In a pair of opinions that appear to draw heavily on a pending rule on disputes about classifying workers, a division of the Department of Labor has come down in favor of independent contractor rather than employee status in a trucking-related case before it.
The Wage & Hour division (WHD) of the DOL, in a Monday letter signed by administrator Cheryl Stanton, told two unidentified petitioners from the trucking sector that scenarios for which they sought clarification both would fit under the WHD’s definition of workers being independent contractors rather than employees.
An opinion letter issued by the WHD is the agency’s opinion on how a law would apply to a particular situation, and it’s issued in response to a specific request to the division.
Part of the rationale behind the division’s ruling appears to be a revised DOL standard on independent contractors vs. employees that isn’t scheduled to go into effect until March and is widely expected to be delayed by the Biden administration. The proposed standard is seen as favoring an approach to employee classification disputes that would likely lean toward more rulings under the Fair Labor & Standards Act that a worker is an independent contractor rather than an employee.
The opinion letter does not identify what parties sought clarification of a worker’s or multiple workers’ status. It notes that such information is protected under federal statute. But the letter says two opinions were sought.
The first is whether a trucking company requiring an independent owner-operator to comply with various legal and safety obligations is evidence of a worker being an employee rather than an independent contractor.
The second is less specific, focusing on a 3PL that has its own drivers and also hires independent owner-operators. WHD’s discussion focuses on several issues that have always been at the center of trucking-sector discussions of independent contractors vs. employees: the status of an independent owner operator driving a vehicle he or she owns or leases but which brandishes the logo of the company employing that person; whether a driver is truly an independent contractor if the trucking company chooses the freight to ship and specifies a route; and, similar to the other question discussed in the ruling, whether requiring certain safety features on the truck of an independent contractor makes that driver an employee.
The WHD in both cases concluded that the drivers in question were independent contractors, not employees. But what was notable about the agency’s rulings was what they said was most “probative”–in other words, what carried the most weight–in how the agency reached its decision. And that’s where the new pending rule that might not ultimately stick in the body of federal regulations in its current form comes into play.
The proposed rule set to go into effect March 8 lays out five key factors determining “economic dependence,” which in turn is what the WHD looks for in determining whether a worker is an employee or independent contractor. The five are the nature and degree of control over the work; worker opportunity for profit or loss from their own initiative or investment; skill required for the job; the “degree or permanence” of the relationship with the “potential” employer; and whether the work is “part of an integrated unit of production.”
Those tests existed previously for the WHD. But in the proposed rule, it said that two of the five were going to be “probative”: the question of whether initiative could lead to greater profitability and the question of control over the job.
The letter from Stanton makes clear that the WHD considered those factors as more important in the agency’s decision. In essence, it adopted as the key tests two standards that are in an announced rule that isn’t formally in effect yet and may never be. But it was a factor in the WHD decision.
For example, in the first question — whether requiring independent contractors to adopt certain safety provisions makes them employees — the WHD letter says those sorts of requirements “do not suggest control indicative of employee status.”
In the second situation for which the WHD is offering its opinion, on the question of an independent contractor driving for a 3PL, the agency again comes back to those two probative standards of the five. Specifically, it says under the situation described by the petitioners who requested an opinion, there’s still plenty of opportunity for an enterprising driver to become more profitable.
In the case before it, the WHD said “the opportunity for profit or loss factor also favors independent contractor status.” That conclusion can be determined if the worker can receive “additional compensation based, not on greater efficiency, but on the exercise of initiative, judgement or foresight, and a worker’s investment in, or capital expenditure on, helpers, equipment or material to further his or her work is probative of his or her economic dependence.” If there is no way that an employee can make more money except by working longer or faster, then that would favor employee status, the letter seems to suggest. But that isn’t the case in the question before WHD.
“We conclude that the safety measures described in the first request do not affect the analysis of the control factor, and the owner operator truck drivers described in the second request are likely independent contractors,” the letter concludes.
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