Labor Department withdraws informal 2015 guidance on role of independent contractors

The Department of Labor (DOL) has withdrawn an informal interpretation of labor law issued in 2015 that trucking interests feared at the time could result in owner-operator drivers being classified as employees rather than independent contractors.

The agency's Wednesday decision, a copy of which was provided to DC Velocity (it has since been removed from the DOL web site) does not detail the reasons for its action. The agency said its decision does not relieve employers of their obligations under the Fair Labor Standards Act (FLSA), the law that governs minimum wage, worker overtime, and child labor laws.

In July 2015, Dr. David Weil, a Boston University economist and the nation's first permanent wage-and-hour administrator, wrote in the first of a series of memos that a six-step "economic realities" test should be applied to determine whether a worker is an employee or a contractor. In his non-binding opinion, Weil said the 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 2015 Weil memo.

The document went on to list six factors to guide the determination. However, rulings determining worker classification typically revolve around the degree of control a company exercises over a worker. The legal rule of thumb during President Barack Obama's administration was that a worker was an employee if he rendered services exclusively for one company.

Business interests have said that the memos, though not carrying the force of law, still could have made it more difficult for companies to prove that workers were independent contractors and not employees. They believed at the time that it was part of an Obama administration strategy to undermine the classification of workers as independent contractors.

Trucking executives and their attorneys have a keen interest in the issue, since an estimated 30 percent of driver contractors work almost exclusively with one carrier under long-term agreements. Gregory M. Feary, partner in Scopelitis, Garvin, Light, Hanson, & Feary, a transport law firm, wrote in a note that the DOL's action is a "welcome departure" from the views outlined in the Weil memos because it "signals less emphasis on the singular issue of exclusivity in the relationship between an independent contractor and transportation company, which appeared to be the cornerstone of the administrator's interpretations."

However, Geary cautioned that the industry needs to remain "vigilant in both actual practices and documentation"—especially when it comes to contract language governing their behavior toward contractors—to sustain contractor relationships that will pass legal muster.