Trucking Industry’s Use of Drivers as Independent Contractors Under Siege

January 23, 2017 by Tiffany Hsu, @tiffkhsu

Several recent court rulings have dealt setbacks to the trucking industry’s practice of classifying drivers as independent contractors rather than full employees.

In decisions against the California Trucking Association and the giant Swift Transportation carrier, two federal judges ruled that truckers should be categorized as employees unless their working conditions meet specific requirements that qualify them as independent contractors.

Earlier this month, a federal judge in San Diego granted a motion to dismiss a lawsuit filed over the summer by the California Trucking Association, or CTA, against California Labor Commissioner Julie Su.

The decision came on the heels of another federal court ruling in Arizona that the country’s largest truckload carrier – Swift Transportation Co. – had misclassified some of its drivers. Swift could now face claims for millions of dollars in back wages.

In the California suit, the trade group argued that so-called owner-operators who own or lease their own trucks are essentially self-employed entrepreneurs rather than employees of the carriers they work with.

The association wanted a declaration that Su was misusing a common law employment test to determine driver classification and sought to stop her from doing so. But U.S. District Judge Cathy Ann Bencivengo wrote in her decision that carriers in question were essentially trying to skirt labor law.

“CTA members are free to use independent contractors or employees,” she wrote. “However, CTA members must do more than simply label a truck driver as an independent contractor; the truck driver must in fact be an independent contractor under California law.’

In short, the argument is just because someone says that something is so doesn’t make it so. The underlying reality is more important than the form or the label, according to case law referenced in the decision.

The CTA said it has spent years trying to work through the issues with Su’s office. But recent research by the group found that regulators decided against trucking companies in more than 300 wage claims issued in the past three years.

The California suit was sparked by “these unprecedented, one-sided findings,” said Shawn Yadon, chief executive of the trade group, in a statement.

“We continue to believe the Labor Commissioner’s policy against owner-operators is in violation of federal law, which allows these relationships, and will ask the court to reconsider and appeal the decision if necessary,” Yadon said.

In the Swift case, the plaintiffs claimed that due to misclassification the carrier failed to pay all the wages required by federal and state wage and hour laws, including the Fair Labor Standards Act.

The drivers considered themselves to be employees because Swift controlled every aspect of their work schedules – from where and how the plaintiffs delivered freight to which routes the truckers had to use. Swift also controlled the equipment the truckers used, including the maintenance and condition of the trucks, the lawsuit said.

U.S. District Court Judge John W. Sedwick ruled on Jan. 5 that the contractor agreements the drivers signed were employment contracts, making them employees.

The rulings are part of an ongoing struggle between the trucking industry and the regulators and labor groups – one that may have major implications for freight companies’ operational expenses.

It’s been especially fractious in California, particularly at the state’s large ports. Since 2011, California truckers have filed roughly 800 wage claims alleging that they have been misclassified as independent contractors and denied benefits including wages, overtime pay, unemployment insurance and workers’ compensation. Drivers have won more than $35 million in over 300 cases, and there are still 196 wage claims pending, California’s Department of Industrial Relations.

Some drivers – and the union representatives hoping to organize them – say their interactions with carriers mirror employee-employer relationships. They allege that trucking companies hold all the power, commanding drivers where to go, when to go and what to do once there.

Drivers who claim misclassification allege that their lack of employee status allows carriers to bypass minimum wage requirements, meal and rest breaks, health coverage and other work-related expenses.

Other truckers, however, say they’d like to hold onto their owner-operator titles. Independent contractor classification affords them control over their own schedules, allowing them to seek out more profitable contracts with multiple companies, they said.

The advent of the so-called gig economy has led more workers into employment situations that are “precarious,” said Orly Lobel, a professor of labor law at the University of San Diego.

“I’m very sympathetic to this very delicate balance between wanting to extend the protective laws that we have to people in the labor market versus those who want more flexibility and independence,” Lobel said.

And some regulators feel passionately about the implications.

“It’s certainly something that departments of labor are thinking of how to correct,” Lobel said. “They certainly have positions on how to draw the lines.”

The California Trucking Association has accused Su and other state government labor agencies of “abusing their authority in order to drive a particular agenda.”

“The conduct is more than suspicious,” Yadon said. “We are not fighting to avoid having legitimate disputes related to independent contractor status adjudicated; but we insist the process be fair, satisfying minimum statutory and constitutional requirements, and the result not predetermined.”

The back-and-forth over truckers is often compared with tussles between ride-sharing company Uber Technologies Inc. and its drivers. In April, the company settled two class action lawsuits that will require it to pay drivers up to $100 million, but allow it to continue categorizing them as independent contractors, rather than employees.

However, the trucking industry “might have a harder time winning compared to Uber,” Lobel said.

“They have to show they’re not just employing full-time drivers working full weeks under same conditions the industry has always worked with, but just labeling it cosmetically as an independent contractor relationship,” she said. “Under current law, they’d have to show more, but maybe there’s a need for a different law.”

7 Responses

  1. stephen webster

    This is also happening in Canada with mileage paid brokers, both with their trucks and driving company trucks as corp.(s)The federal gov. has got over $100 million so in back taxes with many more cases coming up with foreign truck drivers who came over on work permits. This will be be bigger than E-logs in Canada.

  2. ken

    Why the U.S. can we bring in E-logs yet not protect the drivers pay or get the truck drivers good health care like in Canada. If truck drivers were paid the same in real wages as in 1975 the truck drivers shortage would be gone in 3 months.

  3. Harry Eldridge

    Maybe some attention should be given to the fact that once a previously classified independant or owner-operater is deemed to be an employee they will loose the ability to claim all job related expenses as tax deductable including fuel, food and basically every other expense they incur as a now employee. The new tax plan in effect starting 2018 cost me as a company driver over $22,000 in itemized deductions !

  4. Samuel gallezzo

    Swift is without a doubt the most corrupt company out there but most of your small foreign run companies misclassify employee. Guess what….nobody cares. I’ve reported sever as l companies to the IRS and workmans comp authorities and nothing is done. Trucking and the organizations that police the industry are dirty. This is why there is such a push for automation. Finally all the abuses will be swept under the rug.


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