U.S. Department of Labor’s worker classification rule takes effect

The U.S. Department of Labor’s new worker classification final rule is now in effect. However, efforts are underway to overturn it.

In January, the DOL unveiled a 339-page final rule with the stated purpose of preventing companies from misclassifying workers as independent contractors. The action, which officially took effect on Monday, March 11, rescinds a former President Donald Trump-era rule that focused on control and profit and replaces it with a “totality of circumstances” test.

Last week, lawmakers in the House and Senate introduced resolutions aimed at stopping the rule and returning to the regulations that were established under Trump. The resolutions already have 54 co-sponsors in the House and 32 co-sponsors in the Senate. But until those resolutions are passed, the DOL’s new rule is in effect.

The Owner-Operator Independent Drivers Association last week sent an update to its members as a way to help explain what the new rule does and doesn’t do.

DOL’s new rule

The Department of Labor’s new worker classification rule will look at six factors:

• Opportunity for profit or loss depending on managerial skill
• Investments by the worker and the potential employer
• Degree of permanence of the work relationship
• Nature and degree of control
• Extent to which the work performed is an integral part of the employer’s business
• Skill and initiative

OOIDA said the rule does not use the controversial ABC Test or establish on the federal level California’s Assembly Bill 5, which made it extremely difficult for a leased-on trucker to be considered an independent contractor. The ABC Test includes three factors and uses a one-strike-and-you’re-out standard.

“Unlike AB5’s forced use of the ABC Test, the rule emphasizes that no one factor is determinative, no single factor is predetermined to be more important, and the test is not meant to be applied in a mechanical way,” OOIDA wrote. “Classification determinations are made on a case-by-case basis after all facts of each situation are considered.”

OOIDA opposes AB5’s “overly broad and unnecessarily restrictive” approach to worker classification.

The Department of Labor created a frequently asked questions page to help explain the new rule. LL