Biden’s Gig Worker Labor Rule: Effects on Last-Mile Delivery Businesses

The Biden administration recently announced a plan to redefine gig workers as employees under federal law. This has many in the last-mile industry asking, “what does this mean for me?”.

While headlines might suggest a seismic shift in how you run your business, there’s no need for immediate worry – it won’t affect everyone. However, the gig worker versus employee conversation is under the spotlight for a reason. It’s a system built on a loose foundation.

What’s the new gig worker rule?

The new regulation revises the definition of an “employee” under the Fair Labor Standards Act. The redefinition tightens the criteria for independent contractor (IC) classification. This could grant employee status to some who were previously excluded as gig workers.

The shift could lead to:

Increased costs

If the rule reclassifies your ICs as employees, you would be responsible for providing benefits like minimum wage, overtime pay, and healthcare benefits.

Operational changes

You might need to adjust your work model to ensure employees have more control over their schedules and tasks, potentially impacting efficiency.

Compliance challenges

Navigating the complexities of the new rule and ensuring proper worker classification could pose compliance issues, potentially requiring legal and administrative adjustments.

Shifting business models

You would have to re-evaluate your reliance on independent contractors and potentially explore alternative models, such as hiring full-time employees or partnering with different types of shipping logistics service providers.

New rule limitations

While it sounds scary, the rule has its limitations. It will only apply to some workers, hinging on a multi-pronged test that looks at factors including:

Control

How does the company exert power over the worker’s daily activity?

Job performance

How long has the worker been performing duties for the business?

Investment

How much of the worker’s resources are they putting into the job?

This means many platform-based gigs like Uber or DoorDash, characterized by flexible schedules and minimal direct supervision, may still fall outside the “employee” classification. While some workers might see a shift in their status, the rest will likely remain unaffected.

A system on red alert

Despite the new rule’s exclusions, its very existence carries some weight. It represents explicit acknowledgment on the federal level of the mounting concerns surrounding the so-called “gig economy.” Once heralded for its flexibility and entrepreneurial spirit, the IC system now faces increased scrutiny. Gig workers often have precarious incomes, no benefits, and very little power to take legal action against the corporations with which they contract.

Escalating insurance premiums caused by frequent claims within the sector, as well as legislative initiatives for redefining ICs as employees bubbling up at the state level, paints a picture of a system likely to face ongoing pressure for reform.

Importance of Risk Management

This new rule underscores the need for a last-mile framework that safeguards worker wellbeing.

Many businesses hire ICs to save money, which can only get you so far in last-mile. Increased claim frequency and severity, compounded with nuclear verdicts, make skimping on safety and driver experience hazardous. Regardless of worker classification, there are things you can do now to mitigate risk and avoid costly accidents:

Implement robust safety procedures

Operational policies and procedures that enforce safety regulations are necessary. Follow up-to-date procedures to prepare drivers for all common challenges like route management and vehicle maintenance thoroughly.

Hire good drivers

Carefully assess the skills and experience of new hires, adhering to strict guidelines without exceptions. This ensures that unforeseen issues don’t appear during claims discovery by insurance adjusters. Additionally, offer competitive pay and benefits to retain top-tier drivers.

Invest in technology

Mandate four-way directional cameras and telematics to enhance driver performance. Utilize GPS for route optimization. It will boost operational efficiency and provide crucial data for overall improvement. This technology monitors driver behavior and safeguards against potential claims.

Stay current with an insurance broker

The new regulatory measures are only a modest step toward addressing systemic issues within the gig worker industry. While it may not trigger immediate changes for your business and labor force, it reveals cracks in the foundation.

Work with your broker to stay current regarding the latest last-mile regulations and to ensure you’re ready for anything around the bend.