Worker classification remains hot topic in trucking
February 18, 2021
In recent years, worker classification has been a hot topic for everyone from truck drivers to freelance writers. That is not expected to change in 2021.
After a transition in administrations, the U.S. Department of Labor’s final rule on worker classification is pending. Also, a key decision regarding worker classification and the trucking industry is expected to come out of the U.S. Court of Appeals for the Ninth Circuit any day now.
Department of Labor
Earlier this month, the Department of Labor asked for additional time to review a worker classification final rule that was scheduled to go into effect March 8.
The final rule, which was proposed under the Trump administration, attempted to tackle the worker classification controversy by proposing an “economic reality” test to determine whether a worker is an employee or an independent contractor under the Fair Labor Standards Act. The test includes two core factors – the nature and degree of the worker’s control over the work, and the worker’s opportunity for profit or loss.
Shortly after the Labor Department’s test became a final rule, President Joe Biden was inaugurated and issued a regulatory freeze memo on Jan. 20 “to give the incoming administration an opportunity to review any regulations that the Trump administration tried to finalize in its final days.”
On Feb. 5, the Labor Department published in the Federal Register a proposal to delay the effective date of the final rule until May 7.
“This action proposes to delay until May 7 the effective date of the rule entitled Independent Contractor Status Under the Fair Labor Standards Act,” the notice stated. “The Wage and Hour Division seeks comments on this proposed delay, which would allow it additional opportunity for review and consideration of the new rule.”
The public has until the end of the day on Feb. 24 to comment on the Labor Department’s proposed delay of the rule.
“I’m a small fleet owner leased to a carrier,” Jim Sibley posted on the Regulations.gov website on Feb. 11. “I do not deem myself an employee of that carrier. I can refuse to work, or lease to another carrier. They don’t own me. I have been in this business since 1986, and this format has been the standard because it works well for all parties involved.”
To make a comment, go to the Regulations.gov website by Feb. 24 and enter Docket No. WHD-2020-0007-1802.
AB5 and worker classification
Worker classification entered the spotlight when the California Supreme Court’s Dynamex decision established the ABC test in 2018.
Under the strict ABC test all workers are considered employees unless the hiring business demonstrates that three factors are established:
A. That the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact.
B. That the worker performs work that is outside the usual course of the hiring entity’s business.
C. That the worker is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.
In September 2019, California’s Senate passed Assembly Bill 5, which codifies the California Supreme Court’s decision. The law, which was intended to apply to a variety of industries, went into effect Jan. 1.
The California Trucking Association argues that the B prong of the test makes it impossible for a trucking company to hire a truck driver as an independent contractor and would effectively end the owner-operator model in the state.
Shortly after the law went into effect in January 2020, the U.S. Southern District Court of California granted a preliminary injunction that blocked California from enforcing it against motor carriers. This past March, the Ninth Circuit denied a motion to halt the preliminary injunction.
On Sept. 1, the Ninth Circuit heard oral arguments to decide whether the injunction should remain in effect.
Attorneys for the California Trucking Association contend that AB5 is preempted by the Federal Aviation Administration Authorization Act of 1994, which prevents states from enforcing a law or regulation related to a price, route, or service of motor carriers.
During oral arguments, California Deputy Attorney General Jose Zelidon-Zepeda said that a generally applicable state law that doesn’t reference motor carriers couldn’t be preempted by the F4A.
Representing the CTA, attorney Andrew Tauber told the Ninth Circuit that the law does fall under the F4A.
“AB5 is not a law of general applicability,” Tauber said. “It contains numerous exceptions for numerous industries and professions categorically and contains other exceptions for other industries and professions that are conditionally available. It actually specifically targets the trucking industry.”
Tauber then referenced the bill’s author, California Assemblywoman Lorena Gonzalez, and her comments on the floor of the legislature regarding AB5 and the trucking industry.
“She says AB5 was designed to eliminate what she characterized as the ‘outdated’ model whereby motor carriers use independent owner-operators to deliver services to their customers,” Tauber said. “So it simply can’t be maintained on the record that this was a law of general applicability.”
OOIDA amicus brief
OOIDA filed an amicus brief with the Ninth Circuit in support of the California Trucking Association’s lawsuit.
In its brief, OOIDA said the law would be devastating to many small-business trucking companies.
“This court should not adopt the blinders that defendants urge,” OOIDA wrote. “AB5’s impact is not limited to large motor carriers, simply a matter of increasing the cost of doing business, or confined to California.
“Instead, for tens of thousands of interstate owner-operators and small-business motor carriers that regularly cross the California border – small-business truckers critical to the interstate motor carrier industry – AB5 could be fatal.”
More than five months have passed since oral arguments, and the Ninth Circuit is expected to make a decision soon. LL
Previous worker classification coverage:
- Labor Department seeks more time to review worker classification rule.
- Department of Labor rescinds worker classification opinion letter.