Trucking company challenges new federal independent contractor rule
A federal lawsuit filed by a trucking company is challenging the Department of Labor’s final rule that redefines independent contractors.
Frisard’s Transportation, a Louisiana-based family-owned trucking company, has filed a lawsuit in a Louisiana federal court against the DOL. The lawsuit argues that the department’s final rule reclassifying independent contractors is arbitrary and exceeds its statutory authority.
New independent contractor rule
In January, the DOL published its final rule, titled “Employee or Independent Contractor Classification Under the Fair Labor Standards Act.”
The new rule uses a six-factor “economic reality test” to determine whether a worker is an employee or an independent contractor under the Federal Labor Standards Act:
- Opportunity for profit or loss depending on managerial skill
- Investments by the worker and the employer
- Permanence of the work relationship
- Nature and degree of control
- Skill and initiative
- Whether the work performed is integral to the employer’s business
According to the DOL, all factors should be considered, and no single factor determines who can be considered an independent contractor. Additionally, no one factor or combination of factors holds more weight than others.
Guidance set by the new economic reality test is a departure from the previous independent contractor rule set in 2021, which had fewer considerations and focused on two factors.
Previous federal independent contractor rules considered the following:
- Opportunity for profit or loss
- Permanence of the work relationship
- Nature and degree of control
- Whether the work is part of an integrated unit of production
- Amount of skill required for the work
The first two factors were considered “core factors” and held the greatest weight in determining independent contractor status. The other three “guidepost” factors would be used only if the core factors were not determinative.
The new rule has been widely criticized within the trucking industry. The Owner-Operator Independent Drivers Association has raised concerns over changing worker classification laws.
“Truckers are tired of the endless parade of classification rules that do not listen to their concerns,” OOIDA President Todd Spencer said. “This constantly changing landscape has created uncertainty that makes it more difficult for them to operate their businesses. We are still reviewing all the details in the final rule, and it is too soon to know what the exact effect of this final rule would be.”
Frisard’s Transportation lawsuit
In its lawsuit, Frisard’s Transportation claims that the DOL’s new independent contractor rule is “arbitrary and capricious.”
The company relies on court precedent that shaped the 2021 independent contractor rule. In 1947, the Supreme Court found that factors similar to the 2021 rule should be used as guidance in employment classification. When interpreting the Federal Labor Standards Act, a Fifth Circuit Court of Appeals decision ruled that two factors were “critically significant.”
According to the lawsuit, the 2021 independent contractor rule formally interpreted standards established by the Supreme Court and the Fifth Circuit. Conversely, Frisard’s Transportation argues the new rule “rejects the core factors recognized by the Fifth Circuit.”
The challenge to the new rule focuses on the additional sixth factor: whether the work performed is integral to the employer’s business. Frisard’s Transportation claims that sixth factor is inconsistent with court precedent.
Furthermore, the lawsuit points out the distinction between the 2021 rule stating work is “part of an integrated unit of production” versus the new rule stating work is “integral to the employer’s business.” The complaint argues that “an independent contractor can easily be an integral part of a company’s business without being integrated into a unit of production.”
Frisard’s Transportation claims that the new independent contractor rule “threatens to upend (the company’s) business operations, increasing costs, depriving truckers of the opportunity to operate independently within their own business and potentially driving many of the contractors Plaintiff relies on out of business.”
Specifically, the lawsuit claims the new rule is “not in accordance with the law,” as it significantly departs from federal court precedent. The lawsuit also claims the new rule’s interpretation of the Federal Labor Standards Act is “inconsistent with the original meaning of the statute as Congress intended.”
Congressional challenge to independent contractor rule
The new independent contractor rule faces pushback not only from Frisard’s Transportation but also from members of Congress who are trying to overturn it.
On Wednesday, March 6, Rep. Kevin Kiley, R-Calif., and Sen. Bill Cassidy, R-La., introduced Congressional Review Act resolutions to overturn the DOL’s worker classification rule. Read more about that here. LL
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