By Stephanie Gaston, Strasburger & Price LLP
While many motor carriers may worry that the “independent classification” rules regarding the contracted use of owner-operators are slowly being eliminated, Stephanie Gaston with the Washington D.C. law firm Strasburger & Price LLP says that is not quite the case. A lawyer whose practice is focused on resolving labor and employment law matters for private employers, public entities, and non-profits, Gaston outlines her reasoning in the guest column below. She can be reached at [email protected]
In June of 2017, the USA Today newspaper released “Rigged,” an investigative report highlighting abuses of leased owner-operator drivers at the Ports of Los Angeles and Long Beach. The sensational news story claimed that the trucking industry is rife with labor violations and that drivers are forced into a life of indentured servitude.
However, the investigative report focused on only a small subset of the industry and failed to disclose that some drivers prefer to be independent contractors and have enjoyed profitable careers as such.
In an effort to address and contain those rare abuses described in the USA Today report, state agencies and the U.S. Department of Labor (DOL) have launched a misclassification crusade aimed directly at the trucking industry.
State agencies and the federal government alleged that motor carriers and transportation providers are misclassifying employee drivers as independent contractors – depriving them of various rights including overtime pay, unemployment compensation, workers compensation, and health and retirement benefits.
The DOL announced its “Misclassification Initiative” back in September 2011 and, since that time, 35 state labor departments have signed a memorandum of understanding with the agency. The DOL also:
- Provided guidance regarding how it will determine whether workers are employees or independent contractors under the Fair Labor Standards Act, and;
- Instructed employers to apply the “economic realities test” in determining whether workers are employees which sets forth six factors to be considered.
The factors relevant to the trucking industry which have led to courts to conclude that a driver is in fact an employee are:
- The motor carrier chooses the payment method for drivers;
- The motor carrier controls the work load of the drivers and does not allow substitute drivers;
- The motor carrier prohibits drivers from using leased vehicles to offer delivery services to other companies;
- The drivers must buy or use trucks with company specifications such as company logos or symbols;
- The motor carrier controls where and how the drivers deliver freight and which routes drivers must use;
- The motor carrier controls the equipment the driver uses, including the maintenance, repair, and condition of the trucks, and;
- The motor carrier evaluates the performance of drivers.
[See Alexander v. FedEx Ground Package Systems, 765 F.3d 981 (9th Cir. 2014) and Max Trucking, Ltd. Liab. Co. v. Liberty Mut. Ins. Corp., 802 F.3d 793 (6th Cir. 2015) for further details.]
The fact is that many motor carriers, and even some owner operators, remain vested in preserving the independent contractor status of drivers, and, therefore, have been forced to review their contracts and policies to ensure that drivers are given genuine autonomy to run their own individual businesses.
So what can motor carriers do to ensure they are in compliance with the new classification rules? It has been a standard assumption in the trucking industry that owner-operator and related agreements would insulate motor carriers from the imputation of independent contractor misclassification that could lead to defending claims in multiple jurisdictions.
Currently, however, the cases being decided and the literature being promulgated by state agencies and the federal government make clear that courts and relevant administrative agencies are looking beyond the agreement and scrutinizing the actual nature of the relationship between the motor carrier and its drivers.
Additionally, because there is an inherent tension between the requirement that motor carriers extend complete autonomy to its independent contractor drivers – as well as the need to make sure that drivers comply with federal regulations – it is also necessary for motor carriers to look beyond the case law and court decisions to specific industry practices in order to preserve the independent contractor classification of its drivers, avoid litigation over the issue, and avoid audit or investigation by state and federal agencies.
Motor carriers, accordingly, are advised to consider the following guidelines to ensure they do not violate the current classification rules:
- Allow drivers to accept or turn down loads.
- Update owner-operator lease agreements to ensure they clearly disclose charges and deductions from driver compensation.
- Ensure that drivers and the motor carrier maintain separate insurance policies.
- Avoid requiring drivers to wear certain uniforms or paint company logos or symbols on trucks.
- Avoid requiring drivers to work exclusively for the motor carrier.
- Avoid requiring drivers to get repairs made by specified repair technicians.
- Avoid requiring drivers to obtain or maintain specific permits, licensures or insurance.
- Require drivers to reimburse the motor carrier for fuel costs where the motor carrier provides the driver with a fuel card for the purpose of obtaining discounts.
- Avoid requiring mandatory training for independent contractors. (Although it is still appropriate to require remedial training or to terminate the relationship should the driver commit a violation of the carrier’s policies or a violation of federal regulations.)
Motor carriers desiring to preserve independent contractor status for their drivers must be deliberate about their policies and procedures, and closely and consistently review agreements to ensure they provide drivers the autonomy to run their own businesses.
The case of Ruiz v. Affinity Logistics Corp., 697 F. Supp. 2d 1199 (S.D. Cal. 2010) provides an example of when a carrier fought to maintain the independent contractor status of its drivers and won because the evidence demonstrated that it did not exercise excessive control over the manner and method of the drivers’ work.
Motor carriers and independent drivers can still operate fairly and successfully within the current classification guidelines when the motor carrier is painstakingly careful to steer clear of limiting or encroaching upon the independent driver’s ability to run his/her own business with complete autonomy.