Federal Agencies Taking More Business-Friendly Tack on Independent Contractor Classification

Even as multiple developments in California have made it harder for trucking companies to use owner-operators, at the federal level, the Trump administration has backed off of the Obama administration’s get-tough stance on misclassification.

Let’s look at two federal government entities that have power over some aspects of the independent contractor question: the Department of Labor and the National Labor Relations Board.

Back in 2015, under the Obama administration, the Department of Labor concluded that “most workers are employees under the [Fair Labor Standard Act’s] broad definitions.” That was a radical shift of direction for the DOL and a departure from longstanding IRS standards. It asserted that lack of control over the worker was not a determining factor for finding independent contractor status. 

Under the Trump administration, the DOL promptly withdrew that guidance. Last summer, in a case involving nursing (misclassification isn’t just an issue affecting trucking), the Labor Department provided new guidance on independent contractor classification.

The new guidance said the department will consider the “totality of the circumstances to evaluate whether an employment relationship exists” and “will evaluate all factors … to reach appropriate conclusions in each case.” This included a return to a focus on factors that for some time have been regarded as key in determining employment status, including how much control the company has over the work performed by the independent contractor. 

Then, in late January, the National Labor Relations Board reversed an Obama-era standard for determining independent contractor status. The case involved shuttle-van-driver franchisees of SuperShuttle at Dallas-Fort Worth Airport.  The board concluded that the franchisees are not employees under the National Labor Relations Act, but rather independent contractors excluded from the act’s coverage. 

The NLRB found that the franchisees’ leasing or ownership of their work vans, their method of compensation, and the fact that the contractors had control over their daily work schedules and working conditions, meant the franchisees had significant entrepreneurial opportunity for economic gain. These factors, along with the absence of supervision and the parties’ understanding that the franchisees are independent contractors, resulted in the board’s finding that the franchisees are not employees. 

The NLRB decision overruled a 2014 Obama-era NLRB decision involving FedEx Home Delivery, which severely limited the significance of a worker’s entrepreneurial opportunity for economic gain in making the independent contractor determination.

That 2014 FedEx decision emphasized the company’s control of the worker’s activities, according to Michael Pacewicz, attorney with Crowe & Dunlevy, as reported by newsok.com. It also added a new factor, whether the worker was rendering services as part of an independent business.

“This made it difficult for employers to successfully argue that workers were independent contractors, because employers almost always exercise some level of control over contract labor, and the presence of some level of control indicates the worker is not operating an independent business," Pacewicz said.

The January NLRB decision reverts to the 10-factor test, which is regarded as more business-friendly. The 10 factors are:

1. The extent of control the employer exercises of the details of the work being performed;
2. Whether or not the worker is engaged in a distinct occupation or business;
3. The type of occupation involved, and whether the work is usually done under the supervision of an employer or by a specialist without supervision;
4. The level of skill required in the occupation;
5. Whether the worker supplies the instrumentalities, tools and place of work;
6. The length of time for which the worker is engaged to work;
7. Whether the worker is paid by the time or by the job;
8. Whether the work is part of the regular business of the employer;
9. Whether the parties believe they are creating an employer-employee relationship, and
10. Whether the employer is in business.