We use cookies to provide you with a better experience. By continuing to browse the site you are agreeing to our use of cookies in accordance with our Cookie Policy.
  • ::COVID-19 COVERAGE::
  • INDUSTRY PRESS ROOM
  • ABOUT
  • CONTACT
  • MEDIA FILE
  • Create Account
  • Sign In
  • Sign Out
  • My Account
Free Newsletters
  • MAGAZINE
    • Current Issue
    • Archives
    • Digital Edition
    • Subscribe
    • Newsletters
    • Mobile Apps
  • TRANSPORTATION
  • MATERIAL HANDLING
  • TECHNOLOGY
  • LIFT TRUCKS
  • PODCAST ETC.
    • Podcast
    • Blogs
      • Analytics & Big Data
      • Best Practices
      • Change Me
      • Empowering Your Performance Edge
      • Logistics Problem Solving
      • One-Off Sound Off
      • Public Sector Logistics
      • Two Sides of the Logistics Coin
      • Submit your blog post
    • Events
    • White Papers
    • Industry Press Room
      • Upload Your News
    • New Products
      • Upload Your Product News
    • Conference Guides
    • Conference Reports
    • Newsletters
    • Mobile Apps
  • DCV-TV
    • DCV-TV 1: News
    • DCV-TV 2: Case Studies
    • DCV-TV 3: Webcasts
    • DCV-TV 4: Viewer Contributed
    • DCV-TV 5: Solution Profiles
    • MODEX 2020
    • Upload Your Video
  • MAGAZINE
    • Current Issue
    • Archives
    • Digital Edition
    • Subscribe
    • Newsletters
    • Mobile Apps
  • TRANSPORTATION
  • MATERIAL HANDLING
  • TECHNOLOGY
  • LIFT TRUCKS
  • PODCAST ETC.
    • Podcast
    • Blogs
      • Analytics & Big Data
      • Best Practices
      • Change Me
      • Empowering Your Performance Edge
      • Logistics Problem Solving
      • One-Off Sound Off
      • Public Sector Logistics
      • Two Sides of the Logistics Coin
      • Submit your blog post
    • Events
    • White Papers
    • Industry Press Room
      • Upload Your News
    • New Products
      • Upload Your Product News
    • Conference Guides
    • Conference Reports
    • Newsletters
    • Mobile Apps
  • DCV-TV
    • DCV-TV 1: News
    • DCV-TV 2: Case Studies
    • DCV-TV 3: Webcasts
    • DCV-TV 4: Viewer Contributed
    • DCV-TV 5: Solution Profiles
    • MODEX 2020
    • Upload Your Video
Home » Labor Department guidance on worker classifications could cast wide net
newsworthy

Labor Department guidance on worker classifications could cast wide net

July 27, 2015
Mark B. Solomon
No Comments

A U.S. Department of Labor position paper recently released on the issue of worker classification could have far-reaching impact on all U.S. industries by effectively making employees out of all U.S. workers, a labor lawyer for a firm with a large transportation practice wrote last week.

At the same time, a partner in the firm's transportation practice counseled clients that the Labor Department paper is not a "death blow" to the independent-contractor model so prevalent in the trucking business. However, the partner, J. Allen Jones III of Benesch, said the new DOL guidance should motivate businesses to focus more intently on contract language that governs their behavior toward contractors.

The 15-page memo, issued July 15 by Dr. David Weil, a Boston University economist and the nation's first permanent wage-and-hour administrator, said that under the Fair Labor Standards Act (FLSA), which governs minimum wage, worker overtime, and child-labor laws, an "economic realities" test should be applied to determine whether a worker is an employee or a contractor. Most legal rulings to determine worker classification generally center on the degree of control a company exercises over a worker.

Weil's opinion, which is designed to guide labor-law interpretation and is not binding, said the "economic realities" test would consider a worker to be an employee if the worker is economically dependent on the company. By contrast, a worker is a contractor if that worker is in business for himself or herself, according to the memo. The document listed six factors to guide the determination. Among them is to what extent the work performed is integral to the employer's business, whether the worker's opportunity for profit or loss depends on managerial acumen, and the extent of the investments made by the company and the worker. Included on the list is the degree of control held by the company over the worker.

Business interests, and the attorneys that support them, said the memo could make it harder for companies to prove that workers are independent contractors and not employees. They believe that it is part of an Obama-administration strategy to undermine the classification of workers as independent contractors. The Internal Revenue Service (IRS) and state tax agencies are keenly interested in the issue as they know worker reclassifications would mean more income in their coffers; they are looking for more payroll-tax income. The IRS is active in employee reclassification efforts; as employees, workers would be unable to employ the same sorts of tax-avoidance tactics that are abundantly available to them as contractors.

Rick Hepp, an associate with Cleveland-based Benesch's labor and employment practice group, said Weil's memo makes it clear that, in DOL's eyes, most U.S. workers should be classified as employees and not contractors. The memo's language interprets the FLSA's definition of employment so broadly that "almost every worker in the United States will be considered an employee," Hepp wrote in a note last week.

A key byproduct of the memo's language is that employee classification could be determined by the level of economic dependence a worker has on the employer, not on an analysis of the worker's status. The memo also breaks new ground in employee classification by establishing a set of factors to determine if a worker is an employee or a contractor, rather than relying on the singular "control" issue, Hepp wrote. He advised firms that use independent contractors to ensure their business models align with the new interpretation.

However, Jones said that companies don't need to alter their models as a result of the memo. The memo only provides guidance and does not have the force of law, he wrote in a separate note. "For the majority of mainstream trucking companies, the memo poses no new challenge," Jones wrote, adding that it might result in heightened scrutiny of the parcel segment, which has experienced recent adverse court rulings over the issue. "At the very least, the memo calls for increased awareness of the 'do's and don'ts' when operating with independent contractors/owner-operators," Jones wrote.

Any change in the Labor Department's interpretation of employee-classification issues would be of paramount importance to transport and logistics companies, notably truckload carriers and parcel companies. It is believed that about 30 percent of all independent owner-operated truckers are engaged in long-term agreements with big motor carriers.

In the parcel industry, FedEx Ground, the ground and home-delivery unit of Memphis-based FedEx Corp., has seen its long-time use of independent, contracted drivers challenged in recent years. In June, the unit agreed to pay $228 million to settle claims by about 2,300 drivers in California that the company improperly classified them as independent contractors and not company employees while they drove for the unit from 2000 to 2007. In early July, the Seventh Circuit Court of Appeals upheld a Kansas Supreme Court ruling that 479 FedEx Ground drivers were employees and not contractors.

Transportation Regulation/Government
KEYWORDS Benesch FedEx
  • Related Articles

    Labor Department withdraws informal 2015 guidance on role of independent contractors

    Federal judge blocks implementation of Labor Department's overtime-pay rule

    Labor's Day: Appeals court panel's ruling in FedEx case could change rules of the game

Marksolomon
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.

Recent Articles by Mark Solomon

Coming together for road safety: interview with Joshua Girard

Off the rails

Freight rate spikes shaking up the C-suite

You must login or register in order to post a comment.

Report Abusive Comment

Most Popular Articles

  • IBM survey says digitalization trends will sweep trucking industry by 2030

  • Gartner survey signals increased investment in resilience over the next two years

  • What Level of Automation is Right for Your Warehouse?

  • Growing up … and up and up: interview with Sam Bertram

  • Old Dominion adds nine freight service centers to handle business growth

Now Playing on DCV-TV

D92f0dd1 a98c 434a 9e17 30b63ee72c90

Automated Pack-out and Print-Apply System for thredUP

DCV-TV 4: Viewer Contributed
SilMan Industries designed and implemented a mixed polybag-carton system, including automated print and apply, in a new regional Fulfillment Center for thredUP, one of the world’s largest online resale platforms for women’s and kids’ apparel, shoes, and accessories. The Situation Secondhand clothing and online...

FEATURED WHITE PAPERS

  • Time to rethink your lift truck power

  • Warehouse Management System Project Toolkit

  • Solving Talent Management Challenges Now and In the Future

  • Shaping Up Last Mile Delivery to Surpass Customer Expectations

View More

Subscribe to DC Velocity Magazine

GET YOUR FREE SUBSCRIPTION
  • SUBSCRIBE
  • NEWSLETTERS
  • ADVERTISING
  • CUSTOMER CARE
  • CONTACT
  • ABOUT
  • STAFF
  • PRIVACY POLICY

Copyright ©2021. All Rights ReservedDesign, CMS, Hosting & Web Development :: ePublishing