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Dive Brief:
- In the rulemaking hotly debated by the trucking industry, the Labor Department plans to change how it handles an economic reality test developed by the Supreme Court, regulators said.
- The rule repeals the Independent Contractor Rule of 2021, which determined that independent contractors are not employees under the Fair Labor Standards Act and are not subject to minimum wage, overtime, or recordkeeping requirements, under regulatory filing.
- “Rather than using the “key factors” set forth in the 2021 IC rule, this final rule reverts to a total-circumstances analysis of the economic reality test in which the factors are not given a predetermined weight and are considered in view of the economic reality of the entire activity “, the filing states.
Dive Insight:
The Independent Contractor Rule of 2021 was developed under former President Donald Trump, and the change underscored the difference in labor policies between the former and current administrations.
“Contrary to previous guidance and contrary to case law, the 2021 IC rule defined two of the five factors — the nature and degree of control over the worker’s work and opportunity for profit or loss — as “key factors” that should be given greater weight in the analysis,” regulators said in the filing.
The the new rule notes six factors involved in the classification, according to a press release:
- employee’s opportunity for profit or loss
- economic share and nature of resources invested by an employee
- degree of permanence of the employment relationship
- degree of control an employer has over work
- if the work is essential to the employer’s business
- employee skills and initiative
“The Department believes this approach is the most beneficial because it is aligned with the Department’s decades-long approach (prior to the 2021 IC Rule) as well as federal appellate case law, and is more consistent with the text and purpose law’s. interpreted by the courts,” regulators said in the filing.
The rule brings projections of California’s ongoing controversy over AB5 and its impact on independent contractors in the trucking industry. Jessica Looman, administrator of the DOL’s Wage and Hour Division, said the final rule does not adopt an “ABC” test, a framework that jurisdictions including California have adopted in order to determine independent contractor status.
The filing was revealed on Tuesday an “unpublished” versionwill take effect 60 days after it is officially published in the Federal Register, scheduled for Wednesday.
A precursor to the final rule, a notice of proposed rulemaking, disclosed the 2022 shift and created over 54,000 commentsdrawing opposition from the American Trucking Associations and the Trucking Association.
ATA followed up on that rebuke on Tuesday. President and CEO Chris Spear said the Biden administration “has chosen to replace a clear and simple standard with a confusing mess” that will weaken the nation’s workforce.
HR Dive senior reporter Ryan Golden contributed to this report.