Factbox-Key U.S. labor policies will face legal challenges in coming year

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By Daniel Wiessner

(Reuters) - The Biden administration and a Democrat-led U.S. labor board will implement a series of major employment policies in 2023 but could be stymied by challenges from business groups and Republican-led states that have criticized the measures.

The following rules are likely to face lawsuits in the new year, including claims that federal agencies had no reason to abandon Trump-era policies seen as favoring businesses and anti-union workers.

WORKER CLASSIFICATION

The U.S. Department of Labor in October unveiled a proposal to make it more difficult for companies to treat workers as independent contractors, a change that is expected to shake up ride-hailing, delivery and other industries that rely on gig workers.

The proposal would require that workers be considered employees, entitled to more benefits and legal protections than contractors, when they are "economically dependent" on a company. Most federal and state labor laws only apply to a company's employees, who can cost employers up to 30% more than independent contractors, studies suggest.

The final rule, expected in the spring, would replace a Trump-era regulation that says workers who own their own businesses or have the ability to work for competing companies, such as a driver who works for Uber (NYSE:UBER) and Lyft (NASDAQ:LYFT), can be treated as contractors.

The sharp break from the Trump-era standard will likely be the focus of lawsuits challenging the new rule. Federal law requires agencies to adequately explain their decision to withdraw and replace existing rules. Businesses and trade groups are also likely to attack the substance of the new rule, arguing that the way it defines employment is inconsistent with federal law and creates uncertainty around the legal status of many workers.

JOINT EMPLOYMENT

The National Labor Relations Board, an independent agency that gained a Democratic majority last year, moved in September to make it easier for workers and unions to hold companies liable for labor law violations by their franchisees and contractors, proposing to revive an Obama-era standard heavily criticized by trade groups.

The rule would treat companies as so-called "joint employers" under federal labor law when they have indirect control over working conditions such as scheduling, hiring and firing, and supervision. A rule adopted in 2020 by the board when it had a majority of Republican appointees, which was struck down in court, required that companies have "direct and immediate" control.

The new proposal, which will be finalized in the coming year, would broadly affect industries such as manufacturing and construction that rely heavily on staffing agencies and contractors to provide workers and franchises such as McDonald's Corp (NYSE:MCD) that are not typically involved in franchisees' day-to-day workplace issues.

Lawsuits targeting the rule will likely claim that the Trump-era board's narrower view of joint employment was more faithful to federal labor law, and that the new rule will cause confusion and destabilize collective bargaining by making it unclear which companies are accountable for different workplace issues.

UNION ELECTIONS

Weeks after unveiling the joint employment proposal, the NLRB said it would roll back a Trump-era rule that makes it easier for workers to dissolve their unions, saying it could interfere with the right of employees to make free, informed decisions on union representation.

The 2020 rule barred NLRB staff from putting off elections while related cases alleging illegal labor practices are being litigated. Unions had for decades routinely filed so-called “blocking charges” to put off decertification votes and elections they believed they would lose.

Unions and worker advocates have said that blocking charges are a critical tool in preventing coercion by employers and eliminating them effectively ensured that some elections are held under unlawful conditions.

Business groups could bring broad challenges to the rule in court, arguing that it undermines workers' rights to freely choose or reject union representation.

FEDERAL CONTRACTOR WAGES

The thousands of businesses that contract with the federal government are gearing up for a hike in the minimum wage owed to an estimated 330,000 workers, from $15 an hour to $16.20, that will take effect next month.

President Joe Biden, a Democrat, issued an executive order last year raising the minimum wage for workers on federal contracts from $10.95 to $15 and the Labor Department then adopted a rule implementing the wage hike. The rule also tied future increases to inflation and eliminated a lower minimum wage for tipped workers.

The second wage hike under the rule comes as eight Republican-led states are challenging the Biden administration's authority to significantly raise pay for federal contract workers. The states in a pair of lawsuits in Arizona and Texas federal court say that only Congress has the power to make a change with such a dramatic impact on the U.S. economy. The administration in pending motions to dismiss the lawsuits says that the president has broad authority to regulate federal contracting.