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Published 4:30 pm Thursday, December 15, 2022
The U.S. Department of Labor has proposed a new set of guidelines for distinguishing employees from independent contractors.
Labor experts say the proposed rule, which would likely make it harder for businesses to classify workers as contractors, could have far-reaching impacts across American industries, including the agricultural sector.
Proponents say the rule would protect employees from being misclassified as independent contractors. In a statement, the Labor Department said misclassification is a “serious issue” that denies workers’ protections and rights, including to the minimum wage and overtime pay.
“While independent contractors have an important role to play in our economy, we have seen in many cases that employers misclassify their employees as contractors, particularly among our nation’s most vulnerable workers,” said Labor Secretary Marty Walsh.
Opponents say the rule fails to recognize that many workers — some truck owner-operators, for instance — prefer to be independent contractors. Forcing them to reclassify could prompt them to close their operations, impacting other businesses that rely upon them, opponents say.
“The implicit premise of the proposed rule is that legitimate contracting is a poor substitute for being an employee. This is simply wrong,” the U.S. Chamber of Commerce said in a statement.
The chamber cited several studies that found workers choose independent contracting because it offers flexibility, better work-life balance, higher pay per hour and autonomy leading to greater work satisfaction for nine in 10 independent contractors.
“This mountain of scholarly research debunks the misconception that workers are involuntarily forced into independent contracting,” said the chamber.
Working with contractors also allows businesses to remain nimble and competitive while increasing efficiency and keeping costs low, the chamber reported.
Many U.S. farms work with independent contractors — for building projects, shipping and other needs.
Experts anticipate the rule’s impact on trucking especially could have ripple effects on agriculture and the supply chain.
“Eliminating the ability for truck drivers to work as owner-operators would be devastating to the U.S. supply chain,” said Lisa Yakomin, president of the Association of Bi-State Motor Carriers. “The vast majority of port drivers choose to be self-employed owner-operators. … They do not want to be employees, and that choice needs to be respected.”
Matt Schrap, CEO of Harbor Trucking Association, a coalition of intermodal carriers moving cargo at West Coast ports, said he is concerned by the “clear and concerted effort to eliminate the owner-operator business model that we know today.”
The rule, said Schrap, would discourage entrepreneurial activity, raise costs and result in fewer truckers, making it more difficult for farmers to find drivers to move goods.
Although the rule would affect many sectors, it could leave some contractual relationships unchanged.
For example, the proposal opened a debate over the employment status of commercial chicken farmers, most of whom operate under contracts with major poultry processing companies.
Some producers are concerned the rule could change their classification, but experts say it appears the proposed guidelines would not change contract poultry growers’ status.
“We believe that contract chicken farmers remain classified as independent contractors under the proposed rule,” said Bill Mattos, president of the Northwest Chicken Council.
Even so, Mattos said his organization will follow the rule closely.
The Department of Labor is evaluating public comments before taking further action.