Trucking companies that use independent contractors could be breathing a sigh of relief after the Department of Labor Wednesday withdrew an Obama-era guidance that some viewed as an attack on the owner-operator model used in trucking.
The 2015 Obama administration guidance on independent contractors expanded the definition of employees as part of a crackdown on so-called “misclassification” of employees as contractors.
That guidance said the department would consider most workers to be employees under the Fair Labor Standards Act. It told employers to use an “economic realities test” in determining whether workers are employees.
At the time, the American Trucking Associations called it "an aggressive departure from prevailing classification standards," saying it "no doubt signals an attack on industries like trucking that rely significantly on contractors."
The “economic realities” test has been used by several courts and regulatory agencies for years and includes factors such as:
- The extent to which the work performed is an integral part of the employer’s business;
- The worker’s opportunity for profit or loss depending on his or her managerial skill;
- The extent of the relative investments of the employer and the worker;
- Whether the work performed requires special skills and initiative;
- The permanency of the relationship; and
- The degree of control exercised or retained by the employer.
At the time that guidance originally was issued, Rob Moseley, transportation attorney with Smith Moore Leatherwood LLP, called it “problematic” for the industry, noting, ”A trucking company is not going to be able to say having truckers move your freight isn't an integral part of your business.”
Wednesday’s brief announcement on the DOL website said “removal of the administrator interpretations does not change the legal responsibilities of employers under the Fair Labor Standards Act … The department will continue to fully and fairly enforce all laws within its jurisdiction.”
As the National Law Review noted, “while today’s announcement is welcome news for employers and may signal less extreme positions by the Department of Labor, employers should still be mindful of potential liability associated with joint employment and independent-contractor classifications. In addition to DOL enforcement (which the agency made clear will continue), a number of states have been active in their efforts to curb employee misclassification, and employees also have a private right of action under the FLSA and various state laws.”
The Labor Department deleted the Obama-era guidance from its website.