In September, the U.S. Department of Labor (DOL) announced a proposed rule that would create an economic reality test to determine whether a worker was an employee or contractor, an issue that has moved to the forefront with the rising gig economy.
The Owner-Operator Independent Drivers Association (OOIDA) submitted formal comments to DOL, asking the federal agency to consider the long history of the trucking industry’s owner-operator model before finalizing any rules regarding worker classification.
Much of the controversy stems from the increase in such gig economy jobs as driving for companies like Uber or DoorDash, but the proposal would have far-reaching impacts.
“As written, the department’s proposal unfortunately fails to clarify the classification of owner-operators under the Fair Labor Standards Act (FLSA),” OOIDA wrote in comments signed by President and CEO Todd Spencer. “While we appreciate the department’s efforts to work with and ‘sharpen’ the existing test for FLSA classification, we believe the proposal leaves important questions unanswered and could have unintended consequences for independent owner-operators.
“The owner-operator model predates recent developments in app-based work opportunities, and the department must consider this long history before finalizing any classification rule.”
According to DOL, the rule would accomplish the following:
• Adopt an “economic reality” test to determine a worker’s status as an FLSA employee or an independent contractor. The test considers whether a worker is in business for himself or herself or is economically dependent on an employer for work.
• Identify and explain two “core factors,” specifically the nature and degree of the worker’s control over the work, and the worker’s opportunity for profit or loss based on initiative and/or investment.
• These factors help determine if a worker is economically dependent on someone else’s business or is in business for himself or herself.
• Identify three other factors that may serve as additional guideposts in the analysis: the mount of skill required for the work; the degree of permanence of the working relationship between the worker and the potential employer; and whether the work is part of an integrated unit of production.
OOIDA pointed out that the owner-operator model has provided millions of truckers the opportunity to be true independent contractors and small-business entrepreneurs. At the same time, OOIDA acknowledges that there are many motor carriers that misclassify drivers to take advantage of them.
“The specific details of an owner-operator’s situation can vary greatly from case to case because the trucking industry is incredibly diverse,” OOIDA wrote.
OOIDA said owner-operators with their own authority generally provide a straightforward case of being an independent contractor.
Owner-operators also can choose to lease their equipment to a carrier and operate that equipment under the motor carrier’s authority.
“When done right, traditional lease arrangements offer truckers control over their work and the opportunity for profit or loss,” OOIDA wrote. “When a leased-on owner-operator fits this description, they are in business for themselves and should be classified as an independent contractor.
“There are thousands of truckers who currently fit this model, and any FLSA classification must continue to regard them as independent contractors.”
OOIDA opposes California’s ABC test, which makes it nearly impossible for an owner-operator to be considered an independent contractor. The Association encourages DOL to have a more nuanced approach that allows owner-operators who are in business for themselves to remain independent contractors while protecting truck drivers who are in predatory lease-purchase agreements.
“We support the department’s rejection of the ABC test as adopted in Assembly Bill 5 by California,” OOIDA wrote. “This test is overly broad, unnecessarily restrictive, and could potentially upend the owner-operator business model.”
The Association said that the DOL must take a long look at how the proposal would affect trucking before making a final rule.
“We are concerned that some portions of the department’s notice of proposed rulemaking push true independent owner-operators toward classification as an employee and other aspects of the proposal do not recognize certain conditions under which motor carriers control their drivers and should support an employee determination,” the Association wrote. “Adopting OOIDA’s recommendations to the notice of proposed rulemaking will help provide greater clarity for truckers if the department moves forward with this rulemaking.”