Industry groups from every corner of the logistics sector are criticizing a White House policy released Tuesday that would swing U.S. Department of Labor (DOL) standards toward classifying many workers as employees instead of independent contractors.
The long-running debate over that topic could have a large impact on companies that rely on contractors, including supply chain and transportation companies that hire over the road truckers and gig workers to deliver freight loads. The new Biden Administration standard rescinds a policy known as the 2021 Independent Contractor Rule, a Trump-era policy that logistics experts have called favorable to classifying workers as independent contractors.
In its place, the new regulation creates a less predictable framework that increases the likelihood of determining that a worker has employee status under the Fair Labor Standards Act (FLSA), the federal statute that governs minimum wage and overtime pay, according to analysis by the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The regulation is slated to take effect on March 11, although it may be challenged in court before that happens. “We anticipate business groups will file suit(s) challenging DOL’s authority to issue this regulation,” Scopelitis said in an email. “From enactment of the FLSA in 1938 until January 2020, DOL had not issued a regulation on this matter. After issuing a regulation in 2020, DOL abruptly changed its view with a change in control of the White House. Given increased judicial wariness of deference to agency interpretations, it is unclear how the regulation will impact private litigation should it survive anticipated legal challenges.”
Although the regulation’s legal future is cloudy, its standing in the eyes of logistics industry groups is crystal clear. The groups lining up to oppose the new policy include the American Trucking Associations (ATA), Intermodal Association of North America (IANA), National Association of Wholesaler-Distributors (NAW), Owner-Operator Independent Drivers Association (OOIDA), and National Retail Federation (NRF).
The NRF said the new rule would be bad for both retailers and workers. “Retailers, along with countless other employers, maintain a wide range of business relationships with independent contractors, including billing, facility maintenance, data analysis, delivery, marketing and other critical services. These relationships have become even more important and common in a post-COVID-19 environment,” the NRF’s senior vice president of Government Relations, David French, said in a release. “The administration is repealing common-sense rules that clearly articulate the difference between employees and independent contractors. NRF vehemently opposes a change in this important area of law, which is both unwarranted and unnecessary. This decision will only foster confusion, endless litigation, and reduced innovation.”
American Trucking Associations President and CEO Chris Spear was even more cutting in his criticism, calling the new regulation “un-American” for its potential to reduce the freedom of workers such as the nation’s 350,000 truckers who work as independent contractors.
Similar criticism came from IANA President and CEO Joni Casey, who said the “burdensome” new requirement threatens to force the job reclassification of over 80% of intermodal drayage drivers that currently hold independent contractor status.
OOIDA President Todd Spencer was slightly more muted in his criticism, saying that he had concerns that some details contained in the rule may disregard specifics of the trucking industry. “Truckers are tired of the endless parade of classification rules that do not listen to their concerns. 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,” Spencer said.
