Department of Labor proposes new worker classification rules

As arguments over worker classification laws continue to fester in California, the U.S. Department of Labor announced a proposal to update how it determines whether a worker is an employee or an independent contractor.

A notice of proposed rulemaking is scheduled to be published in the Federal Register on Thursday, Oct. 13.

The proposal uses an economic reality test that analyzes a variety of factors to determine a worker’s status. It also returns to a “totality-of-the-circumstances” analysis in which the economic reality factors are not assigned a predetermined weight, and each factor is given full consideration.

“The department believes that this proposal, if finalized, will provide more consistent guidance to employers as they determine whether workers are economically dependent on the employer for work or are in business for themselves, as well as useful guidance to workers on whether they are correctly classified as employees or independent contractors,” the Labor Department wrote in the notice.

“Accordingly, the department believes this proposal will help protect workers from misclassification while at the same time recognizing that independent contractors serve an important role in our economy and providing a consistent approach for those businesses that engage independent contractors.”

Worker classification has been a hot topic in recent years with much of the controversy surrounding California’s adoption of the restrictive ABC Test. In 2019, California lawmakers passed Assembly Bill 5, which codified the ABC Test into law. Opponents in the trucking industry contend the law destroys the owner-operator model. The California Trucking Association and OOIDA continue to fight the law in court.

The Labor Department’s proposal does not use the ABC Test’s restrictive three-pronged approach.

OOIDA’s take

Although it was still reviewing the 184-page notice of proposed rulemaking, OOIDA said the formula appears “promising” on the surface.

“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,” OOIDA President Todd Spencer said. “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.”

Previous attempts to fix problems involving misclassified workers in the trucking industry have failed to strike the right balance, the Association said.

“Truckers are tired of the seemingly endless parade of new classification rules coming from legislators and regulators that have largely disregarded their concerns and preferences,” Spencer said. “Whether it is AB5 in California that jeopardizes their business model, or the Trump-era classification rule that gave mega carriers a carve-out to exercise even greater control over their contractors, small-business truckers and professional drivers feel ignored. If decision-makers listened, they’d realize truckers want to preserve their opportunity to pursue the American Dream of owning their own business, while promoting better pay and working conditions for every driver in the industry.”

How to comment

A 45-day comment period on the proposal will begin once the notice publishes in the Federal Register on Oct. 13.

Once that happens, the public can comment by going to the Regulations.gov website and entering RIN-1235-AA43. LL