Shifting Sands of Independence: breaking down the DOL's new independent contractor rule
The rumble of diesel engines and the endless stretch of asphalt have long embodied the spirit of American independence. For countless truckers, the open road is more than a job; it's a way of life, woven into the fabric of our nation's economic and social landscape. However, this familiar landscape is once gain undergoing a shift due to the recently implemented Department of Labor (DOL) final rule on independent contractor classification, potentially altering the course for owner-operators and the trucking industry as a whole.
This rule reinstates the agency's longstanding six-factor economic realities test to differentiate employees from independent contractors under the Fair Labor Standards Act (FLSA). Each factor is analyzed using a "totality of the circumstances" approach.
Opportunity for Profit or Loss: Does the worker directly reap the rewards of their efforts, or are they beholden to a fixed wage? Owner-operators, with their personal investment in their trucks (and potentially drivers), often have a concrete opportunity for profit or loss.
Investment: Does the worker contribute their own resources and capital to the job, such as owning their truck and equipment? In the trucking industry, the substantial financial burden of owning and maintaining a rig should speak volumes about independent contractor status.
Permanency of the Relationship: Is the engagement a fleeting gig or a sustained partnership? While trucking often involves temporary contracts, consistent work with the same company might nudge the gear towards "employee" territory.
Control: Who is the captain of the ship? Does the company dictate routes, schedules, and workloads, or does the driver set their own pace and itinerary? The greater autonomy enjoyed by owner-operators, the more likely they will be deemed independent contractors.
Skill and Initiative: Does the job require specialized training and independent decision-making, or is it more routine and supervised? Truckers (particularly CDL holders), navigating complex routes and making split-second safety decisions, should be deemed skilled workers.
Integrality of the Service: Is the worker an indispensable cog in the motor carrier machine, or are they merely passing through? This is often a difficult factor for motor carriers to pass.
These six factors ultimately create a picture of whether a worker operates as an indpendent contractor or an integrated part of a larger corporate engine. However, the picture isn't always black and white, and the intricacies of each factor can often lead to ambiguity.
As discussed by transportation attorney Doug Grawe on our recent episode of Trucksafe LIVE!, the new rule isn't a revolutionary upheaval, but it does represent a subtle yet significant shift compared to the previous Trump-era interpretation. Back then, the "opportunity for profit or loss" and "control" factors held more sway, creating a more favorable landscape for independent contractor classification in trucking. With the new rule, however, all six gears receive equal attention, potentially nudging the balance towards employee classification for some owner-operators.
This change doesn't necessarily spell doom and gloom. The rule still leans on the established six-factor test, leaving much of the current trucking landscape familiar. However, the increased emphasis on factors like permanence and skill could push certain owner-operator relationships closer to the employee classification, potentially bringing carriers significant additional responsibilities related to overtime pay, minimum wage, and benefits.
Misclassifying an employee as an independent contractor can be a costly misstep. Fines, lawsuits, and reputational damage are all potential potholes lurking on the wrong side of the road. Carriers need to tread carefully, revisiting their existing independent contractor relationships and ensuring they align with the DOL's six-factor test. This might involve reevaluating contracts, scheduling practices, and even compensation models.
In sum, the new independent contractor rule adds a layer of complexity to the already intricate world of trucking. It's not a death knell for owner-operators, but it is a call for caution and adaptation. Trucking companies need to understand the nuances of the rule, assess their independent contractor relationships, and adjust their course accordingly.
About Trucksafe Consulting, LLC: Trucksafe Consulting is a full-service DOT regulatory compliance consulting and training service. We help carriers develop, implement, and improve their safety programs, through personalized services, industry-leading training, and a library of educational content. Trucksafe also hosts a livestream podcast on its various social media channels called Trucksafe LIVE! to discuss hot-button issues impacting highway transportation. Trucksafe is owned and operated by Brandon Wiseman and Jerad Childress, transportation attorneys who've assisted some of the nation’s leading fleets to develop and maintain cutting-edge safety programs. You can learn more about Trucksafe online at www.trucksafe.com and by following Trucksafe on LinkedIn, Facebook, Twitter, and YouTube. Or subscribe to Trucksafe's newsletter for the latest highway transportation news & analysis.