Rocky Mountain Trucking LLC

Doing a search on the word “trucking” embedded in comments on the Department of Labor’s proposed independent contract rule results mostly in criticisms of the proposal, but it’s far from unanimous.

Most of the comments to the rule read by FreightWaves had the same basic thrust: The independent owner-operator model as it stands today in the U.S. has been profitable and led to financial success for its practicioners but is threatened by the proposed rule that would guide decisions by the Wage and Hour Division of the Department of Labor.

But there are dissenting voices as well.  

When a proposed rule is listed in the Federal Register and a comment period is opened, there often are submissions that are written by a third party and then submitted multiple times, verbatim, by different commenters. 

That is the case with the DOL rule as well. “Employers are increasingly misclassifying workers as gig workers in order to avoid their responsibilities on everything from employer-sponsored health insurance to paying employer contributions toward Social Security,” according to a comment that was seen in multiple filings. “At a time when corporations are raking in record profits while workers’ wages remain flat, it’s critical that the Department of Labor implement policies that support workers’ rights and put more money into the pockets of working people.”

But within those submissions might also be personal stories. 

For example, a commenter named Phillip Hult of Illinois who submitted that form letter added that  he had been classified by his employer as an independent contractor “but they violated the terms of the contract many times.”

“The contract said that I needed to provide a vehicle suitable to deliver the packages on the route,” he said. “But they refused to allow me to buy a truck for my route saying ‘it does not match our fleet.’”

More than whether his account is true is that it brings into focus the issue of “control,” which is at the heart of the proposed rule. 

The Biden administration’s proposal, like that of both the Trump and Obama administrations before it, looks to the six-part “economic realities test” to guide the Wage and Hour Division in determining questions of independent contractor versus employee status. But the Trump administration rule — which went into effect just before Joe Biden took office, was yanked by the Biden administration and then reinstated by a federal judge — relied heavily on two core factors in the economic realities test: a worker’s control over his or her work and the opportunity for profit or loss.

But the Biden administration’s proposal wants all the tenets of the economic realities test to be considered on an equal basis, giving no greater weight to any of the six parts. 

As a trio of attorneys for Littler law firm wrote in an analysis, the proposed rule would defined an employee “broadly as any individual whom an employer ‘suffers, permits, or otherwise employs to work’ and is intended to encompass all workers who ‘as a matter of economic reality, are economically dependent on an employer for work.’ The proposed rule further explains that an independent contractor is only a worker who is, as a matter of economic reality, ‘in business for themselves.’”

That is being viewed by labor attorneys as a definition of control that would more readily lead the Wage and Hour Division to classify a worker as an employee. 

The observations of a commenter named Gerald Ingham and his experiences led him to support the proposed rule and would probably be applauded by its authors in the Department of Labor.  

“Many companies will label a driver/owner operator as an independent contractor, simply to get out of paying the driver proper compensation,” he wrote. “My current employer is a prime example. While yes, I do own my truck, I am coerced into working 65-70 hours per week. I have a set schedule. I have [a] mandatory real time tracking device installed in my truck. I am paid by the hour. I cannot go out and get a second job, because I am limited to the hours I can work by HOS rules. An independent contractor is someone or a business that is hired to do a very specific task, not doing the same thing every day, for years.”

Another critic of the current setup was Kieran Donahue. A driver buying a truck through their lease arrangement is “simply an employee,” Donahue wrote, “and should be given all federal protections as an employee.” 

Many of the comments in opposition to the rule see an apocalypse coming if it is adopted: the end of their days as independent owner-operators. 

It is often referred to by the critics in their comments as a “law.” If implemented, it is not a law, it is guidance. But it is guidance that most company attorneys would suggest that their clients observe as if it was a law, though it is not specific and probably needs a few legal actions taken under it by the Wage and Hour Division to build a body of law of what a company needs to do to correctly classify its workers.

Among the critics of the proposal from the trucking industry were many who cited California’s AB5 test, though the DOL specifically said it had considered and rejected using the AB5 definitions in writing its proposal. 

The three-pronged AB5 test used in California is particularly problematic for trucking because of the B prong. The B prong says a worker can be considered independent if he or she “performs work that is outside the usual course of the hiring entity’s business.” A trucking company hiring an independent owner-operator to move freight risks being found in violation of the B prong. But the ABC test is not in the DOL proposal, despite the many comments that seemed to suggest it was. 

But there were more thoughtful comments that did not necessarily view the rule as the end of the independent owner-operator model but could throw a wrench into its continued existence. 

A comment from NEW Transportation Group — no individual’s name was submitted — lays out the case that the current relationship between independent owner-operators and the companies they are leased to was providing an opportunity for profit to the drivers, and that the relationship in general allowed independence.

“[Drivers] experience a profit/loss since they are responsible to pay for all repairs, fuel, insurance, tolls, and they own their own trucks and trailers and carry the proper licensing for those,” the company wrote. “They are solely leased to the company they run for, under a contract. The trucking company allows them to run under their DOT/MC number in exchange for a percentage of the gross revenue of each load the owner operator hauls. The owner operator benefits from a working relationship with the trucking company, by getting a decent amount of good paying loads, having all invoicing handled by the trucking company, weekly payout for completed work, and many DOT regulations and compliance for trucking are handled by the trucking company itself.”

What isn’t clear is whether a relationship that tight would be defined as independent under the proposed Biden rule. And NEW Transport seemed to acknowledge that possibility. “If these rules are revised to include that solely working for only one company makes you an employee, this will greatly damage the industry as a whole,” the company wrote. “It is rather unclear how we would even be able to make these drivers hourly when they are responsible for all their expenses.”

Labor attorneys have said one of the most significant parts of the proposed rule is that the DOL would view “control” as potentially having been established if the employer requires the worker to abide by certain safety standards. 

“An employer’s compliance with legal obligations, safety or health standards, or requirements to meet contractual or quality control obligations, for example, may in some cases indicate that the employer is exerting control, suggesting that the worker is economically dependent on the employer,” the DOL wrote in its proposed rule.

That brought a response from trucking attorney James Mahoney of Phoenix, who suggested it was a sweeping interpretation of the word “control.” 

“In other parts of the regulations, motor carriers using owner operators understand they have a non-delegable duty for public safety and must control the driver’s operations, whether that person is a company employee or independent contractor,” Mahoney wrote. “There’s no middle ground. The motor carrier must enforce a significant number of controls, e.g., hours of service, inclement weather operations, pre- and post-trip inspection obligations, truck and trailer maintenance, routing. All this requires control and direction to the driver.”

Mahoney recommended an alternative: the Arizona law on independent contractors. He wrote that in that state, a contractor needs to “affirmatively state … that he/she prefers to be a contractor and relinquishes any claim to UIB, Workers’ Comp, and he/she affirmatively takes responsibility for operating his/her own business. Quite like the true entrepreneurs they want to be.”

More articles by John Kingston

Brokerage solution to California’s AB5 rule gets support from Cowen panel

Universal CEO speaks positively of company’s AB5-driven hiring plan in California

California’s AB5 trucking options get a hearing at IANA; brokerage on top?

The post Comments come in from trucking sector on proposed DOL independent contractor rule appeared first on FreightWaves.