Federal Independent Contractor Model Up for Further Debate in Congress

With the air of the recently passed AB5 hanging over California like a smog, and with executives from ride-sharing tech giants Uber and Lyft failing to appear at a Congressional hearing over lax safety oversight, lawmakers are turning their focus to independent contractor classification in the country.

Debates in Congress have been spurred on by regulations out west in California where legislation was passed by the State Assembly in May and the state Senate in September, outlining a way to determine the work status of independent contractors, such as truck drivers or ride-sharing drivers.

The hearing, which was overseen by the Highways and Transit subcommittee of the House Transportation and Infrastructure (T&I) Committee in October, honed in on the need for driver background checks for transportation network companies. This has all happened in the wake of homicides and assaults committed by people posing as ride-sharing drivers.

“It’s hard to imagine that Uber and Lyft didn’t actually show up here today – it’s really disrespectful to the committee and a bad play on their part,” said Thomas Suozzi (D-New York).

The Democrat from New York and his Republican colleague from New Jersey, Chris Smith, threw their support of laws requiring enhanced vehicle identification to make it more difficult to impersonate an actual ride-sharing driver.

Beyond addressing public safety issues surrounding independent contractors, whether in ride-sharing or trucking, Congressional members also debated the topic of worker classification, a big issue coming out of California, as mentioned above. The law will go into effect on January 1, 2020, and will lower the threshold in California for classifying a worker as an employee. This is projected to have major cost implications for everyone from ride-sharing companies to freight companies who hire truck drivers on a daily basis.

Certain Congressional members have shown support for the AB5 legislation, detailing its goal of identifying the difference between independent and permanent employees. This will surely have freight companies rethink the way they hire employees and classify them in their truck insurance options. This issue is gaining attention for its effects on Uber and Lyft in a state where ride-sharing arguably got its start or at least its growth.

The debate around whether or not to elevate stricter tests on independent contractor status outside of California, using the state as a jumping-off point, was also brought up with Republicans on the Hill shooting it down and Democrats wanting to push it along.

“I don’t necessarily think that this committee should blindly follow the state of California,” said Pete Stauber (R-Minnesota). My state is much different than the state of California. It’s much more rural, and I think we have to have a broader look at this issue the transportation network companies, and how we can serve not only urban but rural communities.”

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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.

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.