In this column, we usually discuss laws and regulations affecting parcel shippers that are already in effect. In this installment of PARCEL Counsel, we will take a look at some pending changes in the regulatory landscape that could have a very significant impact on parcel shipping in general and the last mile of e-commerce deliveries in particular.
There are a number of different business factors that can affect the cost of providing parcel delivery services. One major factor is the classification of individuals providing parcel delivery services as either employees of a trucking company or delivery service OR independent contractors. Whether persons working as a driver, working in a warehouse, or providing other services are classified as employees or self-employed independent contractors can determine and affect the benefits they receive, their legal status when providing services, and, under some circumstances, a customer’s right to recovery on claims for loss and damage of the parcels.
Generally speaking, if a person is classified as an employee, it leads to increased costs for the employer that they would not encounter if the person was considered an independent contractor. One example of this is that an employer has to provide worker’s compensation insurance to its employees, but not to an independent contractor. Other examples are that an employer has to pay state unemployment insurance and the employer’s share of Medicare and social security.
The battle between classifying persons as employees or independent contractors has been at the forefront of the transportation industry for years. There were concerted efforts during the Obama administration to reclassify independent contractors as employees. The pendulum swung in favor of the independent contractor classification during the Trump administration. The pendulum now appears to be swinging back under the Biden administration.
There are two developments in particular for which a parcel shipper should be on the lookout. The first is that on February 19, 2021, the Department of Labor withdrew something known as a guidance letter that had been issued in April, 2019.
The gist of that guidance letter, directed to an unnamed “virtual marketplace company” after it inquired, confirmed that certain workers providing work for this company were indeed considered independent contractors. The effect of the February 19, 2021 withdrawing of this guidance letter indicates that the Department of Labor may not be considering typical “gig workers” to be independent contractors in the future.
The other development is the Pro Act, which has been introduced into both houses of Congress. The gist of the Pro Act is to establish at the federal level what is known in California as AB5 and its ABC test. If passed into law, and survives any challenges in court, this could substantially reduce or even eliminate the current independent contractor model for all of the states.
To conclude, it must be noted that there are very strong opinions on both sides of this issue. I will leave it to the reader to decide whether they believe the status quo should remain in place or a new approach adopted. All for now!