Update: The NLRB Returns to its Independent Contractor Standard

On January 25, the National Labor Relations Board returned to its long-standing independent-contractor standard, which reaffirms the Board’s adherence to the traditional common-law test. The main rollout from this is that the Board described clearly the significance that entrepreneurial opportunity has in its determination of independent-contractor status.

The Obama-era standard decided whether workers are employees protected by federal labor law or independent contractors who are not, which in turn gave a boost to companies that prefer to use contract labor. This has the opportunity to disrupt everything from how companies hire workers to get their jobs done to how independent contractors look into commercial truck insurance. Read on to get more information on this ruling.

Independent Workforce

The legal test for employment status properly accounts for workers’ entrepreneurial opportunity for economic gain. This was limited severely back in 2014 due to a ruling that involved FedEx Corp. Members from the NLRB, appointed by the new administration in the White House, pointed this out in their case to return to the old standard.

Many freight companies, for instance, use independent contractors in part to avoid the expense and legal liability that comes with hiring full-time, permanent employees on their payroll. The ruling gives implications for a range of businesses, including ride-hailing companies (think Uber and Lyft), which rely on drivers who are independent contractors and not official employees of the company itself.

According to the U.S. Labor Department, nearly 7 percent of the American workforce counts as independent contractors (around 10.6 million workers), a number that is projected to rise in the coming years as the gig economy grows.

While the ruling has been debated for a number of years, this overturn was sparked by a case regarding a shuttle-van accident at the Dallas-Fort Worth Airport which ended in injuries caused by the driver. This prompted the NLRB to change its legal standard for employment status, stating that the franchisees aren’t employees under the National Labor Relations Act and therefore fall outside of the coverage that law provides.

Only employees are covered by the NLRB, which provides the right to unionize and engage in collective bargaining.

Entrepreneurial Opportunity

The NLRB set forth a legal outline that blends an analysis under the common law with an examination of what entrepreneurial opportunity is. The ruling from the NLRB uses a common-law test drawn from the 1958 version of the Restatement of Agency; this was a legal treatise that states 10 non-exhaustive factors to determine whether a worker is an independent contractor or employee. Those factors that are outlined include the level of control a business exercises over a worker as well as the method of payment and the amount of autonomy they are allowed in their role.

The board states that it can “evaluate the common-law factors through the prism of entrepreneurial opportunity when the specific factual circumstances of the case make such an evaluation appropriate.”

During the Obama-era ruling, the board at that time changed the traditional test for independent contractors by underplaying the importance of entrepreneurial opportunity. It also highlighted workers’ economic dependency on companies, but this was overruled in 2017 when the U.S. Court of Appeals for the District of Columbia Circuit pointed out the importance of considering entrepreneurial opportunity.

About Western Truck Insurance Services

Western Truck Insurance Services is a commercial truck insurance agency with roots dating back to 1954. We have evolved into a highly respected, professionally managed, truck and transportation insurance brokerage. The hallmark of our organization is our desire to provide unparalleled service. We go way beyond what you expect to receive from an insurance brokerage. Equipped with state of the art automation, Western Truck Insurance can provide you with lightning fast truck insurance quotes, customer service, Insurance certificates and coverage changes.

Trucking News: What’s the Status on Owner-Operators in California?

Currently there are competing bills in California state legislature that are aiming to address an April 2018 ruling by the state’s Supreme Court that has threatened the traditional owner-operator model within the state. The bills are pointing to trucking groups wanting to upend years of law used to decide if a worker is an employee or an independent contractor.

Independent contractors make up a large portion of the transportation industry workforce in California. These independent contractors are mostly truck driver owner-operators and the major concern has to do with benefits truck drivers feel they are owed as well as being determined full-on employees.

The Ruling

On April 30 of 2018, the class action lawsuit produced an “ABC test,” or an assessment designed to strictly outline who can be classified as a contractor within the state. This will not only effect truck drivers, but virtually all who work in the growing gig economy (think delivery drivers, ride-sharing employees, etc.). The new standardized testing determines that a worker is an employee under the wage orders unless the hiring company establishes all three of these factors:

  • The worker is free from the control and direction of the hirer in connection with the performance of the work
  • The worker executes work outside the usual course of the hiring entity’s business
  • The worker is engaged in an independently established trade of the same nature as the work performed for the hiring entity

Essentially, the test assumes almost all workers are employees and eligible for the wide protections of California wage laws including overtime pay, meal breaks and minimum wage.

Another benefit workers are vying for are insurance options. From dental to medical, independent contractors are looking for the right coverage, especially given the dangerous nature of the trucking business. And while this is something that is still being volleyed back and forth by the court system in California, trucking companies can invest in commercial truck insurance to provide their own protection.

Having commercial truck insurance will help provide trucking companies with the protection needed to financially safeguarded against injuries drivers sustain on the job.

Gaining Opposition

The Western States Trucking Association has been looking at the idea of legality of the entire trucking industry in the state. The association pushed for a lawsuit filed earlier this past year against California over potential enforcement of the new ruling.

Western States has argued that the ruling violates federal law governing interstate transportation. The group is hoping for a long-term solution to the issue, to push the state legislature to act and correct the court’s decision to require testing.

The California Chamber of Commerce is also working to limit the effect of the ruling, especially since some of its members include trucking companies. The chamber has put together rallies at the state capital in Sacramento supporting workers’ right to choose to operate as independent contractors. Some motor carriers are considering changes to their operations after the ruling as well by turning over hiring to a brokerage firm for example.

About Western Truck Insurance Services

Western Truck Insurance Services is a commercial truck insurance agency with roots dating back to 1954. We have evolved into a highly respected, professionally managed, truck and transportation insurance brokerage. The hallmark of our organization is our desire to provide unparalleled service. We go way beyond what you expect to receive from an insurance brokerage. Equipped with state of the art automation, Western Truck Insurance can provide you with lightning fast truck insurance quotes, customer service, Insurance certificates and coverage changes.