Department of Labor proposes to withdraw worker classification rule

The U.S. Department of Labor wants to withdraw the previous administration’s final rule regarding worker classification.

A notice of proposed rulemaking to withdraw the “Independent Contractor Status Under the Fair Labor Standards Act” rule is scheduled to publish in the Federal Register on Friday, March 12. The original final rule published Jan. 7 – about two weeks before a new administration took control – and was set to take effect March 8.

Earlier this month, the Department of Labor announced it was delaying the effective date of the independent contractor rule until May 7 “to allow the Department to review issues of law, policy, and fact raised by the rule before it takes effect.”

Now, the Labor Department is asking to rescind the rule altogether.

In a news release, the Department of Labor said the rule would “significantly weaken protections to American workers under the Fair Labor Standards Act.”

The worker classification rule attempted to tackle worker classification by proposing an “economic reality” test to determine whether a worker is an employee or an independent contractor under the Fair Labor Standards Act.

According to the current Labor Department leadership, the rule is being withdrawn for several reasons.

• The rule adopted a new “economic reality” test to determine whether a worker is an employee or an independent contractor under the FLSA.
• Courts and the department have not used the new economic reality test, and FLSA text or longstanding case law does not support the test.
• The rule would minimize other factors considered by courts traditionally, making the economic test less likely to establish that a worker is an employee under the FLSA.

“The rule would elevate two core factors, control and opportunity for profit or loss, above all other factors, and would provide that only in rare cases would the other factors outweigh the core factors,” the department wrote in its notice to withdraw the rule. “For decades, the Wage and Hour Division, consistent with case law, has applied a multifactor balancing test to assess whether the worker, as a matter of economic reality, is economically dependent on the employer or in business for him or herself.

“The department is concerned that the rule’s approach is in tension with the language of the Act as well as the position, expressed by the Supreme Court and in appellate cases from across the circuits, that no single factor is determinative in the analysis of whether a worker is an employee or independent contractor and, as such, questions whether the rule’s core factor approach is supportable.”

OOIDA comments

OOIDA said it was disappointed by the decision to completely withdraw the rule.

“It’s frustrating to see the department has decided to completely withdraw the independent contractor rule,” said Bryce Mongeon, OOIDA’s director of legislative affairs. “As we told them when they announced the delay to the rule, there are some improvements that should have been made, and overall, the rule would likely have provided some new certainty for owner-operators. This is a missed opportunity for the department to make changes that address the specific concerns of owner-operators.”

OOIDA submitted comments on Feb. 24, saying it had concerns about specific provisions in the final rule. However, the Association said it would rather see the rule move forward as is rather than withdraw or delay the rule.

“We encourage DOL to reexamine these stipulations regarding the misclassification of certain types of professional truck drivers,” OOIDA wrote. “However, we ask that the department only delay implementation of the rule if it intends to fix these issues, and we would oppose any delay if the goal is an eventual rollback of the entire final rule.”

ABC Test

Worker classification has been a hot topic in recent years with much of the controversy surrounding California’s adoption of the restrictive ABC Test. OOIDA stressed the diversity of the trucking industry and mentioned that the owner-operator model in trucking predates recent developments in app-based work opportunities. The PRO Act is another controversial piece of legislation based on the ABC Test.

“We believe that the department’s approach in the final rule is more practical than proposals like the ABC Test,” OOIDA wrote.

OOIDA acknowledged that worker classification can be a difficult needle to thread in the trucking industry but said the rules should protect misclassified truckers without destroying the entire owner-operator model.

“Trucking is a challenging career, and there are many changes that should be made to improve compensation and working conditions for drivers,” OOIDA wrote. “The department must recognize that some truck drivers are certainly misclassified and support efforts to combat this. Addressing these issues can be accomplished with adjustments to the final rule instead of a wholesale rejection of the leased owner-operator model.”

Once the notice to withdraw the final rule is published in the Federal Register, the public will have 30 days to comment. LL