Avoid scrutiny of company drivers versus independent contractors

August 11, 2017|Thomas Schultz

Determine whether your truck drivers should be classified as company drivers or independent contractors, then make sure your policies and written agreements are updated accordingly.

Profitably running any size trucking organization has never been easy. Among the areas that need specific focus might be something taken for granted—the agreement with independent contractors (IC) signed on to haul freight.

Several recent court cases and known Department of Labor (DOL) audits in the industry have resulted in trucking and logistics companies taking a second look at both their written IC agreements and regular interaction. Have you taken time to review your documents and practices?

Drivers misclassification is a hot topic

The DOL as well as other governmental areas are looking carefully at the way businesses interact with drivers in their effort to identify IC misclassifications. When an IC is misclassified, several employment areas are open to scrutiny including compensation and tax allocations. We are seeing multiple states and the federal government looking closely at the IC classifications in an effort to make sure that the proper tax revenues are collected.

Courts appear to be looking at not only the agreement with the IC, they are also looking at the nature of the relationship. Employers are wise to review IC contract language with legal counsel. An increasing number of states are considering or have passed legislation to increase audits that identify companies that misclassify independent contractors. Several areas have specifically created issues for organizations and should be reviewed including, but not limited to:

  • Payment methods
  • Handbook or other rules
  • Equipment acquisition and maintenance
  • Load acceptance/rejection
  • Freight handling requirements
  • Exclusivity to freight from one organization

One of the more visible court actions over IC misclassification involved FedEx. In Alexander v. FedEx Ground Package System, Inc., the judge found that IC drivers wore company branded uniforms, used equipment with the company logo specified by the company and use only specific routes. The ICs could not make themselves available to haul freight for any other organizations using the same equipment used for Fed Ex. As a result, the drivers who were found to be misclassified as independent contractors were awarded a settlement.

When it comes to the nature of the business relationships with ICs, consider some of these questions:

  • Is the IC free to work with other employers to haul freight?
  • How are lease agreements written?
  • Is the IC ever paid hourly rates, especially for dwell time at a consignee?
  • How fast can the IC terminate any lease agreement?
  • What happens if the IC violates a company policy or federal regulation?

Consider the questions above as a first step toward reconciling your practices against the current driver classification guidelines. Now is the time to take a close look at your independent contractor documents and procedures to ensure you’re following best practices.

For assistance reviewing your driver classification practices, contact Thomas Schultz or another member of Schenck’s HR Consulting team at 800-236-2246.

Thomas Schultz, PHR, SHRM-CP, is a manager – HR Consulting with Schenck. He has more than 25 years of human resources experience, including building human resource systems and structures that match the changing needs of businesses. He brings a broad blend of skills in areas such as leadership coaching, employee relations, benefits, training and development, change leadership and employment law. Thomas is also a member of Schenck’s Trucking & Logistics team, and brings a wealth of industry-related HR knowledge after spending seven years in human resources at an international transportation and logistics provider.