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Biden likely to Reject Proposed Employee Classification Rule

by Punjabi Trucking

Elections have consequences and one consequence for the trucking industry of the recent presidential election is that the incoming Biden administration will most certainly put a stop to a proposed rule which seeks to define whether a worker is an employee or an independent contractor under the Fair Labor Standards Act.

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The proposed rule, announced in September, is in direct response to California’s independent contractor’s law, AB5. AB5 uses the three-pronged ABC test to determine if a worker should be given full employee status or can be treated as independent. It is possible the rule will be finalized before the current administration leaves office.

For trucking, the California law has given companies very little room to maneuver since one of the prongs of the test says an employee is someone who performs a job that is a primary part of the business. 

When a trucking company hires an independent contractor to deliver freight, that worker is engaging in the primary function of the company. It’s not like when a shoe company hires a graphic artist to come up with a sign or advertising campaign.

Instead of the ABC test, the new rule uses four bulleted points to determine worker classification and relies heavily on what it calls an “economic reality” test. The proposed rule says, “The test considers whether a worker is in business for themselves (independent contractor) or is economically dependent on a putative employer for work (employee).”

The new rule identifies and explains “two ‘core factors,’ specifically: the nature and degree of the worker’s control over the work; and the worker’s opportunity for profit or loss based on initiative and/or investment.”

Since Biden is on record supporting AB5 and the ABC test, saying, it provides a “clearer, simpler and stronger” test to classify workers, it is likely he will either seek to delay the rule or rescind it. Biden has the backing of the International Brotherhood of Teamsters who oppose the rule.

In the wake of the recent Georgia Senate runoff elections which have now provided the Democrats with control of the Senate, it is possible that new legislation will make the ABC test not only a state law but also part of a broader federal law. 

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