OVERVIEW
On January 9, 2024, the U.S. Department of Labor (“DOL”) issued its Final Rule to provide guidance in determining whether workers should be considered employees or independent contractors under the Fair Labor Standards Act (“FLSA”). Given that the rule goes into effect on March 11, 2024, now is the time to consider its impact on your business, and you may find the DOL’s Small Entity Compliance Guide and FAQ page useful.
COMPARISON TO CALIFORNIA’S AB5
Much has been written about the trucking industry grappling with California’s AB5 and its “ABC Test” (see: here, here, and here). Under the ABC Test, all California-based workers are considered employees unless ALL of the following are true:
- The worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact;
- The worker performs work that is outside the usual course of the hiring entity’s business; and
- The worker is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.
THE NEW DOL RULE
Interestingly, the DOL did not adopt the ABC Test as the Federal standard to determine a worker’s status. Instead, they formulated the (arguably more complicated) “Economic Reality Test” to determine, as a matter of economic reality, whether the workers are not economically dependent on their employer for work and are in business for themselves. According to this new test, following six factors to be considered:
- Opportunity for profit or loss depending on managerial skill;
- Investments by the worker and the potential employer;
- Degree of permanence of the work relationship;
- Nature and degree of control;
- Extent to which the work performed is an integral part of the potential employer’s business; and
- Skill and initiative.
Further details to consider in assessing each factor for your employees can be found here.
THE RUNBUGGY ADVANTAGE
The RunBuggy Marketplace provides you as a shipper with access to over 17,000 qualified motor carriers, without having to worry about whether you are properly classifying your truck drivers as employees or independent contractors.
As a carrier or truck driver, RunBuggy gives you the freedom to run your own business, with access to thousands of loads every day, without having to worry about whether your shipper needs to hire you directly.
DISCLAIMER: This blog post is not intended to and shall not be used as legal advice. You should consult with qualified legal counsel before acting on any of the above information.
