‘Chaos would ensue’ if Labor Dept. changes worker classification rules, opponents argue

The trucking industry and supply chains could face chaos if the Biden administration’s Department of Labor changes how independent workers, such as owner-operator truck drivers, are classified by the federal government. That is according to opponents of the Labor Department’s Wage and Hour Division’s proposal on worker classification.

The Department of Labor has nearly 50,000 comments to sift through on its proposed new federal rule designed to determine if workers are employees or independent contractors under the Fair Labor Standards Act (FLSA). The proposal, filed on Oct. 13 in the Federal Register, would guide the classifying of workers and reduce employee misclassification, according to the Labor Department.

American Trucking Associations called the DOL proposal a “blunderbuss approach” that would “shock the nation’s supply chain” in comments submitted to the Federal Register. “The rule will create chaos for our members and the hundreds of thousands of independent owner-operators with whom they contract and have partnered for eighty years to supply the nation.”

Thousands of the comments filed with the Federal Register this fall included messages from owner-operators against the proposed rule change. Other trucking industry groups also came out against it.

“Trucking has been using independent contractors in our industry legally and legitimately since before the Fair Labor Standards Act was passed,” ATA wrote in its comments submitted Dec. 13. “Modern employers in our industry are also doing the right thing by adhering to applicable workplace safety and including monitoring of compliance—in many instances pursuant to a mandate from FMCSA—in their contractual relationships. Some even go beyond what the law requires to make workplaces safer by providing training or equipment as part of their subcontracting to smaller motor carriers or independent contractors. 

ATA argues that this “kind of corporate citizenship” should be rewarded instead of turned into a liability. 

Congressional leaders take opposing sides in independent contractor debate

The extended comment period ended Dec. 13 as Congressional Democrats praised the proposed rule change and their counterparts across the aisle urged the DOL to protect independent contractor classifications, which many small trucking companies and owner-operators rely on as part of their businesses.

“The independent contractor proposed rule would have immediate and long-term disruptive effects on millions of workers and thousands of businesses at a time when the economy is facing high inflation rates,” reads a Dec. 13 letter signed by nearly 50 Republican senators and representatives. 

Predicting that a Labor Department rule change could devastate the economy, the GOP writers cited Upwork estimates that 59 million Americans performed freelance work in 2021, contributing $1.3 trillion to the U.S. economy. They noted that small and large businesses in transportation and other sectors rely on independent contractors. “This allows businesses to have a dynamic workforce while giving workers the autonomy and flexibility they prefer,” the Republicans wrote. “It is clear the proposed rule’s attempt to restrict this flexibility for businesses and workers will be disruptive.”

In comments filed through the Federal Register, the Alabama Trucking Association wrote that the Labor Department's “proposal would harm our industry, the independent entrepreneurial men and women who work with our members as owner-operators, our nation’s supply chain, and, most importantly, the general public. In fact, the proposal will only drive up litigation and court costs as well as overwhelm judicial dockets by blurring the lines so badly that virtually every case has to go to trial.”

Congressional Democrats, however, argue that the DOL’s proposed rule change would protect workers and “even the playing field for businesses that properly classify their workers,” wrote Senator Patty Murray (D-Washington) in a Dec. 13 letter co-signed by 11 other Senate Democrats. 

Murray leads the Senate’s Committee on Health, Education, Labor, & Pensions. Her letter said the proposed rule from the Biden administration would limit employee misclassification, protect workers’ rights, and more closely align with congressional intent that a press release from her office said was weakened by the Trump administration.

The Biden administration attempted to withdraw a Trump administration rule that made it easier to classify workers as independent contractors—but a federal court upheld the rule. Biden’s move would have returned the Labor Department to the rules under 1938’s FLSA to determine worker classifications. 

How independent contractor classification could affect trucking industry

The DOL’s latest rulemaking attempt “jettisons the Trump regulation's emphasis on two core factors—nature and degree of control over the work and the worker’s opportunity for profit or loss—and proposes to weigh all six of its proposed factors more equally,” according to Scopelitis, Garvin, Light, Hanson & Feary, a trucking and transportation industry law firm, wrote after the Notice of Proposed Rule Making was filed in October. “The NPRM also eliminates the Trump regulation's emphasis on actual practice in favor of also weighing theoretical possibility. And in a break from the weight of judicial precedent, the NPRM explains that all instances of control should be considered, even if deriving from contractual requirements, quality control or safety standards, or legal obligations.”

The Labor Department’s October notice lays out a framework that it argues would be more in line with fair labor laws and based on judicial precedent. The department said it believes the new rule would preserve basic worker rights and provide consistency for regulated entities. It highlighted six main points the rule would accomplish:

1. Align the Labor Department’s approach with the courts’ FLSA interpretation and the economic reality test.
2. Restore the multifactor, totality-of-the-circumstances analysis to determine whether a worker is an employee or an independent contractor under the FLSA. 
3. Ensure that all factors are analyzed without assigning a predetermined weight to a particular factor or set of factors.
4. Revert to the longstanding interpretation of the economic reality factors. These factors include the investment, control, and opportunity for profit or loss factors. The integral factor, which considers whether the work is vital to the employer’s business, is also included.
5. Assist with properly classifying employees and independent contractors under the FLSA.
6. Rescind the 2021 Independent Contractor Rule. 

Supply chain concerns over Labor Department’s rule proposal

The Owner-Operator Independent Drivers Association, which represents more than 150,000 independent truck drivers, wants any final DOL rule to address “shortcomings in this proposal that could misclassify drivers and jeopardize their ability to work as independent contractors,” the organization wrote in comments filed on Dec. 13.

“OOIDA has long advocated for a classification structure that offers truckers the opportunity for true independence to operate their own small businesses while protecting them against carriers that seek to take advantage of them through misclassification,” the trade organization wrote. “This is a difficult task, given the diverse nature of the industry and the ability for carriers and truckers to enter into many different types of working arrangements.”

The National Motor Freight Traffic Association said the rule change could end owner-operator trucking companies. The trade organization is arguing to keep the 2021 rule in place. 

“Each of the factors, as further described by WHD (the Department of Labor’s Wage and Hour Division) in the proposed rule, would transform nearly all independent owner-operator truck drivers into employees, notwithstanding their longstanding treatment as independent contractors because they are, in most respects, managing their own business,” NMFTA wrote in comments submitted to the Federal Register. “In so doing, WHD would impose even greater burdens on motor carriers who are already struggling with both a shortage of drivers and supply chain issues to maintain the flexibility that would satisfy their day-to-day needs for operational flexibility that independent contractor truck drivers would afford.”

The Transportation Intermediaries Association warned regulators on Dec. 9 that “chaos would ensue in the marketplace, causing disruption for both the industry and the consumers” if the DOL’s proposed rule was adopted.

Third-party logistics companies and brokers “require the flexibility of independent contractors to function most effectively in the marketplace,” according to comments filed by TIA this month.

“The risk of being misclassified as employees poses a great threat to the industry, which is why we need a current and updated definition that gives a clear standard for independent contractor classification. Leaving classification of independent contractor status up to interpretation will lead to frivolous lawsuits and lead to chaos for all parties involved. All parties, whether potential employers, individuals desiring to be self-employed business owners or employees of those independent contractors, benefit from being able to utilize an independent contractor model. We are hoping it can be reviewed more thoroughly once all parties’ concerns are put on the record.”

It all comes down to the American Dream for the Congressional Republicans who signed a letter against the proposal: “Individuals such as ride-share and delivery drivers, financial advisors, direct sellers, truckers, and franchisees view their independent contractor status as enabling the pursuit of the American Dream. Innovations and on-demand companies have opened doors for these individuals to make their own hours and pursue other economic opportunities. The proposed rule would damage this model and hurt their livelihood.”