Update on DOL’s Final Rule on Independent Contractor Classification

On Jan. 9, 2024, the U.S. Department of Labor’s (DOL) Wage and Hour Division announced its final rule. Employee or Independent Contractor Classification. The announcement marks the end of a rulemaking process that started with the DOL’s Oct. 22 notice of proposed rulemaking (NPRM) on workers classification under the Fair Labor Standards Act (FLSA) Officials received more than 55,000 public comments in response to the NPRM. The new rule replaces a 2021 policy issued by the Trump administration and is based off an administrative interpretation issued by the DOL under the Obama administration. Like the NPRM, the final rule preserves the use of an “economic realities” test that analyzes an employee’s classification through the totality of the circumstances of the worker-employer relationship.

EMA is concerned with the final rule as its member companies’ contract with common carriers to haul motor fuels. Typically, the energy marketer has engaged a company to pull and deliver products, as well as manage automatic fuel deliveries, and this arrangement should not be problematic. Where there could be some pause is if the common carrier uses independent operators as drivers. This is one area where the DOL rule would come into play. The likelihood is that hauling costs would go up if the independent operators working with the common carrier are now considered employees. Additionally, if an EMA member company uses an independent operator to deliver fuels or packaged goods (e.g., lubricants) for the company, including using the EMA members’ trucks, they are also likely to be captured by the DOL final rule. Outside of transportation, there are issues under the DOL rule where the energy marketer uses independent contractors for sales or other non-transportation roles (e.g., accounting or environmental compliance). “The bottom line is that this Rule will likely lead to higher consumer costs at the pump,” said EMA President Rob Underwood.

The DOL’s initial attempt to withdraw the Trump-era rule was stalled after a federal judge found that the DOL violated the Administrative Procedure Act (APA) by failing to properly seek comment or consider policy alternative before delaying and revoking the rule. The new rule was published in the Federal Register on Jan. 10, and it will go into effect on March 11.

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