Is the third time a charm?
How do you determine if a worker is an employee or an independent contractor?
Well, that’s a bit of a loaded question. You see, the answer keeps changing.
The U.S. Department of Labor is attempting to change the rule for the third time since 2021.
On Feb. 27, the DOL issued a notice of proposed rulemaking regarding how to determine whether a worker is an employee or an independent contractor. The new rule replaces a 2024 rule with one nearly identical to a short-lived 2021 rule.
A widespread problem across the trucking industry is the misclassification of truck drivers as employees. Numerous lawsuits have been filed against motor carriers accused of hiring drivers as independent contractors while treating them as employees to undercut wages.
For the most part, both rules kept the status quo intact for owner-operator truck drivers.
However, there was one issue with the 2021 rule that could allow motor carriers to require speed limiters and other devices on independent contractors’ trucks. That provision is not included in the new rule.
2021 rule vs. 2024 rule
Part of the issue was a lack of clarity over who is considered an independent contractor.
Before 2021, there were no official rules in the books. Disputes were mostly settled by relying on case law and Department of Labor guidance.
DOL guidance has used some version of an “economic reality” test. In 2008, that guidance included seven factors to consider when determining employment status:
- Extent to which the services rendered are an integral part of the principal’s business
- Permanency of the relationship
- Amount of the alleged contractor’s investment in facilities and equipment
- Nature and degree of control by the principal
- Alleged contractor’s opportunities for profit and loss
- Amount of initiative, judgment or foresight in open market competition with others required for the success of the claimed independent contractor
- Degree of independent business organization and operation
In the final days of his first term in 2021, Donald Trump’s DOL published a final rule clarifying who is considered an independent contractor. That rule looked at five factors:
- Nature and degree of control
- Opportunity for profit or loss based on initiative, investment or both
- Skill required for the work
- Permanence of the work relationship
- Whether the work is part of an integrated unit of production
The first two factors were considered “core factors.” If the core factors clearly tilted in favor of an independent contractor, then the determination was made, and no further questions were asked. If the core factors were more ambiguous, the remaining three factors would guide the decision on employment status.
Point of contention
Trump’s 2021 rule was largely seen as maintaining the status quo for owner-operator truck drivers.
However, one example of how to apply the rule suggested that motor carriers could require speed limiters on independent contractors’ trucks to stay compliant with federal and state regulations. That opened the door for carriers to require a suite of technologies on owner-operators’ trucks.
None of that mattered. When Joe Biden took office, the 2021 rule was struck down before it even took effect. In 2024, Biden replaced the independent contractor with a new one.
The 2024 rule included mostly the same factors. Instead of designating core factors, the Biden-era rule looked at the totality of the factors. All factors had equal weight. None was more determinative than the others.
2026 independent contractor rule
The DOL’s proposed rule is mostly a resurrection of the 2021 rule.
All of the economic reality test factors from 2021 are in the 2026 rule, including the core factors. There are some minor tweaks to definitions and examples.
One significant change for truck drivers is amending the example related to owner-operator truckers. While the 2021 rule used speed limiters as an example of motor carriers allowed to impose requirements for regulatory compliance, the 2026 rule does not.
Instead, the new independent contractor rule replaces the speed limiter scenario with a drug and alcohol compliance example. Specifically, a motor carrier can require an owner-operator to undergo drug and alcohol testing to remain compliant with regulations.
The Owner-Operator Independent Drivers Association applauded the changes.
“We welcome the Trump Administration’s proposal protecting independent contractors and rejecting any backdoor attempt to mandate dangerous speed limiter devices on truckers,” said Collin Long, OOIDA senior director of government affairs. “Today’s proposal largely mirrors the 2021 rule, ensuring owner-operators can continue working under their existing arrangements with carriers without fear of being reclassified as employees. We applaud the Department of Labor for correcting a problematic speed limiter loophole in the previous rule that would have enabled carriers to micromanage their independent contractors. We look forward to reviewing all the details of the rule and ensuring independent truckers aren’t controlled like employees or forced to give up a business model that works for them.”
The DOL gave the public through April 28 to comment on the proposal. Now that the comments are in, the agency will determine whether or not to move forward with a final rule. LL