Court rules against freelancers in Department of Labor case

Freelancing in America had a setback recently: A trial court in Atlanta dismissed a case brought by four freelance writers and editors, challenging a Department of Labor regulation which makes it harder for independent contractors to operate.  

In Warren v. U.S. Department of Labor, Pacific Legal Foundation represents four freelance writers and editors, all women, who want nothing more than to be able to continue operating their home businesses. They have been freelancing from home for years—which allows them to balance their home and work life—and are challenging a Department of Labor rule which changes the way federal wage and hour law distinguishes independent contractors from employees. The government deliberately crafted its new rule to be as vague as possible, putting companies that wish to employ independent workers in an impossible position. 

Unfortunately, the trial court in Atlanta did not give the independent communicators the chance to state their case against the Department of Labor. The court determined that they lack standing to pursue their lawsuit, based on the twisted logic that the regulation is too vague to determine whether it will apply to their businesses. 

Despite this outcome, this case isn’t over: These fearless women plan to appeal their case to the United States Court of Appeals for the Eleventh Circuit. They plan to continue fighting for their right to work and to be free of over-burdensome, unfair government regulation. 

What we’re fighting for 

This case is a challenge to the Department of Labor’s January 2024 rule, Employee or Independent Contractor Classification Under the Fair Labor Standards Act. This rule adopts a new interpretation of the federal minimum wage and overtime law that narrows and muddles the standard for who is considered an “employee” and who is an “independent contractor.” This is a critical interpretation because federal law requires burdensome recordkeeping, minimum wage, and overtime pay for employees, but not for contractors. 

The DOL’s previous interpretation made crystal-clear how this worked: Independent contractors were defined as workers who have control over their work and who have the opportunity for profit. So, for example, a freelance writer who organizes her own workflow, chooses her clients, and has control over the where and when and how of how she does her work, would be an independent contractor. 

Under the new rule, this clear approach is out the window. Instead, the Department has adopted a free-floating, multi-factor balancing test. Rather than prioritizing an inquiry into control and opportunity for profit, the Department now says that no factors can be judged as more important ahead of time. According to the DOL’s new rule, it is effectively impossible to tell ahead of time whether a worker is an employee or is independent. 

This new rule has at least two major problems. First, it undermines independent businesses. The freelance writers and editors who are the plaintiffs in Warren do not want to be employed. By making it harder for them to set up their businesses to remain independent, the rule threatens their livelihood. And with no certainty, hiring a worker—even one who says they are independent and controls their own hours and can make their own profit—can pose serious legal risks for a company. 

Second, the uncertainty inherent in the Department’s new rule serves only to accrue arbitrary power to the agency. Businesses have a right to know what the law expects of them. The new rule takes any certainty away and holds an executioner’s axe over every independent contracting business in the nation. This cannot be the law. 

The decision 

The trial court elected not to hear this argument, instead concluding that freelance writers lacked standing to challenge the rule because they could not show with certainty that they would be harmed by future enforcement actions. We believe this decision misunderstands standing law and discounts the real harm currently inflicted on freelancers’ businesses by the DOL’s amorphous standard. 

Faced with this decision from the trial court, these freelancers are not giving up. They have worked hard in their careers and to build their successful independent businesses, and they are not ready to let the federal government undermine their entire way of life. With PLF’s help, they plan to continue the fight in the Court of Appeals.