U.S. looks to better define employees, independent contractors

Deborah Lockridge

TORONTO, Ont. – The debate about which truck drivers are employees or independent contractors is not limited to Canada alone.

On the side of the border, the Canadian Trucking Alliance (CTA) continues to sound the alarm about Driver Inc. – a business model that sees fleets misclassifying employees as independent contractors to bypass a series of employer obligations.

(Photo: istock)

A similar debate is underway in the U.S., where the U.S. Department of Labor is looking to better define employees and independent contractors under the Fair Labor Standards Act.

The proposed rule adopts an “economic reality” test to determine a worker’s status, considering whether the worker is in business for themselves or economically dependent on an employer for work.

In its Notice of Proposed Rulemaking, the U.S. department points out, “the multifactor test [for determining independent contractor status under the FLSA], as currently applied, has proven to be unclear and unwieldy.”

“The department’s proposal aims to bring clarity and consistency to the determination of who’s an independent contractor under the Fair Labor Standards Act,” U.S. Labor Secretary Eugene Scalia said in a press release. “Once finalized, it will make it easier to identify employees covered by the Act, while respecting the decision other workers make to pursue the freedom and entrepreneurialism associated with being an independent contractor.”

The department believes that streamlining and clarifying the test to identify independent contractors will reduce worker misclassification, reduce litigation, increase efficiency, and increase job satisfaction and flexibility.

“The proposal marks a more significant venture for the DOL than its previous efforts to define the parameters for determining independent contractor status generally under the FLSA,” the transportation attorneys at Scopelitis, Garvin, Light, Hanson and Feary said in an email alert. “The proposal synthesizes various courts’ approaches to implementing the Supreme Court’s economic realities test.”

They explain that a court would examine two “core” factors, including the nature and degree of control the worker has over the work, and the opportunity for profit and loss based on initiative and/or investment.

The proposal identifies three other factors that may serve as additional guideposts: the amount of skill required for the work; the degree of permanence of the working relationship between the worker and potential employer; and whether the work is part of an integrated unit of production.

The attorneys at Scopelitis advised that “in the customary and usual fact patterns found in trucking, both core factors should most often point in the direction of independent contractor status.” The secondary factors, however, “could present challenges to maintaining independent contractor status based on some existing case law addressing driver work classification under various state laws.”

The American Trucking Associations (ATA) has praised the proposal.

“Secretary Scalia understands that many Americans choose the independent contractor model — including hundreds of thousands of owner-operators in the trucking industry — because it expands their opportunities to earn and empowers them to choose the hours and routes that suit their individual needs and lifestyle,” said ATA president and CEO Chris Spear. “This proposal is about giving working Americans the freedom to pick the occupation and flexibility they desire.”

Once the notice is published in the Federal Register, there will be a 30-day comment period.

  • A version of this article originally appeared at truckinginfo.com, and is reproduced under an editorial sharing agreement between Today’s Trucking and Heavy-Duty Trucking magazines. Additional files from Today’s Trucking have been included.
Deborah Lockridge

Deborah Lockridge is editor in chief of Bobit Business Media’s Heavy Duty Trucking and Truckinginfo.com. She has covered trucking since 1990 and has been with HDT since 1998. The award-winning writer is known for her in-depth coverage and insightful commentary on topics ranging from driver fatigue to counterfeit parts to supply chain issues.

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