Recently the Department of Labor (DOL) provided
guidance and clarification on how independent contractors should be classified
according to the Fair Labor Standards Act (FLSA). Worker complaints concerning
misclassification across all industries brought about by poorly written
contracts and negligence to adhere to contractual obligations has made this a
major issue for businesses who employ contractors. Taking into account the
large number of driver owner-operators, this guidance will have a major impact
on the transportation industry.
The DOL is where complaints are initially filed and
eventually make their way to the courts. So while the DOLs guidance does
not carry the force of regulation, they do make their position clear in this
matter that when contracting with an independent contractor, the employer must follow
these guidelines or face workers complaints that can lead to increased audit
activity. Neither of which are good for business.
Independent contractor lawsuits due to
misclassification can be costly and damaging to your reputation as a motor
carrier who utilizes owner-operators and wants to maintain this relationship. It
is good practice to regularly review your owner operator lease agreements and
then follow them as written. A recent audit of a standard motor carrier lease
agreement by HUB’s Transportation team highlighted the following issues that if
audited could deem the independent contractor an employee.
- The language in the agreement didn’t apply to the motor carrier
agreement referred to workers’
compensation coverage, when the motor carrier meant occupational accident coverage.
contract specified that the motor carrier would “provide” items to the independent
contractor, which if audited could render the contractor a full employee.
Unfortunately, these findings
are typical. Make sure your lease agreement is consistent with your business
operations and comprehensive in nature. We recommend the following to mitigate
worker complaints and protect your business.
have your independent contractor agreement reviewed by a labor or
policies and procedures to ensure that independent contractors are not
being treated like employees. This includes dispatch, uniform, and
time off requirements.
your supervisors on how to interact with independent contractors.
They cannot violate the terms of the agreement made with your independent
- Review best
practices for utilizing independent contractors.
your local HUB representative to ensure that insurance options are
available to protect the financial interests of independent
contractors. These can include cargo insurance, occupational
accident insurance, and non-trucking liability insurance.
- Maintain a
good relationship with all drivers so that they do not have the desire to
report your organization in retribution for a wrong that they feel was
done to them.
HUB Transportation offers guidance and counsel on
contractual issues related to owner-operator agreements. Look for the upcoming eBook,
Don’t Get Caught Asleep at the Wheel
that advises on contractual best practices and highlights cautionary tales of contractual
issues gone wrong, and then take the survey to test your knowledge on
Contact a HUB Transportation expert.