A group of Louisiana trucking firms and a moving and storage company are challenging the U.S. Department of Labor (DOL) on a new rule that changed how independent contractors are classified . The trucking industry has shared concerns that the rule could necessitate reclassifying independent drivers as employees, thus escalating costs and reducing driver autonomy.
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In February, Frisard’s Transportation first filed a lawsuit in the U.S. District Court for the Eastern District of Louisiana against the DOL, arguing that the new rule “strips businesses like Frisard’s of certainty” and threatens its business operations that is wholly reliant on contractors.
Fellow trucking companies A&B Group, Triple G Express and the Louisiana Motor Transport Association, as well as Northlake Moving and Storage, all joined the lawsuit in March. Almost immediately after, the plaintiffs requested a preliminary injunction from the district court to stop the new ruling from going into effect, but the injunction was swiftly denied.
In response, the plaintiffs filed an appeal with the Fifth Circuit Court of Appeals on April 8, asking that it override the lower court and issue the injunction.
On July 3, Louisiana district court Judge Eldon Fallon ordered a stay on any other proceedings in the case at the lower-court level until the Fifth Circuit rules on the injunction.
While the case is currently in limbo, the application of the new independent contractor ruling could have major impacts on how a company like Frisard’s functions as an employer.
Frisard’s contracts with more than 30 owner-operated independent drivers who own their own trucks and manage their own schedules. The company only works with independent owner-operators to make deliveries and employs no in-house drivers.
According to the suit, the lead plaintiff says the use of independent owner-operators is beneficial to the company, which can operate more efficiently and reduce excess costs under the business model. Additionally, it alleges the contractors gain more autonomy and the opportunity to derive greater profits.
Acting Labor Secretary Julie Su and the DOL’s Wage and Hour Division Administrator Jessica Looman were also named in the suit.
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The independent contractor regulation, which officially went into effect in March after final wording was announced in January, has been criticized by lobbying groups including the American Trucking Associations (ATA) , the National Retail Federation (NRF) and the U.S. Chamber of Commerce. The ATA referred to the ruling as an “opaque and deliberately confusing standard designed to fuel frivolous litigation.”
Under the 2024 update, the regulation outlines a six-element test to determine whether a worker should be classified as an employee protected by the Fair Labor Standards Act.
There are six factors identified by the new rule including: the workers’ opportunity for profit or loss depending on managerial skill; investments made by the worker and employer; the degree of permanence of the work relationship; the nature and decree of businesses control over the worker; the extent to which work performed is an integral part of the potential employer’s business; and whether the worker uses specialized skills in performing the work.
Frisard’s argued that the agency’s 2021 rule, which focuses on two factors rather than six, is clearer and should be restored. The two factors include the nature and degree of worker’s control over work and the worker’s opportunity for profit or loss.
The trucking company said in the lawsuit that the 2024 ruling “replaces the previous rule’s objective factors with an open-ended balancing test inconsistent with the Fair Labor Standards Act and U.S. Supreme Court and Fifth Circuit precedent.”
Although Frisard’s and its fellow transportation providers are fully against the March ruling, labor rights groups and unions including Gig Workers Rising, the National Employment Law Project (NELP), PowerSwitch Action, the Service Employees International Union (SEIU) and Temp Worker Justice are in favor of the changes it brings to the employer-worker dynamic.
Many of these organizations argue that a ruling that classifies more independent contractors as employees is more beneficial to the worker.
“Employees have a right to a minimum wage and overtime, the right to a discrimination-free and harassment-free workplace, the right to join a union and collectively bargain and the right to a safe and healthy workplace,” NELP said in a post on its website when the ruling was first announced in January. “Employees also have workers’ compensation and unemployment insurance. ICs lack these bedrock rights and protections.”
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