Industry weighs impact of proposed independent contractor rule

Stakeholders have 45 days to comment on a Biden administration independent contractor rule that could potentially reclassify millions of workers as employees. The rule was published in the Federal Register Thursday, with the comment period extending through Monday, November 28.

The proposed rule, announced earlier this week, could affect workers in a range of industries, including trucking, which relies heavily on independent contractors. Industry experts say the move represents a step away from the independent contractor model and that employers should pay close attention to how the issue may affect their business.

“I think [the proposed rule] is designed to lean toward eliminating independent contractor businesses under what [the current administration] considers to be the more noble goal of creating a protective employment environment,” said Greg Feary, president and managing partner at law firm Scopelitis, Gargin, Light, Hanson & Feary, a nationwide practice focused on the transportation industry.

The DOL’s proposal would rescind the 2021 Independent Contractor Rule, a Trump-era policy that is viewed as favorable to classifying workers as independent contractors. The proposal would replace that rule with one that is viewed as more likely to classify workers as employees, according to Feary and others. The current policy uses a five-factor test for employers to determine whether a worker should be classified as an employee or an independent contractor, with two factors receiving greater weight: the nature and degree of the worker’s control over the work, and the worker’s opportunity for profit or loss based on personal initiative or investment. The new rule proposes a six-pronged test with factors weighed equally, essentially loosening classification guidelines and favoring employee status, experts say.

Industry groups such as the American Trucking Associations (ATA), the national trade group representing the trucking industry, and the Owner-Operator Independent Drivers Association (OOIDA), which represents small businesses and professional truck drivers, are still reviewing the 184-page proposal, but expressed concerns this week over the government’s efforts to undo the existing rule.

“ATA is reviewing the new proposed rule and looks forward to providing feedback to the Department, but we are disappointed this proposal seeks to undo the current rule which has brought needed clarity to the issue of independent contractor status,” ATA Vice President of Workforce Policy Nick Geale said in a statement.

“We are just beginning to review this proposal, but any rule must recognize the owner-operator model if it is to be successful when applied to trucking,” added OOIDA President Todd Spencer, in a separate statement. “The administration’s stated desire to formulate a test that considers all aspects of a working relationship is promising, but we will carefully review every detail of their proposal and fight back against any provision that would unfairly stack the deck against true independent contractors.”

The National Retail Federation (NRF) weighed in earlier this week as well, calling the proposal unwarranted, unnecessary, and likely to cause confusion and spur litigation.

Feary echoed those concerns and said he expects the issue to linger into 2023.

“I wouldn’t expect an actual rule until late spring, early summer of next year, [and we] may see litigation over this,” he said. “I think you’re not going to see anything other than some legal machinations through the end of this year and early next year, and then probably start to see the manifestation of this rule.”

Timing and the political landscape will likely play a role as well.

“If this hits in June of 2023 … and if the US DOL enforcement body is trained on it and ready to enforce it by the end of 2023, now you’re into 2024 and you may have a new administration,” Feary explained. “Because of the politics of it, it’s hard to predict the long-term ramifications.”