A Louisiana-based trucking company has initiated a federal lawsuit against the Department of Labor (DOL) regarding its recently established rule that alters the classification of independent contractors.
Frisard’s Transportation, a family-run trucking firm from Louisiana, is contesting the DOL’s final rule in a federal court. The lawsuit claims that the DOL’s reclassification of independent contractors is arbitrary and exceeds the authority granted to the department by law.
Updated Independent Contractor Rule
In January, the DOL released its final rule, titled “Employee or Independent Contractor Classification Under the Fair Labor Standards Act.” This new regulation employs a six-factor “economic reality test” to ascertain whether a worker qualifies as an employee or an independent contractor under the Federal Labor Standards Act:
- Opportunity for profit or loss based on managerial skills
- Investments made by both the worker and the employer
- Stability of the work relationship
- Level of control over the work
- Skills and initiative required
- Whether the work is critical to the employer’s operations
The DOL asserts that all factors must be weighed, and no single factor is dominant. This approach markedly diverges from the previous 2021 independent contractor rule, which had a more limited scope and concentrated on just two primary factors.
Previous Rules and Industry Reactions
The earlier federal criteria for independent contractors included these elements:
- Opportunity for profit or loss
- Stability of the work relationship
- Control level
- Whether the work is part of an integrated production unit
- Skill requirements for the job
The first two were deemed “core factors,” holding the most significance in determinations. This new regulation has faced significant backlash from the trucking sector. The Owner-Operator Independent Drivers Association has expressed worries regarding evolving worker classification laws, with OOIDA President Todd Spencer commenting on the continual changes causing operational uncertainties for truckers.
Details of the Frisard’s Lawsuit
In its legal action, Frisard’s Transportation argues that the DOL’s new independent contractor classification is “arbitrary and capricious.” The company cites court precedents that informed the 2021 rule, referencing a 1947 Supreme Court decision advocating for factors similar to those in the previous guidelines. A Fifth Circuit Court of Appeals ruling noted that two factors were particularly significant.
The lawsuit contends that the 2021 rule reflected the Supreme Court’s and Fifth Circuit’s standards, whereas the new rule dismisses these core elements. The main challenge arises from the new sixth factor regarding whether the work is essential to the employer’s business, with the company asserting that this is inconsistent with prior court decisions.
Moreover, the lawsuit highlights the difference between the earlier rule describing work as “part of an integrated unit of production” and the new standard stating it is “integral to the employer’s business.” Frisard’s argues that an independent contractor can be vital to a company without being part of a production unit. They claim the new rule threatens their operations, raising costs and hindering truckers’ ability to operate independently.
Congressional Opposition
In addition to Frisard’s Transportation’s lawsuit, the new independent contractor rule is facing resistance from Congress. On March 6, Rep. Kevin Kiley (R-Calif.) and Sen. Bill Cassidy (R-La.) introduced resolutions under the Congressional Review Act aimed at overturning the DOL’s worker classification rule.
