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New Labor Rule for Worker Classification
A new ruling from the U.S. Department of Labor announced on January 9 establishes a multi-step “economic factors” test to help companies decide if a worker is an independent contractor or an employee. This change raises concerns among transportation stakeholders about its potential disruption to the business model of independent truck drivers.
Industry Concerns
Chris Spear, President of the American Trucking Associations, expressed disappointment, stating, “The trucking industry has relied on independent contractors since interstate trucking began, and court rulings over the last 90 years have consistently validated their role in the economy. It’s unfortunate that the administration has opted for a complex standard that threatens our supply chain and jeopardizes the income of countless truckers nationwide.”
Details of the Rule
The rule, which will begin on March 11, requires employers to assess six criteria when determining a worker’s status, without a predetermined prioritization. The formal announcement was published in the Federal Register on January 10.
Rescinding Previous Rules
In implementing this new rule, the Labor Department stated it is repealing a 2021 regulation and modifying Wage and Hour Division guidelines to better align with judicial precedents under the Fair Labor Standards Act. The Department noted that maintaining the 2021 rule would create confusion and disruption for both workers and businesses.
Guidelines for Assessment
The final rule specifies how to evaluate the six economic factors, including opportunities for profit or loss, investments from both worker and employer, the stability of the work relationship, and the degree of control exerted. While those core factors are primary, additional relevant factors may also be considered.
Anticipated Legal Challenges
Opposition from the business community is likely, with the U.S. Chamber of Commerce among those hinting at legal action. The Indianapolis-based transportation law firm, Scopelitis, Garvin, Light, Hanson, and Feary, indicated that it expects lawsuits challenging the Department of Labor’s authority regarding this regulation.
Comments and Feedback
The initial deadline for feedback on the proposed rule was November 28, 2022, resulting in approximately 55,400 submissions. While generally, employees, labor unions, and worker advocacy groups supported the proposed rule, independent contractors and related business entities largely opposed it, claiming the economic factors test was vague and biased against independent contracting.
