Why independent contractor rules matter for trucking

Contractor importance varies by sector

The importance of independent drivers depends on the market. For some sectors, independent contractors are a major component of the driver workforce.

The Truckload Carriers Association pays close attention to carrier-contractor relationships and maintains a policy committee on independent contractor practices.

“Many of our members are using independent contractors to their fullest extent, improving their businesses, and we want to encourage that,” David Heller, SVP of safety and government affairs for TCA, told FleetOwner. “We pride ourselves on saying our carrier members are using this relationship the right way and the way it’s designed to be used.”

The issue is also important for OOIDA and its members.

“A large portion of our membership is made up of independent contractors, so it’s something that is very important for our members and something we’ve been tracking very closely,” Bryce Mongeon, director of legislative affairs for OOIDA, said.

For other sectors, like the National Private Truck Council, contractor classification is less relevant.

“Fewer than 10% of NPTC members use owner-operators who would be considered independent contractor drivers,” Rick Schweitzer, legal counsel for NPTC, told FleetOwner. “Of those 10% or fewer companies, I’m sure it’s a minority of their drivers who would be considered independent contractors to begin with, so this is a relatively minor issue for them.”

The classification affects several laws

The contentious rulemakings behind independent contractor classification only deal with one law: the Federal Labor Standards Act. The law has little relevance for truck drivers. However, the classification brings repercussions for several other laws.

How FLSA applies to drivers

At its most basic level, the classification at issue decides whether a worker can receive FLSA protections as an employee.

“It is an interpretation of the standard used for who will be considered an employee under the Fair Labor Standards Act,” Schweitzer explained.

FLSA protections are important for most of the U.S. workforce; the law regulates overtime, minimum wage, recordkeeping, and child labor. Under the law, independent contractors do not receive FLSA protections, while employees do.

However, truck drivers have a lot of exemptions to the law. Unique rules apply to drivers’ overtime limits and age requirements. Minimum wage is the most relevant FLSA provision for drivers.

But even minimum wage may not be very relevant, as Scopelitis’s president and managing partner Greg Feary said earlier this year. Feary said most motor carriers already pay above the $7.25 per hour federal minimum wage.

Feary suggested that, because of its small potential impact, the independent contractor rule will not see much enforcement in the truckload sector. FLSA protections would have little effect on drivers’ careers.

“My point is, even though the Department of Labor has 10,000 enforcement officers, do you expend resources on an industry that the juice isn't really worth the squeeze? So we'll see,” Feary said at the Truckload Carrier Association’s annual conference. “I think the smaller-vehicle courier industry, with a little different dynamic, is probably a little bit more worried.”

On the other hand, some of the most scandalous case studies of worker misclassification concern the trucking industry—particularly port operations.

Repercussions for other laws

FLSA is far from the only regulation that distinguishes between independent contractors and employees.

The classification matters for a heap of other acronyms, including NLRA, FUTA, FICA, FMLA, OSHA, and ACA. Each organization in charge of executing those laws has its own classification guidance. And that is only at the federal level. State laws further complicate the issue.

An employer could hypothetically use separate classifications for separate laws—but that rarely happens.

“I don’t think that many, if any, employers are going to have employees for purposes of FLSA and then classify them as contractors for other acts,” Mehrens said. “The analysis gets really messy to try and do that.”

The Department of Labor recognized that its rulemaking would likely affect all other contractor classifications.

“Although this rule only addresses whether a worker is an employee or an independent contractor under the FLSA, the Department assumes in this analysis that employers are likely to keep the status of most workers the same across all benefits and requirements, included for tax purposes,” the DOL said in its latest rule.

The independent contractor rule could therefore promote much more than a minimum wage; it has a ripple effect across unionization, inward facing cameras, taxation, workplace safety, unemployment, insurance, time off, sick days, and much more.

A cost difference between employees and contractors

There is a cumulative cost to all these classifications. The regulations make for an expensive distinction. An employee can cost 30% more than an independent contractor, as economist Robert Habans writes.

However, in his research, Habans also found that the cost disparity for trucking was the opposite. Employee drivers may cost 3% less than independent contractors, without consideration for some related costs such as human resources.