On January 10, the U.S. Department of Labor (DOL) published its final rule (the 2024 Rule) for determining employee or independent contractor status under the Fair Labor Standards Act (FLSA). In so doing, the DOL repealed and replaced the rule promulgated for similar purposes by the Trump administration in early 2021 (the 2021 Rule). A federal district court held an earlier attempt to repeal the 2021 Rule was unlawful and reinstated that rule. The same organizations (and having added others, including the American Trucking Associations) that prevailed in the challenge to the repeal have challenged the 2024 Rule, as have other lawsuits filed in federal courts in Georgia and Louisiana.

As compared to its 2021 predecessor, the 2024 Rule provides far less clarity and certainty, and suggests an increased likelihood for an employee status determination. It analyzes the totality of the circumstances guided by six enumerated factors: (1) opportunity for profit or loss depending on managerial skill; (2) investments by the worker and the potential employer; (3) degree of the permanence of the work relationship; (4) nature and degree of control; (5) whether the work performed is an integral part of the potential employer’s business; and (6) skill and initiative. In contrast, the 2021 Rule included an investment within the opportunity for profit or loss factor and provided that if two factors – control and opportunity for profit or loss – weigh in favor of the same worker status, that would generally end the inquiry. Additionally, the 2024 Rule directs consideration of contractual rights – even if unexercised – as well as actual practices; whereas the 2021 Rule focused on actual practices.

There were, however, some incremental improvements from the originally proposed 2024 Rule. For example, the proposed rule suggested that investment in tools to perform a job would not count as a factor, but the final rule’s commentary notes that trucks purchased for a business purpose would be considered investments indicating independent contractor status. As proposed, compliance with laws, safety standards, and customer requirements could be considered control indicative of employee status; however, as finalized, compliance with specific laws would not be considered control. This notwithstanding, the rule left open the possibility that requiring compliance with safety best practices and customer requirements would indicate employer-like control. This poses numerous difficult challenges for transportation entities, where customer demands for on-time delivery and safe operations are ever-present.

The 2024 Rule poses a number of other challenges for a highly regulated industry, like trucking. The 2024 Rule will govern the DOL’s enforcement of the FLSA, but it is less clear to what extent it will influence federal courts that have been interpreting the FLSA for decades. The FLSA, which governs minimum wage and overtime at the federal level, may not be a law high on the U.S. DOL’s enforcement agenda with respect to interstate trucking, because of the motor carrier exemption from overtime (for vehicles over 10,000 lbs. GVWR) and the current $7.25/hr. federal minimum wage. Nevertheless, the 2024 Rule might be used in some state actions to help persuade judges to find employment status.

The effective date of the 2024 Rule, barring a court granting an injunction, was March 11. Although the 2024 Rule does not end the independent contractor model in transportation, it highlights the need for motor carriers to review their practices and contracts.