IANA calls out DOL on new independent contractor final rule

Following the issuance of the final rule for determining independent contractor status under the Fair Labor Standards Act by the United States Department of Labor earlier this week, the Intermodal Association of North America (IANA) became the most recent industry organization to express its disdain for the new rule.

DOL explained that this final rule provides guidance on proper classification while also seeking to combat employee misclassification, which it called a serious problem impacting workers’ rights to minimum wage and overtime pay, facilitates wage theft, and allows some employees to undercut their law-abiding competition and also hurt the economy.

And it added that the “guidance provided by the final rule aligns with longstanding judicial precedent on which employers have previously replied to determine a worker’s status as either an employee or independent contractor,” also noting that “the new rule will preserve essential worker rights and provide consistency for entities covered under the Fair Labor Standards Act.”

DOL said that this new final rule restores the multifactor analysis used by courts for decades, which ensures that all relevant factors are analyzed to determine whether a worker is an employee or an independent contractor. It explained that the final rule addresses six factors guiding the analysis of a worker’s relationship with an employer, including: any opportunity for profit or loss a worker might have; the financial stake and nature of any resources a worker has invested in the work; the degree of permanence of the work relationship; the degree of control an employer has over the person’s work; whether the work the person does is essential to the employer’s business; and a factor regarding the worker’s skill and initiative.

The rule rescinds the 2021 Independent Contractor Rule, which determined that independent contractors are not employees under the Fair Labor Standards Act. Under the 2021 Rule, independent contractors were not subject to minimum wage, overtime or recordkeeping requirements.

“Instead of using the ‘core factors’ set forth in the 2021 IC Rule, this final rule returns to a totality-of-the-circumstances analysis of the economic reality test in which the factors do not have a predetermined weight and are considered in view of the economic reality of the whole activity,” the filing said.

The 2021 Independent Contractor Rule was developed under former President Donald Trump. This latest change underscores the differences in labor policies between the former Trump and current Biden administrations.

IANA called the new rule “burdensome,” adding that its requirements significantly limit the use of independent contractors in the trucking industry and threaten to force the reclassification of more than 80% of intermodal drayage drivers that currently enjoy independent contractor status.

IANA President & CEO Joni Casey said in a statement that for decades, the independent contractor business model has been widely favored by intermodal motor carriers and drivers.

“Although employee-driver positions are readily available, these owner-operator drivers explicitly chose the freedom, flexibility, and independence that comes with small business ownership,” said Casey. “By maintaining control over their schedules, opportunities, and business decisions, independent drivers are highly incentivized to provide safe, efficient, and cost-effective services that contribute to our nation’s economic growth

DOL’s final rule would eliminate a worker’s ability to determine their own preferred career path and instead force them to either become an employee or leave their chosen profession—a profession in which they have already heavily invested. Among other things, this investment includes significant safety training and, in many instances, the purchase of a power unit. The rule will have detrimental impacts on the intermodal freight industry; reducing service efficiency and reliability, exacerbating existing workforce shortages, and increasing consumer costs. Already, the trucking industry is experiencing a shortage of qualified drivers. This shortage stands to worsen with the implementation of this rulemaking.”

And the top IANA executive said her organization is concerned about the forthcoming changes that risk the livelihood of its industry’s drivers and the owner-operator business model, which could adversely impact the supply chain and the greater economy, concluding her comments by urging Congress to act swiftly to overturn what she called an ill-conceived rulemaking.

In a LinkedIn post, Adrienne Bailey, partner and head of the North American Rail Team at Oliver Wyman, said that independent Contractors have been a mainstay of the intermodal drayage community and this ruling has the potential to wipe them out.

“Countless drivers have started with one truck and grown a multi-truck enterprise supporting their families and the livelihood of the other drivers who work for them,” wrote Bailey. “It is a story of the American Dream made real for people who want to build something of their own—to work for themselves—set their own parameters. The work these drivers do makes American commerce possible - makes the store shelves in your neighborhood stay full. They operate without the bloat of large corporate overhead—they have the ultimate choice to quit at any time and take a job elsewhere—including working for a large for-Hire trucking company. And yet they don’t—but we want to issue a rule that voids their right to self-determination? How it makes sense to take this option away from people eludes me. Ultimately, we all lose.”