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Tweaks in final independent contractor rule could benefit trucking

Over a year since its initial proposal, the Department of Labor has officially unveiled its conclusive independent contractor rule, with one prominent analyst noting that it has undergone minimal substantive changes from the proposed version.

However, despite the limited alterations, some of the amendments, albeit minor, are being perceived as advantageous for the trucking industry.

The DOL’s New Rule: Perspectives and Reactions

The DOL’s rule now serves as the guiding framework for the Wage and Hour division of the DOL in resolving issues brought before it. The analyst in question is Richard Reibstein, an attorney affiliated with Locke Lord, maintaining a blog exclusively dedicated to matters concerning independent contractor status.

In a blog post swiftly published after Tuesday’s early release of the rule, Reibstein expressed that the final version held no surprises. He noted, “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.”

Within an hour of the rule appearing in the Federal Register, the American Trucking Associations promptly issued a statement strongly criticizing its contents.

“I can’t imagine a more un-American action than the government extinguishing individuals’ freedom to select work arrangements that align with their needs and aspirations,” remarked ATA President Chris Spear regarding the rule.

“It’s regrettable that the Administration has opted to replace a clear and straightforward standard with a convoluted situation that weakens our supply chain and jeopardizes the livelihoods of hundreds of thousands of truckers nationwide. ATA will collaborate with Congress members and other stakeholders to counteract this misguided rule.”

This rather dire perspective on the rule sharply contrasts with Richard Reibstein’s viewpoint. In his Tuesday blog post, he revisited an earlier statement on the proposed rule. “Unlike most regulations with rigid guidelines, the regulation was more of an administrative interpretation, involving the Labor Department’s assessment of existing court decisions and its articulation of a preferred legal analysis … [one that] courts would likely give minimal, if any, deference to.”

In concluding, he stated that the Biden Administration’s final 2024 regulation remains essentially unchanged.

“Incrementally positive”

Trucking-centric law firm Scopelitis conveyed in an email alert that “compared to the initial proposed rule, there were some gradually positive changes in response to comments from various contributors, including those from Scopelitis. However, these adjustments are insufficient to make the final rule overwhelmingly favorable.”

Scopelitis highlighted a shift in the consideration of capital investment by a worker as a notable area of change.

While the proposed rule scarcely mentioned the terms “truck” and “trucking,” the final rule extensively delves into discussions regarding independent contractors and their personally owned or leased vehicles.

One of the more contentious aspects of the original rule pertained to the idea that a worker’s investments were not necessarily indicative of “capital or entrepreneurial investment” and did not automatically imply independent status. This interpretation could encompass ownership of a truck.

Consideration of Personal Equipment

For instance, the proposed rule explicitly stated 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.”

This provision raised concerns within the trucking sector. The DOL rule released on Tuesday acknowledged the concerns, citing Real Women in Trucking’s comment on the rule. The group stated that truck drivers who wholly own or independently finance a truck are genuine owner-operators because “this type of investment provides them with the ability to retain their truck if they decide to cease working for a specific company, offering a degree of economic independence.”

The DOL emphasized a shift towards assessing investments in a “qualitative” manner, focusing on the types of investments rather than solely considering the monetary value. The department asserted that this approach better gauges whether a worker is economically reliant on the employer or is operating independently. Regardless of the investment amount, if the worker is making similar types of investments as the employer in a manner that fosters independence in their industry or field, it suggests the worker is in business for themselves.

This led to revisions in the DOL’s language on investments, with the new wording emphasizing the qualitative nature of investments rather than just the quantitative aspect. The DOL now places emphasis on whether the investments align with those the employer must make. This implies that a trucker owning a truck could be perceived as making a comparable investment to a trucking company, potentially supporting an independent status in a case before the Wage and Hour division.

Six Crucial Factors

The six key factors in the Biden administration rule closely resemble those in the Trump rule. Determining a worker’s status as an employee or independent contractor hinges on:

  1. The extent to which the services are integral to the employer’s business.
  2. The contractor’s investment in facilities and equipment.
  3. The nature and degree of control exerted by the principal.
  4. Opportunities for profit and loss.
  5. The level of initiative, judgment, or foresight required for the success of the claimed independent enterprise.
  6. The permanency of the relationship.

Additionally, there is a provision for considering unspecified other factors.

DOL Rule Dynamics: A Comparative Analysis and Industry Impact

The Trump rule incorporated the same six factors as the Biden rule. However, during the initial proposal of the Biden DOL rule, observers noted a difference from the Trump rule, highlighting that the latter emphasized control and profit opportunities over the other factors. In contrast, the Biden rule adopts a totality of the circumstances approach, treating all six factors as equally important.

A significant concern in the original rule involved the notion that if an employer mandated certain legal or safety-related steps for an independent contractor, it could be construed as exerting control. However, Scopelitis expressed satisfaction with the revised rule, noting a change that specifies actions taken solely for compliance with specific laws or regulations are not indicative of control. The law firm stressed that considering actions beyond legal compliance and those aligning with the employer’s safety or quality control standards may indicate control.

In a notable triumph for the trucking industry, the DOL affirmed that holding a Commercial Driver’s License (CDL) is a “specialized skill.” This recognition can be advantageous in categorizing a worker as an independent contractor.

Legal Dynamics

The background of the DOL’s IC rule involves the Trump administration’s rule, which inclined toward defining specific workers as independent contractors and was implemented in the final days of that administration. The incoming Biden administration initially withdrew it, but a subsequent court ruling deemed the revocation illegal, reinstating the Trump rule. The Biden administration now plans to replace it with its own rule.

Reibstein’s blog served as a reminder to its readers that while the DOL rule has stirred controversy, it doesn’t serve as the ultimate authority in independent contractor regulation.

“Regulatory bodies don’t have the final say in determining who qualifies as an independent contractor and who does not; courts do,” he emphasized. “Regulations are not laws. (His italics). While courts generally show deference to valid regulations, it’s not guaranteed, especially when regulations are in constant flux, and the regulation seems more like an agency’s interpretation of prior court decisions on a specific subject.”

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