Louisiana Record

Louisiana Lawsuit Challenges Federal Rule that Redefines Independent Contractors

February 26, 2024

(Louisiana Record)—A family-owned trucking firm in Louisiana is suing the Biden administration over a proposed rule that retools the definition of independent contractor, arguing that the rule threatens the livelihoods of millions of U.S. workers.

The plaintiff, Frisard’s Transportation LLC, filed the federal complaint February 8 in the Eastern District of Louisiana. Representing the company are the Pelican Institute for Public Policy and the Liberty Justice Center, a nonprofit, nonpartisan, public-interest litigation firm that works on cases involving economic liberties.

The federal rule drawn up by the U.S. Department of Labor, which would take effect March 11, puts in place a test consisting of six criteria that employers would have to use to determine whether to classify a worker as an independent contractor or employee. The issue has raised concerns among business groups that see the rule as vague and open-ended, and they fear more workers would have to be classified as employees, meaning they are entitled to the minimum wage, overtime pay and other protections that could raise the cost of doing business.

“It’s unclear how Frisard’s is going to have to classify workers” under the rule, M.E. Buck Dougherty III, senior counsel with the Liberty Justice Center, told the Louisiana Record. “… There’s just a negative domino effect all the way around with the new rule.”

The rule would affect Frisard’s bottom line and could force the firm to rely on fewer workers, according to Dougherty.

The rule could lead to more unemployment generally if companies are forced to reduce the number of independent contractors they work with, he said. Generally, the contractor model reduces labor costs for the employer while giving contractors flexible hours, autonomy and the potential of making more money by taking on more jobs or deliveries, according to Dougherty.

In addition, proposed changes in the contractor rule could potentially lead to serious supply-chain disruptions, since contractors in the trucking industry are a key component of the U.S. economy, he said.

The plaintiff maintains that the changes to the federal rule would fly in the face of the Fair Labor Standards Act and U.S. Supreme Court  and Fifth Circuit Court of Appeals precedent. But the Department of Labor contends that the change, which would rescind a Trump administration rule imposed in 2021, is actually more consistent with judicial precedent and the Fair Labor Standards Act’s provisions and purpose.

“Plaintiff’s use of independent owner-operators is beneficial to both (the) plaintiff, who is able to operate more efficiently and reduce excess costs, and to (the) plaintiff’s contractors, who assume more responsibility for their own business operations but gain autonomy and the opportunity to derive greater profit from their work,” the lawsuit states.

The new rule’s “open-ended” test to determine whether a worker is an independent contractor will cause real harm to businesses such as Frisard’s, which rely on contractors for core functions of their business plans, according to the complaint.

“The 2024 Rule threatens to upend (the) plaintiff’s business operations, increasing costs, depriving truckers of the opportunity to operate independently within their own business, and potentially driving many of the contractors plaintiff relies on out of business, or into different lines of business than (the) plaintiff’s, depriving plaintiff of needed manpower to deliver cargo wherever their clients need it delivered,” the lawsuit says.

The plaintiff is seeking an injunction to stop federal officials from enforcing the rule and attorney fees and costs. The complaint also contends the rule is arbitrary and capricious and exceeds labor officials’ statutory authority.