As the Department of Labor reviews the Biden-era independent contractor classification rule issued in 2024, which replaced the Trump-era IC classification rule issued early in 2021, members of the trucking industry are working to protect the trucking industry’s longstanding leased owner-operator model.
Classification-related legislation is pending in Congress, too, yet the Owner-Operator Independent Drivers Association said, for now, it sees no need for its owner-operator and small fleet membership to change how it does business.
“Based on recent developments related to the Department of Labor’s independent contractor rule and associated guidance, we do not anticipate the need for our members to alter their business operations in the near-term,” said OOIDA President Todd Spencer. “We will closely review any further proposals from the Department and provide clear feedback on how to ensure the continuation of the owner-operator model within the trucking industry. Small-business truckers and professional drivers are the backbone of the trucking industry, and failing to listen to them would make any rule unworkable.”
Owner-operators would do well to heed recent developments. Earlier this year, Rep. Kevin Kiley (R-California) introduced a pair of bills intended to “protect independent workers and businesses from regulatory uncertainty,” he said.
The “Modern Worker Empowerment Act” would amend existing federal labor laws to establish a clear and predictable test for determining whether a worker is classified as an independent contractor or an employee, Kiley said. An accompanying bill, the “Modern Worker Security Act” would allow companies to voluntarily provide portable benefits to independent contractors without the risk of federal agencies reclassifying those workers as employees.
“California’s disastrous AB 5 law wreaked havoc on independent workers, stripping them of their ability to work on their own terms and forcing businesses to cut off contractor relationships,” Kiley said. “Shifting federal regulations threaten to impose similar uncertainty nationwide, putting millions of workers at risk. By codifying both these protections into law, we prevent future administrations from undermining independent workers and provide businesses with the confidence to fully engage with a modern, flexible workforce.”
[Related: Labor Department reviewing Biden-era independent contractor rule]
The Biden independent contractor rule established a “totality-of-the-circumstances” analysis for determining a worker’s classification and used six “economic reality” factors that are weighted equally to make the determination. Those six factors:
- Opportunity for profit or loss depending on managerial skill
- Investments by the worker and the potential employer
- Degree of permanence of the work relationship
- Nature and degree of control
- Extent to which the work performed is an integral part of the potential employer’s business
- Skill and initiative
The prior Trump-administration rule relied on five factors but put greater emphasis on two “core factors” -- nature and degree of the worker’s control over the work and the worker’s opportunity for profit or loss.
Other “non-core factors” included the amount of skill required for the work; the degree of permanence of the working relationship between the worker and the potential employer; and whether the work is part of an integrated unit of production.
[Related: Are leased owner-operators truly independent contractors for fair-labor-law purposes?]
Kiley’s Modern Worker Empowerment Act, if passed and signed into law, would amend the Fair Labor Standards Act to essentially codify the two core factors from the Trump rule. It would classify a worker as an independent contractor rather than an employee of another person if:
- The would-be employer does not exercise significant control over the details of the way the work is performed by the individual, without regard to any control the other person may exercise over the final result of the work performed; and
- While performing such work, the individual has the opportunities and risks inherent with entrepreneurship, such as the discretion to exercise managerial skill, business acumen, or professional judgment.
The bill would also make clear that the following factors could not be used in determining that an individual is an employee of another person:
- Whether the would-be employer requires the individual to comply with legal, statutory, or regulatory requirements
- Whether the would-be employer requires the individual to comply with health and safety standards that are more stringent than otherwise applicable health and safety standards
- Whether the would-be employer requires the individual to carry insurance of any kind
- Whether the would-be employer requires the individual to meet contractually agreed-upon performance standards, such as deadlines
The bill would also codify the above requirements for classification into the National Labor Relations Act for the purposes of labor disputes.
Kiley’s other companion bill, as noted, seeks to backstop provision of benefits to independent contractors by the companies they work with. The Modern Worker Security Act requires that employee/independent contractor determinations be made without considering whether the worker receives “portable benefits” from the would-be employer.
The bill defines a “portable benefit” as “a work-related benefit that is provided to an individual for work performed for another person in a manner that allows the individual to maintain the benefits without regard to whether the individual continues to perform work for such person.”
A “work-related benefit” is a benefit “commonly provided to full-time employees such as workers’ compensation, skills training, professional development, paid leave, disability coverage, health insurance coverage, retirement savings, income security, and short-term saving,” and also includes contributions, financial or otherwise, to those benefits.
[Related: Another legal blow to the trucking case against California's AB 5 contractor law]
ATA puts its own stamp on defending the independent contractor model in trucking
In a May 20 hearing on Capitol Hill, American Trucking Associations Vice President of Workforce Policy Nathan Mehrens testified before the House Subcommittee on Workforce Protections to defend trucking’s independent contractor model.
“In trucking, being an IC puts the individual in the driver’s seat -- both literally and figuratively,” Mehrens said. “Truckers choose the IC model because it gives them economic opportunities and flexibility. It enables them to run their own businesses, select their own routes, and oftentimes, make more money.”
In written testimony, Mehrens reiterated ATA’s previous argument that the DOL’s 2024 rule “mischaracterizes and ignores substantial data in the record; dismisses without justification the Department’s previous findings; mischaracterizes" the Trump DOL's rule in terms of "content and purpose; reverses course without adequate explanation"; and "misinterprets long-standing FLSA precedent,” among other elements of the ATA's argument.
Mehrens added that “returning to the standard promulgated in 2021 will protect the livelihoods of independent contractors and correct the errors found in the Biden-era rule.”
While ATA applauded the current DOL for moving toward a potential repeal of the 2024 contractor rule, the organization said “the changing standard from administration to administration poses a significant compliance issue for the regulated community. Individuals face challenges in their long-term planning if they don’t know whether the standard that exists today will be the standard tomorrow or later in the future. The same is true for businesses; their ability to engage in strategic planning is also hampered by regulatory whiplash.”
As such, Mehrens and ATA highlighted the Modern Worker Empowerment Act highlighted above as a way “to amend the FLSA in a way that permanently protects the ability of ICs to continue to engage in their chosen professions.”
Mehrens’ written testimony also called on Congress to reject the Richard L. Trumka Protecting the Right to Organize (PRO) Act, which was reintroduced for this Congressional session in March. The PRO Act would codify the ABC independent contractor test into the National Labor Relations Act for determining worker status for the purposes of seeking to unionize.
“While proponents of the bill would assert that the provision is only about collective bargaining, this ignores the practical reality that an individual who is classified as an employee for purposes of the NLRA will be classified as an employee for [other] purposes as well,” Mehrens’ testimony said.
[Related: Carriers' lease-purchase programs 'meaningful' for at least half of lessee operators]
