While many of us held out hope that 2021 would suddenly usher in an era of tranquility, remember, pandemics don’t go away quickly. It will take a long time for us to recover to pre-pandemic levels if we ever do. Still, the gears of the government grind on. With a new administration coming in and the previous one leaving, there is movement in Washington.
So, today we will provide our latest update on things happening in Capitol Hill that impact our country. The topics we will cover include a final independent contractor rule from the department of labor and the current state of truck orders. Both topics impact truck drivers and the companies they work with. Let’s begin!
What Has Changed?
While the Department of Labor (DOL) has issued a final rule defining what an independent contractor is versus an employee under the Fair Labor Standards Act, there is still some uncertainty as to how the final rule will fair in a new administration.
The rule was originally proposed in September and uses an “economic reality” test to determine a worker’s status. The test will determine whether they should be classified as an employee or an independent contractor. When applying the criteria, the test looks at factors such as:
- Is the worker in business for himself/herself?
- Is the worker economically dependent on an employer for work?
Right now, the DOL uses a multifactor test to determine whether someone is an independent contractor or not, but that test has been described as “unclear and unwieldy.” Still, the rule is in danger because it was provided as an example by the Biden-Harris transition team when they are naming Trump administration regulations they planned to halt when they come to power.
What Are the Changes?
If the incoming administration does not kill the rule right away, it is set to go into effect in early March. The question now is, what is in the final rule? There are a couple items that jump out right away. First, there are changes to what can be considered “evidence of control.” You may remember that the final classification relies on how much evidence of control there is of the employer over the employee or independent contractor.
The final rule states that certain contractual provisions designed to ensure compliance with federal regulations – such as those governing safety – will not be considered evidence of control. In addition to this, the final rule aims to clarify some of the issues identified when the rule was being drafted. They include clarifications such as:
- Long-term relationships between parties does not necessarily imply control. This was needed because in many cases independent contractors will choose to drive for a single motor carrier for a prolonged period, but that does not necessarily make them an employee.
- Compliance with safety and non-safety mandates will be separated.
- Quality control requirements will be separated from the analysis of a worker’s ability to either earn a profit or suffer a loss.
- Pay by load or mile does not necessarily mean a worker is an independent contractor.
It should be no surprise that the Biden administration is expected to put this new rule on ice, considering the Teamsters union and other worker advocacy groups have come out strongly against it.
What Are the Objections?
The teamsters have basically said that the rule would make it easier for trucking companies to classify their workers as independent contractors, which would result in them not being covered by federal laws governing minimum wage and overtime. They contend that the rule defeats the entire purpose of trying to clarify who can be classified as an employee and who should not.
The Teamsters released the following statement in a press release:
“As it stands, companies across the country have sought loopholes and workarounds to misclassify workers as independent contractors, which denies them proper wages and job protections as well as access to unemployment benefits. Teamsters have been aggressively pushing back on this issue for years at the ports, and especially during the pandemic where misclassified truck drivers are denied proper protective gear and workplace safety measures in addition to fair wages and benefits. There is already a growing anti-worker issue that will be exacerbated if these regulations are enforced.”
The ATA, while not implicitly supporting or coming out against the rule, did make a note that the final rule does not pre-empt wage and hour laws at the state level. Still, this distinction might not make much of a difference considering many states follow federal guidance when it comes to employment classification. So, even if the rule never goes into effect federally, you could see states adopt it still. They also noted that the final rule does not impact compensation, taxes, or Title VII employment laws.
Now the question is, how much of an impact will this have with a new administration coming to bear? For now, those questions remain to be answered. It is expected that President-Elect Biden will undo many of the regulations and executive orders Trump passed, but to what extend is unknown.
New Truck Orders Take Off
Next up on our look at 2021 items truckers should keep in mind is truck sales. 2020 was definitely a strange year for new-truck orders. If you remember, there was a deep plunge in new-truck orders when the spring of 2020, just before the pandemic shutdowns. But that was to be short lived. Why? Because at the end of the year, new-truck orders took off like a rocket ship.
FTR and ACT Research both reported December truck orders coming in just over 51,000 orders. And consider that this was down from November. We are talking a massive number of new-truck orders at the end of the year. Both months are in the top five for most new-truck orders ever recorded.
What happened in the trucking industry to precipitate such an increase? Well, the pandemic-impacted economy continues to benefit trucking companies, simply because of the amount of freight being hauled around the country. Just consider that April unit orders were under 5,000 and the increase truly comes into focus. Imagine how stellar of a year 2021 will be for new-truck orders.
There are some headwinds to contend with, however. The truck driver supply chain, for example, remains constrained. What will this result in? Surging rates, of course. This will be a good thing for fleets, however, as motor carrier profits are expected to soar in the first quarter of 2021. The main reason for this lies in the symbiotic relationship between long haul freight rates and medium-duty demand. The shift in consumer spending away from the service sector and into the e-commerce sector has been very good for trucking companies and other transportation providers.
What Remains for 2021
It could very well be that we finally see a huge infrastructure package passed, now that Congress and the White House are in the Democrats’ hands. We could also see much more stimulus passed and help for businesses. As a result, we should see the economy continue to improve. Motor carriers across the country are already feeling more confident about their prospects.
With profits rising, fleets are working hard to replace used trucks, which is driving the higher level of new-truck adoption. With everything in the trucking sector headed in a positive direction, expect fleets to make big bets on updating their equipment and other assets.
Many trucking companies will focus on technology. Fleet management systems, advanced safety systems, and other innovations will be on the docket for 2021 and vendors are going to be making big bucks as trucking companies embrace technological trends.
Even more, with a vaccine out, expect more people to get back to work. Consumer goods seem to be doing well and the manufacturing sector is showing signs of strength after struggling in 2020. The question now is where your fleet will be when the economy begins to really roar back. Are you prepared to take advantage of the windfall to position your trucking company for the 21st Century?