Congressional Committee Examines Independent Contractors

With the release of a proposed rule concerning independent contractors by the Department of Labor, a House of Representatives Subcommittee held a hearing to examine the impact of the proposed rule. A federal district court in Texas ruled that some of the preventive care requirements in the Affordable Care Act are unconstitutional. Legislation has been introduced in Congress that would increase the salary basis threshold resulting in more employees qualifying for overtime. Four federal agencies have issued a joint statement on the use of automated systems.


House Subcommittee Holds Independent Contractor Hearing – The Subcommittee on Workforce Protections of the House Committee on Education and the Workforce held a hearing on April 19th that it titled as “Examining Biden’s War on Independent Contractors”. According to Representative Kevin Kiley (R-CA) who chairs the Workforce Protections Subcommittee, the subcommittee believes “independent contractors are critical to the 21st century economy. We will protect the freedom of Americans to earn a living as they choose and will fight every effort to take that right away.”


During the previous administration, the Department of Labor (DOL), issued final regulations making it easier for employers to classify workers as independent contractors. The regulations  were due to take effect on March 8, 2021, but the effective date was first delayed by the Biden Administration and then DOL withdrew the rule effective May 6, 2021. A lawsuit was filed challenging the 2021 delay and withdrawal of the independent contractor rule and the United States District Court for the Eastern District of Texas reinstated the independent contractor rule finding that both the postponement of the effective date and subsequent withdrawal of the rule violated the Administrative Procedure Act (APA).


On October 11, 2022, the DOL proposed a new independent contractor rule, which according to its most recent regulatory calendar, it plans to finalize in May. According to the DOL, the proposed rule would restore the longstanding multi-factor totality of the circumstances analysis to determine whether a worker is an employee or independent contractor. In determining whether an employment relationship exists, the following non-exhaustive list of factors may be considered: 1) opportunity for profit or loss depending on managerial skill, 2) investments by the worker and the employer, 3) degree of permanence of the work relationship, 4) nature and degree of control, 5) extent to which the work performed is an integral part of the employer’s business, and 6) skill and initiative required.


Federal Court Rules Against Some ACA Preventive Care Requirements – The US District Court for the Northern District of Texas ruled in the case of Braidwood Management, Inc. v. Xavier Becerra that some Affordable Care Act (ACA) preventive care requirements were unconstitutional. The District Court believed that preventive care recommendations of the U.S. Preventive Services Task Force did not have to be complied with because the “members of the Task Force have not been appointed in a manner consistent with Article II’s [of the US Constitution’s] Appointments Clause.” The District Court also found that the Religious Freedom Act was violated by the requirement that insurers and employers provide coverage for such items as preexposure prophylaxis drugs that are used by persons at high risk of HIV.


The case was brought by six individuals and two businesses who contend the ACA preventive care mandates violate both the Constitution and the Religious Freedom Restoration Act (RFRA). The ACA established four categories of preventive care services that most private health insurance must cover. The U.S. Preventive Services Taskforce (PSTF), the Health Resources and Services Administration (HRSA), and the Advisory Committee on Immunization Practices (ACIP) issue guidelines on mandatory coverage of preventive care that private health insurers must cover without imposing cost sharing requirements. The District Court noted that HRSA and ACIP are subject to the supervision and direction of the Secretary of Health and Human Services, PTSF is a volunteer body that the ACA established to be “independent and, to the extent practicable, not subject to political pressure.”


The District Court decided that the decision would apply nationally. The Biden Administration has announced that it will appeal the decision to the United States Court of Appeals for the Fifth Circuit.


Increasing Eligibility for Overtime Pay Proposed – Legislation (S. 1041, H.R. 2395) has been introduced that would increase the salary basis threshold resulting in additional workers qualifying for overtime pay. The Restoring Overtime Pay Act of 2023 has been introduced by Senator Sherrod Brown (D-OH) and Representative Mark Takano (D-CA). Under the Fair Labor Standards Act (FLSA), the current salary basis threshold for administrative, executive, and professional employees is $35,568 per year.  According to the bill sponsors, at this level, fewer than 15% of workers are currently eligible for overtime pay when they work more than 40 hours per week. The Department of Labor indicated in its regulatory agenda that it intends to propose a rule in May updating the salary level requirement.


This proposed legislation would increase the salary basis threshold to:

  • $45,000/year on the effective date of the law,
  • $55,000/year on January 1, 2024,
  • $65,000/year on January 1, 2025,
  • $75,000/year on January 1, 2026, and
  • On January 1, 2027, to an amount  equal to the 55th percentile of weekly earnings of full-time salaried workers nationally based on data from the second quarter of 2026.


The bill provides for annual adjustments starting in 2028 to keep the salary basis threshold at the 55th percentile. The bills have been referred to the Senate Committee on Health, Education, Labor, and Pensions and the House Committee on Education and the Workforce.


Federal Agencies Issue Statement on the Use of Automated Systems – The Equal Employment Opportunity Commission, Department of Justice, Consumer Financial Protection Bureau, and Federal Trade Commission issued a joint statement on enforcement efforts against discrimination and bias in automated systems. The statement notes that automated systems can result in innovations that increase efficiencies and cost-savings, but “their use also has the potential to perpetuate unlawful bias, automate unlawful discrimination, and produce other harmful outcomes.” The issuing agencies advised that potential discrimination in automated systems may come from different sources, including problems with data and datasets that may  include unrepresentative or imbalanced datasets, lack of transparency concerning the internal workings of the automated systems, and design that is based on flawed assumptions.


Neil Reichenberg is the former executive director of the International Public Management Association for Human Resources. He is an attorney, a frequent writer and speaker on public policy and human resource issues, and an adjunct faculty member at George Mason University. For questions or additional information, contact Reichenberg at