National Labor Relations Board Proposed New Rule Could Increase Liability for Carriers Using Independent Contractors Fleet Owners

The NLRB has issued a notice of proposed rulemaking that would make it easier for workers to claim joint employment, reversing a February 2020 rule that made it more difficult for workers to make such a claim. 

The current rule states that employees could only claim to be employed by companies holding “substantial, direct and immediate control” over their employment. The proposal would loosen that standard to include employers that exercised such control over essential terms and conditions “directly or indirectly.”

Under the proposed rule, two or more employers would be considered joint employers if they “share or codetermine those matters governing employees’ essential terms and conditions of employment”, such as wages, benefits and other compensation, work and scheduling, hiring and discharge, workplace health and safety, supervision, and work rules.

The NLRB proposal, therefore, would make it easier for employees of contractors or staffing firms. In announcing the proposal, NLRB said the proposal would ground the joint-employer standard in established common-law agency principles consistent with board precedent and guidance from the U.S. Court of Appeals for the District of Columbia Circuit.

Under the new proposed NLRB’s rule, companies across industries could be held responsible for their contractor’s violation of labor laws. The proposed rule could have a far-reaching effect on franchisees, agents of all types and in particular fleets and owner operators which employ their own drivers and in turn lease their equipment with drivers to licensed carriers under the truth in leasing regulations.

The proposed “Co-Employer” rule could be used to facilitate collective bargaining and eliminate any barrier to tagging mega carriers with employee taxes and benefits in the event their independent contractors fail to comply or otherwise default.

Unfortunately, this new proposed rule tracks other pending administrative actions before the Department of Labor which evidence a partisan agenda that affects the opportunities currently available to small businessmen, and in our industry, owner operators in particular. The American Transportation Research Institute’s recent studies show an overwhelming preference of independent contractors for the freedom of dispatch and entrepreneurial opportunities the independent contractors model provides.

As noted, before, trucking is a unique industry which has traditionally enjoyed a carve-out for independent contractors under federal regulations. Changes in labor laws could de-incentivize entrepreneurial opportunities and result in less, not more, trucks and drivers, as the ATRI study suggests. Under the administrative process, small businesses have the opportunity to be heard and must be considered in promulgating and new rule. Now, before the mid-term elections, is the time for the industry to make clear to regulators that eliminating the independent contractor model and facilitating collective bargaining is against public policy and will exacerbate, not facilitate, the recruitment of more drivers. 

Independent Contractor Audits

Recent developments at the National Labor Relations Board (NLRB) and the U.S. Department of Labor’s Wage and Hour Division (DOL) could make it more difficult for businesses to classify workers as independent contractors. On January 6, the NLRB and the DOL announced that they entered a Memorandum of Understanding which provides for and encourages interagency cooperation through “information sharing, joint investigations and enforcement activity, training, education, and outreach.” In a separate press release, the NLRB stated that the Memorandum of Understanding “will allow for better enforcement against misclassification of workers as independent contractors.”

Businesses that use independent contractor work would do well to pay attention to the news out of Washington, D.C., because on Oct. 11, the U.S. Department of Labor (DOL) announced its long-awaited proposed rule on contractor classification. The proposed rule would impose a six-factor “economic reality test,” with all the factors equally weighted. The six-factor test would look broadly at the “totality of the circumstances” to determine whether a worker is an independent contractor or employee under the Fair Labor Standards Act (FLSA).

According to the DOL press release, the proposed rule provides a framework more consistent with existing judicial precedent than the current rule, which was promulgated by the prior administration. Indeed, the proposed rule expressly rescinds the currently applicable rule. The public has 45 days to comment on the proposed rule once it is printed in the Federal Register on Oct. 13.