreme Court’s recent Loper Bright decision, which held that courts need not defer to an administrative agency’s interpretation of a law. In that case, courts would rely on their existing precedent.
Further complicating things is the fact that the new U.S. Secretary of Labor Lori Chavez-DeRemer has long been seen as a supporter of organized labor, which strongly supported the Biden rule. In addition, other federal and state laws have their own independent contractor standards.
Read the full story SCOTUS Declines to Review Independent Contractor Case While Biden-Era Rule in Limbo – Lexology