Source: FreightWaves (January 9, 2024)
More than a year after it was first proposed, the Department of Labor has formally released its final independent contractor rule that one leading analyst said was “little … changed substantively in comparison to the proposed rule.”
But there are provisions in the changes, though minor, that are being viewed as positive for the trucking industry.
The DOL’s rule becomes the guidance that the Wage and Hour division of the DOL will use in settling issues that come before it.
That leading analyst is Richard Reibstein, an attorney with Locke Lord who writes a blog devoted solely to issues of independent contractor status.
Reibstein, in a blog post published soon after the early Tuesday release of the rule, said there was “no surprise” in the final version. “Only a few tweaks were made despite the fact that over 55,000 comments to the proposed regulation were posted in a two-month period by individuals and organizations both in support of and in opposition to the proposed regulation,” he wrote.
Within an hour of the rule being published in the Federal Register, the American Trucking Associations released a statement blasting its contents.
“I can think of nothing more un-American than for the government to extinguish the freedom of individuals to choose work arrangements that suit their needs and fulfill their ambitions,” ATA President Chris Spear said of the rule.
“It’s unfortunate that the Administration has chosen to replace a clear and straightforward standard with a tangled mess that weakens our supply chain and undermines the livelihoods of hundreds of thousands of truckers across the country. ATA will work with members of Congress and other stakeholders to defeat this ill-advised rule.”
That apocalyptic view of the rule differs sharply from what Reibstein wrote. In his blog posted Tuesday, he referred back to an earlier statement of his on the proposed rule. “Unlike most regulations with hard and fast rules, the regulation was in the nature of an administrative interpretation comprising the Labor Department’s review of existing court decisions and its articulation of a preferred legal analysis … [that] courts would give little if any deference to.”
His conclusion was that “the Biden Administration’s final 2024 regulation is no different.”
Trucking-focused law firm Scopelitis said in an email alert that “as compared to the initial proposed rule, there were some incrementally positive changes in response to comments filed by commenters, including comments filed by Scopelitis, though not enough to make the final rule favorable on balance.”
One area cited by Scopelitis is a change in the consideration of capital investment by a worker.
Whereas the word “truck” and “trucking” were barely mentioned in the proposed rule, there is an extensive discussion of independent contractors and their owned or leased vehicles in the final rule.
One of the more controversial aspects of the original rule was that investments by a worker were not necessarily evidence of “capital or entrepreneurial investment” and would not necessarily indicate independent status. That could be read to include ownership of a truck.
Use of personal equipment
For example, the proposed rule said that “the use of a personal vehicle that the worker already owns to perform work — or that the worker leases as required by the employer to perform work — is generally not an investment that is capital or entrepreneurial in nature.”
That provision alarmed many in the trucking sector. The DOL rule published Tuesday noted that Real Women in Trucking, in a comment submitted about the rule, said of truck drivers who own their vehicles: “Truck drivers who wholly own or independently finance a truck are true owner-operators because ‘[t]his type of investment gives [them] the ability to keep their truck if they decide to stop working for any particular company, and accordingly some measure of economic independence.’”
While the DOL did not outright change its original proposal, it did express sympathy for some of the arguments it received that were similar to those of Real Women in Trucking and would modify its view on investment.
Looking at investments in a “qualitative” manner — the types of investments rather than a dollar amount — ”is a better indicator of whether the worker is economically dependent on the employer for work or is in business for themselves,” the DOL wrote. “That is because regardless of the amount of size of their investments, if the worker is making similar types of investments as the employer of investments of the type that allow the worker to generate independent in the worker’s industry or field, then the facts suggest that the worker is in business for [themselves].”
The end results were revisions in the DOL’s language on investments. New wording focuses on the qualitative nature of the investment, not just the quantitative, and that the DOL’s focus should be on whether the investments are similar to the investments the employer needs to make. That would seem to suggest that a trucker owning a truck might be seen as making the same type of investment as a trucking company, raising the possibility that the worker will be found to be independent in a case before the Wage and Hour division.
Six key factors
The six key factors in the Biden administration rule are similar to what was in the Trump rule. Determination of a worker’s status as an employee or independent contractor is dependent upon:
The extent to which the services in question are an integral part of the employer’s business.
The amount of the so-called contractor’s investment in facilities and equipment.
The nature and degree of control by the principal.
Opportunities for profit and loss.
The amount of initiative judgment or foresight required for the success of the claimed independent enterprise.
Permanency of the relationship.
There is also a provision for unspecified other factors.
The Trump rule used the same six factors as the Biden rule. But when the Biden DOL rule was first proposed, observers said it differed from the Trump rule in that the latter elevated the issues of control and opportunity to profit above the others. The totality of the circumstances approach in the Biden rule has all six factors as equal.
Another key concern in the original rule was a suggestion that if an employer required an independent contractor to take certain legal or safety-related steps, that could be seen as proving control.
But Scopelitis liked what it saw in the revised rule. “The final rule includes a change so that actions taken for the sole purposes of compliance with a specific law or regulation are not indicative of control,” the law firm said. “However, actions beyond compliance with a specific law or regulation and those taken for the putative employer’s safety or quality control standards may be indicative of control.”
And in a clear victory for the trucking industry, the DOL concluded that having a CDL is a “specialized skill.” That consideration can aid in finding a worker to be an independent contractor.
“The Department clarifies that it recognizes the distinctive nature of CDLs and further recognizes that drivers performing work requiring such licenses are likely using specialized skills as compared to drivers generally,” the agency said. “As with any worker, consideration of whether a driver with a CDL uses that specialized skill in connection with business-like initiative determines whether this factor indicates employee or independent contractor status.”
Scopelitis called that finding “potentially helpful.”
The history of the DOL’s IC rule is that the Trump administration rule, viewed as leaning more to a definition of certain workers as independent contractors, was implemented in the final days of that administration. The incoming Biden administration yanked it, but a court later said that revocation was illegal and the Trump rule went back into effect. It now will be replaced by the Biden administration’s rule.
Reibstein’s blog reminded its readers that while the DOL rule has been the source of controversy, it isn’t the end-all in independent contractor regulation.
“Regulatory bodies do not have the final say on who qualifies as an independent contractor and who does not; courts do,” he wrote. “Regulations are not laws. (His italics). While courts typically give deference to valid regulations, that is not a given where regulations keep changing and where the regulation appears to be little more than an agency’s interpretation of prior court decisions on a particular subject.”