FMCSA UPDATES: Are you an Employee or an Independent Contractor?

Effective March 11, 2024, the FMCSA’s final rule will rescind the Independent Contractor Status Under the Fair Labor Standards Act rule (2021 IC Rule) and replace it with an updated analysis for determining employee or independent contractor status that is more consistent with the Fair Labor Standards Act (FLSA) — as interpreted by longstanding judicial precedent.

While the goal, according to the FMCSA, is to correctly classify employees and independent contractors, the same six factors that were used before this final rule, have been weighted differently — subtly shifting the mindset of the classification system and making it more challenging to keep the “Independent Contractor” classification.

The six factors taken into account are:

  1. Opportunity for Profit or Loss: Are wages fixed or is there fluctuation, based on hard-earned efforts? Is there personal investment in equipment and drivers, giving more opportunities for profit/loss?
  2. Investment: Are personal resources and capital, such as owning a truck and equipment, in the equation?
  3. Permanency of the Relationship: What is the relationship between the worker and the company? Is it temporary or long-term and consistent?
  4. Control: Who dictates routes, schedules, and workloads: the company or the driver?
  5. Skill and Initiative: Does the job require specialized knowledge, training, and skilled decision-making? Or is it general, with supervision throughout the process? 
  6. Integrality of the Service: How integrated into the organization is the worker? Are they necessary to the success of the organization, or can they be easily replaced or not replaced at all?

Previously, the Control factor and Opportunity for Profit/Loss factor held more weight in the classification process. With this final rule, these six factors now hold similar weight. This means that, starting March 11, 2024, it could be more difficult to retain the Independent Contractor status, moving the needle in favor of Employee classification.

To avoid fines, lawsuits, and damages, be sure to re-evaluate your existing relationships to ensure your classification and contracts align correctly with this new Employee or Independent Contractor Classification Under the Fair Labor Standards Act, RIN 1235-AA43.

Need help or guidance? Please connect with our team at Navigator Truck Insurance Agency. We’ll be happy to get you started in the right direction and answer questions along the way.

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