Independent Contractor Rule for DOL and Trucking

WASHINGTON, D.C. — On January 6, 2021, A clarifying rule regarding the standards for independent contractor status versus employee status was announced by the United States Department of Labor. The ruling falls under the Fair Labor Standards Act. This rule includes specific examples regarding the requirements for safety in the trucking industry. This will become effective on March 8, 2021. Experts think that President-Elect Joe Biden will nullify the rule when he takes office.

The American Trucking Associations say that the rule will provide benefits to owner-operators and motor carriers alike for certain policies. They noted that this “provides working Americans the freedom to pick the occupation and flexibility they desire and gives businesses clarity on the characteristics of a bona fide independent contractor so they can more easily comply and avoid litigation. Many Americans choose the independent contractor model - including hundreds of thousands of owner-operators in trucking - because of the opportunity it provides and empowerment to choose the conditions (i.e., hours and routes) that suit their lifestyle.”

The ultimate rule submitted by The U.S. Department of Labor in September 2020, includes the following notations for clarification:

• It identifies and explains two “core factors” that are most probative to whether a worker economically depends on someone else’s business or is in business for him or herself:
• The nature and degree of control over the work.
• It reaffirms an “economic reality” test to determine whether an individual is in business for him or herself (independent contractor) or economically depends on a potential employer for work (FLSA employee).
• The worker’s opportunity for profit or loss based on initiative and/or investment.

Also identified within the rule are three items that serve as additional guidelines, in particular how to move forward when two factors are not in the same classification:

• The worker’s opportunity for profit or loss based on initiative and/or investment.
• Permanence of the working relationship between the worker and the potential employer.
• Whether the work is part of an integrated unit of production.

According to the United States Secretary of Labor Eugen Scalia: “This rule brings long-needed clarity for American workers and employers.Sharpening the test to determine who is an independent contractor under the Fair Labor Standards Act makes it easier to identify employees covered by the Act, while recognizing and respecting the entrepreneurial spirit of workers who choose to pursue the freedom associated with being an independent contractor.”

However, the incoming of the new presidential administration under Biden has announced that they plan to reverse and nullify the ruling on inauguration day. The American Trucking Associations noted that the rule does not affect or override the wage and hour laws per state, even though many states follow the federal guidelines and rulings that make up how employment is classified and many adopt additional guidelines and requirements to implement state laws. This is regardless of whether the law is federal. This ruling will not directly affect employees’ payroll, state or federal payroll taxes, unemployment taxes, or other laws that govern employment.

The Teamsters Union has called the Biden Administration upon to halt the implementation of the ruling. They believe that the ruling would make it easier for carriers to classify their employees as independent contractors and exempt them from the federal laws dictating overtime and minimum wage.

The Teamsters Union stated, “As it stands, companies across the country have sought loopholes and workarounds to misclassify workers as independent contractors, which denies them proper wages and job protections as well as access to unemployment benefits.Teamsters have been aggressively pushing back on this issue for years at the ports, and especially during the pandemic where misclassified truck drivers are denied proper protective gear and workplace safety measures in addition to fair wages and benefits. There is already a growing anti-worker issue that will be exacerbated if these regulations are enforced.”

The Union also states that the new rule inhibits the capabilities of the Fair Labor Standards Act and increases the number of people who are not protected under this legislation. Especially during a time when the economic stability of the nation and industry are uncertain. The Teamsters Union is certain that the new presidential administration will not allow this ruling to go into effect.

President of the Teamsters Union JIm Hoffa made this statement regarding Biden. “Joe Biden is a friend of workers as he has said on the campaign trail and proven with his public service. I have no doubt that he will postpone the implementation of this despicable rule so hard working Americans can earn a fair wage and support their families.”