More than 65 million workers in the U.S. are classified as independent contractors. Their ranks will shrink if a new rule from the Department of Labor is allowed to take effect on March 11 (as is the case at press time). Such a move would greatly harm supply chain operations by raising costs and reducing the flexibility to easily scale operations to meet demand. It would also drive many current independent drivers out of the market.
Trying to determine who is and isn’t an independent contractor has always been tougher than solving a Sherlock Holmes mystery. The Labor Department offers a few tests based on who owns the equipment (such as trucks) and who determines how the work should be performed. But this has always been a gray area when it comes to logistics, as there tends to be a lot of overlap between the work done by employees and work done by the contractors that execute many of the required handoffs as shipments move through the supply chain.
To make matters worse, the new rule implements a new six-factor test that opponents say will make such determinations more confusing and make it harder for employers to classify workers as independent contractors.
Granted, there are workers who are currently considered contractors but should rightfully be considered employees, with benefits like insurance and workers’ compensation. Some companies classify them as contractors simply to save on these expenses.
But there are also workers who actually prefer to be independent contractors. They own their equipment and want the freedom of being their own boss. One study I saw showed that 84% of independent contractors say they are happier working on their own, while only 10% said they are independent only because they cannot find suitable work from an employer.
Altering how these workers are classified will affect supply chains and how they operate, especially in trucking, where independent contractors handle much of the hauling and most of the drayage. It’s no wonder that a formidable array of industry groups has lined up in opposition to the new directive, including the American Trucking Associations, the Customized Logistics and Delivery Association, the National Association of Wholesaler-Distributors, the National Retail Federation, and the Intermodal Association of North America.
Another group that has joined the opposition—and the one whose members may be most affected by such changes—is the Owner-Operator Independent Drivers Association. Why do they oppose the new rule? Maybe it’s because, as their name implies, they want to remain independent.
Opponents plan to go to court to block the new rules, something that may have already happened by the time you read this. However, organized labor and others have long wanted to see more independents classified as employees even if it’s against their will. I believe that this is a fight that will likely continue for years to come.
