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Independent Owner-Operators Under Assault

Volume 2, Issue 3
February 15, 2014
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Unions have made major progress in getting their allies in federal and state governments to tighten the legal definition of truck owner-operators with the ultimate aim of eliminating their status as independent contractors.

Independent-contractorThe unions wish to eliminate independent contractors in trucking for a simple reason: They can’t be organized – at least not legally.

Because independent contractors are considered individual business entities rather than employees, organizing them to bargain collectively over rates with the companies that use their services creates an antitrust violation because it is the legal equivalent of businesses ganging together to conspire to fix prices.

In recent years, this legal status was confirmed by the U.S. Supreme Court after the Teamsters union attempted to organize owner-operators performing drayage services at the Port of Los Angeles.

Bills have been introduced in Congress to address the issue of “misclassification” of employees as contractors. The most recent is a Senate measure that would require an employer subject to the Fair Labor Standards Act both “accurately classify” a worker as either an employee or “non-employee” and provide that person with written notice of this classification.

Under the bill, absent this notice a worker would be presumed to be an employee and the presumption could be rebutted only “through the presentation of clear and convincing evidence.” Failure to do so would incur still financial penalties.

Thus far, the gridlock on Capitol Hill caused by having a Republican-controlled House and Democrat Senate has stymied national legislation aimed at helping the unions on this issue.

Federal Agencies Work With States

Unions have been far luckier when it comes to the Obama Administration’s federal agencies and some state governments. In late 2013 New York became the 15th state to sign a memorandum of understanding aligning its efforts with the U.S. Department of Labor to crack down on misclassification of independent contractors.

New York had joined 14 other states (including California, Colorado, Illinois, Missouri, Minnesota, Connecticut, Maryland, Massachusetts and Washington State) that partnered with DOL to “root out bad actors and bring them to justice,” as the Labor Department put it.

DOL also noted that since the implementation of these types of agreements with other states, it has collected 97% more in back wages over a two-year period, resulting in over $18.2 million obtained for more than 19,000 workers who it says had been classified improperly.

“Business models that attempt to change or obscure the employment relationship through the use of independent contractors are not inherently illegal, but they may not be used to evade compliance with federal labor law,” DOL said at the time.

On Jan. 10 New York Gov. Andrew Cuomo signed a law which creates a presumption that anyone with a commercial driver’s license who performs transportation services under contract to another company is classified as an employee.

Want to counter this presumption? The law says owner-operator services must be outside the contracting company’s usual course of business.

To maintain independent contractor status, every one of 11 detailed criteria laid out in the law must be met. These include the driver being able to make its services available to the general public or the business community on a continuing basis; and to others on whatever basis and whenever it chooses.

Recently, a federal court in Massachusetts, upheld a similar law which includes the requirement that the independent contractor’s service is performed outside the usual course of business of the company using that service. The court also rejected the Massachusetts Delivery Associations contention that federal law pre-empted the state statute.

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