“May you live in interesting times,” is the old (probably mythical) Chinese curse. Any owner-operator, and anyone who utilizes the services of O/Os in their business, knows that these times are indeed “interesting.”
First, California adopted Assembly Bill 5 (AB5) in 2019, establishing the “ABC” test as that state’s standard in determining employee status. And on Oct. 13 of this year, the U.S. Department of Labor (DOL) issued a Notice of Proposed Rulemaking (NPRM) to potentially place a new federal classification of employees and independent contractors into regulation – a standard that is explicitly not the “ABC” test but which may prove troublesome, nonetheless.
For owner-operators, the perils of the “ABC” test are well known. The “B” prong of that test looks at whether the worker engages in the usual course of business at a company. If so, that worker is likely an employee. For an owner-operator offering truck driving services to a motor carrier, courts would find it difficult to distinguish the role of the owner-operator from the basic function of the fleet.
A court injunction delayed enforcement of California’s AB5 until earlier this year. The U.S. Supreme Court declined to hear a challenge by the California Trucking Association in June, allowing the state to begin enforcement. The case will now go to trial on its merits at the district court level. It is unknown whether California will seek to apply AB5 to those owner-operators associated with out-of-state fleets who happen to operate in the state.
California trucking fleets and owner-operators are weighing several approaches to avoid the impact of AB5, from pure brokerages, to so-called “two-check” solutions where motor carriers separately retain drivers and their equipment, to limiting the use of owner operators in California. Undoubtedly, litigation will help determine what can be done.
Past court rulings bar the U.S. Department of Labor from directly adopting the “ABC” test. Still, the DOL asserts that “employee misclassification”:
“… denies workers’ rights and protections under federal labor standards, promotes wage theft, allows certain employers to gain an unfair advantage over law-abiding businesses, and hurts the economy at large.”
DOL has identified trucking as one of the industries in which employee misclassification impacts workers.
In its 184-page NPRM, the DOL proposes a multi-factor economic realities test that weighs six factors in determining whether a worker is an employee or an independent contractor (owner-operator). The NPRM proposes that employers weigh all six factors equally. This approach abandons the emphasis placed by the previous Administration on two “core” factors – the nature and degree of control over the work and the worker’s opportunity for profit or loss – which often favor independent contractors.
The latest proposal would consider such company standards as worker compliance with laws, rules, safety regulations, and customer requirements as evidence of employer “control,” even though many of those items are not directly created or imposed by the employer itself.
Comments on the Department of Labor’s NPRM are due by Nov. 28, 2022.
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