By withdrawing the rule, the department acknowledged what most employers and industry experts said following a Supreme Court ruling earlier this month: the emergency temporary standard could not be reinstated after the court blocked it.
"It's them admitting what everyone has been saying: the rule is dead," said Brett Coburn, an Alston & Bird lawyer.
The Supreme Court ruled 6 to 3, with the liberal justices dissenting, that the Labor Department's Occupational Safety and Health Administration lacked the authority to require workers to be vaccinated against the coronavirus or tested weekly, calling the agency's approach "a blunt instrument."
The mandate would have affected approximately 80 million people.
The decision by the Labor Department to withdraw the rule means that the pending legal proceedings will be dropped. The case was remanded to the United States Court of Appeals for the Sixth Circuit in Cincinnati for further consideration, though that court would have most likely followed the Supreme Court's lead and dismissed it.
According to David Michaels, a former OSHA administrator and professor at George Washington University, OSHA could still try to move a version of the vaccine-or-test standard forward through its official rule-making process, such as one focused on high-hazard industries like meatpacking, but that would likely face legal challenges.
Employers are subject to a patchwork of state and local laws on Covid-19 workplace safety in the absence of the Labor Department's standard, with places like New York City requiring vaccine mandates and others prohibiting them.
"OSHA continues to strongly encourage workers to be vaccinated against the continuing dangers posed by Covid-19 in the workplace," the Labor Department wrote in its withdrawal notice.