The trucking industry faces numerous regulatory challenges as it conducts daily operations to move cargo across the country. Many of these regulations are designed to establish safety standards, while others focus on employment-related aspects of the transportation sector. During the Trump Administration, rules governing worker classifications were adopted; under the new Biden Administration, two of these rules may be reversed. Just as trucking insurance protects transportation companies against certain operational and liability risks, understanding the ramifications of the rule reversal can help protect truckers from expensive penalties.
U.S. Department of Labor Rules
Published in the Federal Register at the end of the Trump Administration, the U.S. Department of Labor (DOL) created two new rules governing worker classifications. The two rules are:
- The Joint Employer Rule – governing joint employer status when an employee works for an individual employer but his/her work also benefits another individual or entity.
- The Independent Contractor Rule – determining when an employee can be classified as an independent contractor.
Both of the Trump-era rules fall under the Fair Labor Standards Act, which is one of the primary employment practices laws in the United States. These two rules are important to the trucking sector because many truck drivers fall into certain employee classification categories, such as truckers working jointly for two or more entities or who are owner/operators who contract independently with other companies such as freight forwarders or cargo brokers. Classification of employees may necessitate additional or revised coverages by trucking insurance, which can mean unexpected costs for trucking companies.
The Joint Employer Rule
In January 2020, the DOL issued the Joint Employer Rule, which went into effect two months later in March. Immediately, the validity of the rule was challenged by state attorneys general, and the U.S. District Court for the Southern District of New York invalidated much of the rule in September 2020. The District Court’s decision is currently under appeal.
The Biden Administration has moved to rescind the rule, arguing that it goes against both the Fair Labor Standards Act (FLSA) and the DOL’s prior guidance on joint employer classifications. In April 2021, public comment on the proposed rule reversal closed. It is unclear whether the District Court decision and subsequent appeal will affect the rule’s future.
The Independent Contractor Rule
January 2021 saw the publication of another Trump-supported DOL rule, this time one that would reclassify certain employees as independent contractors. The rule was supposed to take effect at the beginning of March 2021. Within hours of Biden’s inauguration in January, the White House Chief of Staff Ron Klain issued a memorandum freezing pending regulatory actions until March 21. Just a few weeks later, the DOL published a notice delaying the effective date of the Independent Contractor Rule until May while inviting public comment about the proposed rule. Comments were varied, but many business owners came out in support of the rule, which they believed would help establish clear delineations between employees and independent contractors. Despite these objections, the DOL moved to withdraw the rule.
What the Rule Reversal Means for Truckers
Trucking companies have long been in limbo as state and federal laws evolve. Employment laws that aim to change employee classifications can have long-term ramifications for the sector, potentially costing companies more money in licensing and in trucking insurance expenses. For now, the Biden Administration’s push to reverse the DOL rules proposed under Trump are on hold. To better manage the risks associated with these rules or their reversal, truckers must maintain awareness about pending court decisions. Trucking insurance protects against a broad range of risks. By understanding the rules governing employee classifications, trucking companies can enhance the protections of that insurance by avoiding costly regulatory penalties.
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. Contact us today at (800) 937-8785 to learn more!