Driver Recruiting Summit: The Risks & Opportunities of Filling Your Fleet

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Driver Recruiting Summit 2014
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The Quick and Dirty Guide
to Employment Law
Presented by:
Sara L. Pettinger and Steven F. Stanaszak
Driver Recruiting Summit: The Risks & Opportunities of
Filling Your Fleet

Because It’s Complicated
 The Basic Laws at Play
 The Hiring Reminders
 Pre-Employment Agility Testing
 Fair Credit Reporting Act
 Criminal Background Checks
 The Termination Meeting
 When a Complaint is Filed

Civil Rights Act of 1964
(Title VII) Overview
 Title VII of the Civil Rights Act of 1964 prohibits
discrimination in employment on the basis of
 Race
 Color
 Religion
 Sex
 National origin
 Pregnancy

 In certain instances, differential treatment is
allowed for religion, gender or national origin if a
bona fide occupational qualification exists.
 Sexual harassment is also prohibited under this law
as are all forms of harassment based on
membership in a protected class.
 Same-sex sexual harassment also included

 In a Title VII case, a plaintiff may seek damages including:
 backpay,
 reinstatement or front pay,
 compensatory damages for emotional distress; and
 attorneys' fees if plaintiff is a prevailing party.
 Title VII also makes it unlawful for an employer to retaliate
against an individual who:
 files a charge of discrimination,
 makes a complaint about discrimination, or
 participates in an investigation made pursuant to the statute.

Americans with Disabilities Act
(ADA) of 1990 Overview
 The Americans with Disabilities Act, prohibits
unfavorable treatment of an employee or applicant
because he or she:
 has a disability,
 is regarded as disabled, or
 has a record of a disability.
 The law requires an employer to provide a
reasonable accommodation to an employee or job
applicant with a disability, unless doing so would
cause significant difficulty or expense for the
employer ("undue hardship").

 2008 changes to the law did several things:
 Made it easier for an individual seeking protection under
the ADA to establish that he or she has a disability within
the meaning of the statute.
 Protects individuals from discrimination based on their
relationship with a person with a disability (even if they
do not themselves have a disability).
 For example, it is illegal to discriminate against an
employee because her husband has a disability.

 In an ADA case, a plaintiff may seek damages of:
 back pay,
 compensatory damages for emotional distress; and
 attorneys' fees if he or she is a prevailing party.

Discrimination in Employment Act
of 1967 (ADEA) Overview
 The Age Discrimination in Employment Act prohibits
unfavorable treatment of an applicant or employee
because of his or her age. The ADEA forbids age
discrimination against people who are age 40 or
older.

 The law prohibits discrimination when it comes to
any aspect of employment, including:
 hiring
 firing
 pay and fringe benefits
 job assignments and training
 promotions
 layoff
 any other term or condition of employment.

 In an ADEA case, a plaintiff may seek damages of
 back pay,
 reinstatement or front pay
 attorneys' fees if plaintiff is a prevailing party, and
 an employee may recover liquidated damages in an
amount up to twice the amount of back pay if an
employer's discrimination is found to be willful.

Family Medical Leave Act of 1993
(FMLA) Overview
 The Family Medical Leave Act, provides qualified
employees with up to 12 weeks of unpaid leave
in any 12-month period for qualified events
including:
 the birth or adoption of a child or placement of a
foster child in the employee's home,
 care of the employee's spouse, child or parent with a
serious health condition, or
 the serious health condition of the employee.

Family Medical Leave Act of 1993
(FMLA) Overview
 In an FMLA case, a plaintiff may seek damages of
 back pay,
 attorneys' fees if plaintiff is a prevailing party, and
 an award of liquidated damages in an amount up to twice
the amount of back pay, unless the defendant can prove
that it acted in good faith and had objectively reasonable
grounds to believe that its actions did not violate the
FMLA.

The Fair Labor Standards Act –
A General Background
 The Fair Labor Standards Act proscribes standards
for the basic minimum wage and overtime pay and
affects most private and public employment.
 It requires employers to pay covered, non-exempt
employees at least the federal minimum wage and
overtime pay of one-and-one-half times the regular
rate of pay.

 The FLSA applies to employees engaged in interstate
commerce or employed by an enterprise engaged in
commerce or in the production of goods for
commerce, unless the employer can claim an
exemption from coverage.

The Motor Carrier Exemption
 Section 13(b)(1) of the FLSA provides
overtime exemption applies to employees
who are:
 Employed by a motor carrier or motor private
carrier, as defined in 49 U.S.C. Section 13102;
 Drivers, driver’s helpers, loaders, or mechanics
whose duties affect the safety of operation of
motor vehicles in transportation on public
highways in interstate or foreign commerce.

 A plaintiff in a FLSA case may seek reinstatement,
back pay, front pay or liquidated damages in an
amount up to twice the amount of backpay.

 A two year statute of limitations applies to the
recovery of back pay, except in the case of a willful
violation, in which case a three year statute applies.
 A FLSA collective action permits an individual to
bring suit on behalf of multiple allegedly aggrieved
individuals.

If you’re not Tom Brady . . .
 Numerous federal laws in play
 There are motor carrier variables
 Each state supplements the federal law
 Claims brought by employees can be litigated in
federal courts, state courts/agencies –
sometimes more than once
 Law is constantly changing – double check
 The best protection is good process and an
exceptional HR team

THE HIRING REMINDERS
“Bad Hires Make Bad Fires”

The Effective Interview
 Start slow so candidate is comfortable
 Prepare questions in advance
 Prepare to be flexible when responses are
short
 Make sure the process isn’t too short or long
 Consider more than one interviewer
 Take notes

PERSONAL OR FAMILY LIFE
• You MAY ask:
• Are you willing and able to work days,
evenings and/or weekend?
• Who should be notified in case of an
emergency?

CITIZENSHIP AND
NATIONAL ORIGIN
 You MAY NOT ask:
• Where were you born?
• Are you a U.S. citizen?
• How long have you been a resident?
• When did you arrive in the U.S.?
• When did you become a citizen of the
U.S.?

CITIZENSHIP AND
NATIONAL ORIGIN
• What nationality are you?
• How did you learn to speak, read or write a
particular language?
• What is your native language?

CITIZENSHIP AND
NATIONAL ORIGIN
 You MAY ask:
• Are you legally authorized to work in the U.S.?
• What language can you speak, read or write
fluently?
CAUTION: If you do ask these questions you must
ask all applicants.

VETERANS
• What type of discharge did you receive from
the military?
• Did you receive an honorable discharge from
the military?
• What is your current military status?
• Are you on active duty status in the military?

AGE
• How old are you?
• When were you born?
• When did you graduate from high school?
 You MAY ask:
• If you were hired, can you submit proof that you
are of the legal age for employment?
• Did you graduate from high school or obtain a
GED?

RELIGION
• What is your religion?
• Would your religious obligations interfere with
your ability to work on weekends?
 You MAY ask:
• Are you willing and able to work days, evenings
and/or weekends?

DISABILITY AND
WORKERS’ COMPENSATION
• Have you ever received
workers’ compensation?
• Have you ever been off
work due to work-
related injury?
• How many days were
you sick last year?

DISABILITY AND
 You MAY NOT ask: Does stress ever affect
your ability to be productive?
• Do you ever get ill from stress?
• Have you ever been unable to cope with work-
related stress?

DISABILITY AND
 You MAY ask:
• Do you need a reasonable accommodation
to assist you in taking the written test that
we require of all applicants?
• Can you perform the job functions, with or
without reasonable accommodations?

DISABILITY AND
 You MAY ask:
• Please describe how you would perform the
job functions.
• How well do you handle stress?
• How many days were you absent from work
last year?
• After stating the employer’s attendance
requirements: Will you be able to meet our
attendance requirements?

CONCLUSION
OF INTERVIEW
 DO NOT MAKE any promises that you cannot keep.
 DO NOT INDICATE that you have authority to hire
the person, if you do not have such authority.
 If you do offer the individual employment, DO NOT
MAKE statements suggesting permanent
employment.

PRE-EMPLOYMENT
AGILITY TESTING

Pre-Employment Testing: Prohibited
Examination/Inquiries Under the ADA
 Pre-employment testing procedures are on
the EEOC’s radar.
 The Americans With Disabilities Act (“ADA”)
allows an employer to give a physical agility
test to determine the physical
qualifications necessary for certain jobs
prior to making a job offer, but only if the
test is not a medical examination.

Pre-Employment Testing: Prohibited
Examination/Inquiries Under the ADA
 A physical agility test must be given to all
similarly situated applicants or employees
regardless of disabilities.
 Test cannot screen out individuals with
disabilities.

Agility Test v. Medical Examination
 The EEOC defines a medical examination
as a procedure or test that seeks
information about an individual’s physical
or mental impairment.
 Tests that require medical equipment or
interpretation by a healthcare professional
are not permissible.

 Impermissible Medical Examination:
 Blood pressure screening and cholesterol
testing
 Range of motion tests that measure muscle
strength and motor skills

 Permissible Agility Tests:
 An employee’s ability to perform actual or
simulated job tasks
 Physical fitness tests which measure an
employee’s performance of physical tasks,
such as running or lifting.

HIRING AND THE
FAIR CREDIT REPORTING ACT

FCRA
 It is not illegal for an employer to ask
questions about an applicant’s background.
 If an employer uses a company in the
business of compiling such information, the
employer must comply with the Fair Credit
Reporting Act.

FCRA Compliance
Disclosure and Authorization form
 The Requirements:
 Clear and conspicuous disclosure
 In writing
 In a stand-alone document – not the application
 Prior to the report being procured
 Applicant authorization in writing
 What We’re Not Getting Right:
 Lack of a stand-alone document.
 Including extraneous information.

FCRA CONCERNS
Adverse Action Protocol
 The Requirements:
 Decisions based in whole or in part on the report
 Prior to taking adverse action
o Pre-adverse action letter with (1) copy of the report, and
(2) Summary of Rights Under the FCRA
o Wait a “reasonable” period of time – allow explanation
o Send final adverse action letter explaining decision
 What We’re Not Getting Right:
 Following this protocol

Criminal Background
 In Wisconsin, an applicant’s arrest or
conviction record can lead to a refusal to hire
only when there is a “substantial
relationship” between the criminal conduct
and the circumstances of the job.
 This is a tough standard sometimes because
not everything is clear cut.
 The importance stems from the ability of
third-parties to sue for negligent hiring.

EEOC Concerns Regarding Criminal
Background Checks
 Background:
 Guidance Memorandum issued April 25, 2012
 Not a law or regulation
 Underlying theory: employers using criminal
background as a substitute for race and national
origin discrimination
 Renewed focus on “blanket bans”

Policy Reminders
 Review Your Polices and Procedures:
 Audit your criminal background screening
process
 Do not ask about arrests
 Do not use a blanket ban
 Avoid permanent exclusions from positions
 Allow for individual assessment
 Look for guidance on close calls

LEGITIMATE BUSINESS REASONS
FOR TERMINATION
 Performance
 Behavior
 Business
 Illness, Disability and Death

MOST COMMON PITFALLS WHEN
TERMINATING EMPLOYEES
 Discharging without first conducting a proper
investigation.
 Failure to follow company procedures.
 Terminating without a witness present.
 Failure to properly document events.
 Failure to obtain proper medical information and
consider reasonable accommodations.
 Unnecessary publication of the reason for
discharge.

THE TERMINATION MEETING
 Within the first 20 seconds of the meeting, tell the
employee that he or she is being terminated.
 Explain the decision briefly and clearly.
 Avoid counseling at this point; it should have already
been done.
 Do not compliment the employee in an effort not to
hurt his or her feelings.
 Do not fail to give an explanation for the
termination consistent with the truth.

THE TERMINATION MEETING continued
 The decision to terminate an employee should not
be based on a discriminatory reason. There should
be business-related reasons for the termination.
 During the course of a termination conference, the
conversation should never include references to a
prior claim.
 Be organized and prepared for the meeting and give
the impression that you are confident that the right
decision has been made.
 After the meeting write detailed notes of what the
employee has been told, and what the employee
said.

THE TERMINATION MEETING continued
 If the termination is voluntary, try to get a signed
resignation which sets forth the voluntary reason(s)
for leaving.
 Be sure the employee physically leaves with as
much dignity and self-esteem as possible.
 Make sure the procedure used in conducting the
discharge and exit of the employee is consistent
with that used generally.

RULES FOR DISCIPLINARY DOCUMENTATION
 Do It
 Whenever an event occurs that effects terms and
conditions of employment
 Know Your Audience
 Objective documentation
 Follow the Rules
 Follow company policies and procedures
 Tell the Story – All Sides

What if your efforts fail?
 When a complaint is filed by a former employee
you need to take it seriously --regardless of the
facts.
 Internally,
 Follow policies and procedures
 Preserve ALL evidence
 Consider additional investigation
 Consider the attorney-client privilege and work product
privilege
 Consider Severance Agreements

What if your efforts fail?
 Externally,
 EEOC may request:
o Position Statement
o Documents (Request for Information)
o Site Visit or Interviews
 Consider the attorney-client privilege and work
product privilege
 Consider conciliation, mediation and other “business
decisions”

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The Independent
Contractor Dilemma:
Issues & Answers
Presented by:
Gregory M. Feary • Managing Partner
A. Jack Finklea • Partner
HNI Driver Recruiting Summit
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Owner-Operator Independent
Contractor Model – PROS:
1. Highly motivated business entrepreneurs
2. One man/one truck – 1990s ATA study
indicates safest driver
3. Customer-service oriented problem solver
4. Economic business partner – O/O makes
money only when you make money
5. Operating expense efficiency – i.e., lower
cost alternative
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Owner-Operator Independent
Contractor Model – CONS:
1. Fierce independence of O/O can make overall
operational planning difficult
2. Daily instruction needs to be less detailed
leaving room for service errors
3. Contractual relationship is far more complex
with greater chance for errors
4. Legal uncertainty of IC status can cause
contingent liability and hidden costs
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• Legislative and Case Law Forecast
• IC Status – Challenges & Strategies
• Settlement Carrier Model
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Legislative and Case Law Forecast
Workers’ Compensation Legislation/Amendments
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General IC Misclassification Laws that Apply for WC Purposes
 New York Commercial Goods Transp. Ind. Fair Play Act
 Targets misclassification of commercial vehicle drivers who:
 Possess a “state-issued” driver’s license; and
 Contractor of 10,001 lbs. or heavier vehicle
 Applies for purposes of state labor, WC, and UET laws
 If Business Entity, then
 11-factor test that is reasonable to meet
 Otherwise, revert to difficult to meet ABC Test
 Enrolled June 21, 2013
 Amendments enacted by Gov. Cuomo on March 17, 2014
 NY DOL drafting rules to interpret Act
 Effective Date: April 10, 2014

State Owner-Operator Exemption “Gotchas”
Workers’ Compensation
 Arkansas
 Exempts owner-operators and drivers fleet-operators employ
drivers from definition of employee vis-à-vis the motor carrier
 Intended to rectify increasingly problematic “certificate of non-
coverage”
 Provides mechanism for owner-operator to obtain workers’
compensation coverage under motor carrier’s policy without
otherwise affecting status as IC
 Requires written election in lease
 Allows chargeback of premium
 Not clear whether failure to at least offer owner-operators
opportunity to secure workers’ compensation coverage under
motor carrier’s policy negates presumption of IC status.
 Anticipate need for clarification on technical application
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Federal IC Legislation
 S 1706 seeks to limit Section 530 Safe Harbor
provision
 S 1687 creates Payroll Fraud Prevention Act
 Amends FLSA to require records of ICs
 Requires know your rights notice
 Provides for civil penalties and damages for
misclassification
 Requires targeted audits by Wage & Hour Division
 In Senate Health, Education, Labor and Pensions
Committee
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Minnesota
 Replaces current generally-favorable trucking
and courier definition with 2-phase ABC/
Separate Business Entity test used in NY Fair Play
Act
 Does not include later favorably-negotiated
changes to NY language
 Scope of legislation (whether limited to WC or
applied more broadly) is a point in negotiation
 Active efforts to defeat/limit the legislation are
underway
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Ohio
 Creates owner-operator exemption for
purposes of overtime, WC, and UET
 Based on favorable NCOIL and ATA Model
Language
 Currently in Committee
 Language has been negotiated and agreed
enactment is anticipated
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 Massachusetts IC Law (M.G.L.A. 149 § 148B)
 FAAAA preempts state laws that is directly or indirectly
“related the price, route, or service of any motor carrier .
. . with respect to the transportation of property.” 49
U.S.C. § 14501(c).
 E.D. Virginia found FAAAA preempted 148B because it
“dictates an end to independent contractor carriers in
Massachusetts.”Sanchez v. Lasership, Inc., 937 F. Supp. 2d
730 (E.D. Va. 2013).

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 Imposes difficult ABC Test to demonstrate status as IC
 May be misinterpreted as applying for purposes of
workers’ compensation
 One FAAAA preemption decision but several that did not
decide favorably

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 Lasership settled before ruling from 4th Cir.
 D. Mass and D.N.H. have found that FAAAA does not
preempt 148B because the Statute “has nothing to do
with the regulation of the ‘carriage of property.’”
Schwann v. FedEx Ground Pkg. Sys., Inc., 2013 WL
3353776.

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 Recent Supreme Court decision offers hope.
 ADA (nearly parallel preemption provision) preempted
common law breach of duty of good faith and fair dealing
claim because it sought “to enlarge the contractual
obligations that the parties voluntarily adopt[ed].
Northwest, Inc. v. Ginsberg, 2014 WL 1301865

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 Reclassification claims under 148B similarly seek to
“enlarge the contractual obligations” of the parties by
altering financial obligations of the parties with respect
to payment for labor and equipment.

IC Status – Challenge to
Business Model
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IC Status – Challenge to Business Model
 Sources of Potential IC Litigation
 Workers’ compensation claims – Ark. Trucking
Association’s legislative victory this year
 Employment class actions – w/reclassification
 Unemployment compensation audits/taxes
 State misclassification penalties
 IRS and Section 530 “safe harbor”
 Union-organizing (NLRB)
 U.S. Dep’t of Labor initiatives
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STRATEGIES FOR AVOIDING LITIGATION
 Lease-purchase programs
 State statutes may prohibit
 Capital lease – IC equity
 Allow use of Equipment for other carriers
 Trip leasing
 Shows IC serves more than one master
 Carrier approval
 Insurance; Leasing Regs.; safety regs. continued
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 Opportunity for multiple trucks and drivers
 Demonstrates entrepreneurship
 Substitute drivers help too
 Bolsters argument for separate business entity
 Choice in charge-backs
 Avoid forced purchases and “free” services
 Present choices among competing vendors
 Discourage loans to cover charge-backs continued
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 Method of compensation
 Avoid time-based; consider %-of-AGR
 Build in ways for IC to increase its profitability
 Operations – maintenance, fuel, routing, forced
dispatch
 Promote selection/self-determination by IC
 Excessive limitations = improper control
 Customer and government requirements
 Highlight role in limitations or req’ts on IC
 Cite to regs.; use customer letterhead
continued
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 Business coaching
 OK to convey customer requirements
 Facilitate third-party business-consulting svcs.
 “Employee” terminology
 Guard against this in paperwork, website, blogs,
customer communications
 Other business models – Settlement carrier
 May carry their own risks
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Overview of Conversion
 Traditional Model: authorized Motor Carrier
utilizes independent contractor owner-
operators operating under Motor Carrier’s
authorities and DOT number
 Settlement Carrier Model: Motor Carrier
converts operations into third party logistics
(3PL) operations using owner-operators that
are authorized motor carriers
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Driving Objectives Behind the Model
 Response/defense against reclassification of
owner-operators as employees rather than
independent contractors of existing Motor
Carrier
 Minimization/elimination of standard motor
carrier accident liability – though shippers may
require
 Minimization/elimination of motor carrier safety
regulation by the Federal Motor Carrier Safety
Administration (“FMCSA”) – though shippers
may require
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10 Reasons Why the Settlement
Carrier Model Passes the ABC Test
(SC = Settlement Carrier; PB = Property Broker/ Incumbent Motor Carrier)
1. Possession of a license and operating authority by SC
2. Satisfies different trade, occupation, or profession
prong
a) SC: For hire motor carrier
b) PB: Property broker
3. Satisfies exclusive work relationship prong
a) SC is for hire carrier that may haul without legal
limitation
4. Compliance with federal motor carrier law no longer
creates control
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continued

10 Reasons Why the Settlement
Carrier Model Passes the ABC Test
(SC = Settlement Carrier; PB = Property Broker/ Incumbent Motor Carrier)
5. PB requirements more easily identified as customer
requirements
6. Less legal and historical precedent for finding motor
carriers the employees of brokers/ freight forwarders
7. Expense of becoming a motor carrier creates favorable
fact of investment in tools of trade
8. SC must make independent business decisions regarding
motor carrier compliance
9. Placards identifying SC as the motor carrier equate to
holding out as independent business
10. Easily misapplied Federal Leasing Regulations no longer
relevant
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THE OWNER OPERATOR LANDSCAPE
• Recent Legislation and Administrative Activity
Involving Owner Operators – Added
Commentary
• Additional Recent Case Law Relating to
Owner Operators
• More Practical Considerations for the Use and
Treatment of Owner Operators
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The Owner Operator Landscape
 Why do you want to use owner operators?
 An avenue for overflow work?
 Flexibility?
 To maintain a lean operation?
 Administratively?
 Equipment –wise?
 To save on employment taxes?
 To avoid hassles that come with employees?
 To avoid regulatory compliance?
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 Whatever the reason for using owner operators:
 Regulatory compliance issues will remain
 U.S. DOT regulations apply to owner operators as well as
employee drivers
 Whistleblower statutes (Surface Transportation Assistance
Act) applies to owner operators as well as employee
drivers
 Background check requirements under the Fair Credit
Reporting Act almost certainly will apply to owner
operators as well as employee drivers
 42 U.S.C. 1981 – Race discrimination in contracts – applies
regardless of whether employment relationship exists
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Owner Operator Landscape
 Whatever the reason for using owner operators:
 Written agreements and labels will be disregarded if
owner operators are treated like employees
 Significant liability arises under misclassification
 Wage and hour liability
o Including overtime, minimum wage, wage payment, wage deductions
o Class actions
 Employment discrimination
 Union organizing
 Employment tax liability
 Legislatures, administrative agencies and courts have
taken notice and have acted to police independent
contractor relationships
100

 April Huffington Post Article on delivery
drivers
 “It's like they want us to be employees, but they
don’t want to pay for it.”
 Shifting costs associated with employment to the
employee
 No overtime, no job security, no health insurance
101

Recent Legislation and Admin Activity
 New York’s transportation industry “Fair Play”
Act follows New York’s activity over the past few
years to scrutinize independent contractor
designations
 NY, in 2010, enacted a “Fair Play” Act for the
construction industry
 NY and Massachusetts engaged in a publicity
campaign to condemn misclassification
 NY committed resources to identifying
misclassification and obtaining millions in unpaid
employment taxes
102

Recent Legislative and Admin Activity
 California Willful Misclassification Statute
 “Willful misclassification means avoiding
employee status for an individual by knowingly
and voluntarily misclassifying that individual as
an independent contractor.” Labor Code §226.8
 Violation could subject company to $25,000 fine
per misclassified employee, along with other
penalties
103

 Several States Contain Some Form of Presumption That a
Worker Is an Employee
 The Company therefore bears the burden of proving that a
worker has been properly characterized as an independent
contractor
 Dozens of Bills Are Drafted Each Legislative Session
Addressing Misclassification
 Most die at various stages of the process
 New Jersey’s persistent attempt to address misclassification in
the trucking industry
 Made it to the Governor’s desk before being vetoed last session.
 Teamsters re-launched the bill this session
 The Governor’s weaker political position may mean a greater
chance for the bill becoming law
104

 IRS Employment Tax National Research Project
 Conduct audits (6,000) for the express purpose of testing
misclassification
 U.S. Department of Labor Misclassification Initiative
 Describes misclassification as a “pervasive” problem
 Denies workers access to critical benefits and protections
 Drives substantial loss of revenue to the government
 In place to combat the issue and reduce misclassification
 Joining Forces
 MOU with IRS to work together and share information
 Similar MOU with 15 states
105

 State Task Forces on Worker Misclassification
 At least 25 states have task forces designed to
identify and reduce misclassification
 New York Joint Enforcement Task Force on
Employee Misclassification is particularly active
 Wisconsin:
 workermisclass@dwd.wisconsin.gov
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 FMCSA Examination of Pay Practices
 A Hallmark of the independent contractor analysis is payment by the job as opposed to an
hourly rate.
 Motor carriers typically pay by miles and stops or by a percentage of the load.
 Such “productivity” pay has recently drawn increased attention.
 The FMCSA is currently evaluating whether productivity pay plays a measurable role in
causing accidents
 Part of an overall examination into safety, and coming down hard on productivity pay may serve a
purpose
 Congress mandated a reduction in highway accidents, regardless of fault
 Ferro: paying someone by the mile pushes them to do more, and lengthy unpaid detention times
exacerbate the issue.
 Calls to lessen the burden of the new regulations on split sleep and the 34 hour restart may
make productivity pay a casualty.
 The FMCSA’s study will likely not be completed until the end of 2015.
 Effects of FMCSA Findings
 Even if the FMCSA is unable to correlate accidents with productivity pay, it may very well attempt
to discourage productivity pay
 To the extent hourly pay becomes the recommended course, one more factor in the analysis will
automatically tip toward classification as an employee
 Current highway bill contains provision relating to minimum wage for all on duty time
107

Recent Case Law
 FedEx Ground v. NLRB (D.C. Cir. 2009)
 Focus: does a real opportunity for profit or loss
exist?
 The opportunity was present in this case
 Rates could be and were negotiated
 Contractors could and did sell their routes
 Contractors could take days/weeks/months off
 The “ability to hire others to do the Company’s work is no
small thing”
 Some form of this analysis is generally worked into
most tests for reclassification
108

Recent Case Law
 Blair v. TransAm Trucking (D. Kan. 2013)
 The written agreement spelled out an
independent contractor arrangement
 The plaintiff provided evidence that the
company’s actual practices were otherwise
 The decision must therefore go to a jury
109

Recent Case Law
 Carney v. JNJ Express, Inc. (W.D. Tenn. 2014)
 Drivers sued for violations of Truth in Leasing Regulations
and sought damages for wrongful deductions
 The company moved to compel arbitration pursuant to
the Federal Arbitration Act and the written agreement
 Drivers argued the FAA did not apply because they were
actually employees despite the independent contractor
language of the agreement
 The Court held the drivers were independent contractors,
the FAA therefore applied, and the parties had to go to
arbitration rather than Court
110

Recent Case Law
 Pac Anchor Transportation case
 Company uses independent contractor drivers for work in
Ports in Southern California
 California Attorney General: The company has received
an unfair advantage by classifying drivers as independent
contractors and attempting to avoid employment costs
 Trial court dismissed the case as preempted by federal
law, but the Appeals Court reversed
 Oral argument in the Cal. Supreme Court is set for May
28, 2014
 California Trucking Industry has described the case as
potentially ending the ability to use independent
contractors
111

Practical Considerations
 Review:
 A well-drafted Independent Contractor
Agreement is a Must
 Following the Agreement is crucial
112

 Use Owner Operators Who Have Formed a
Corporation, LLC, or Similar Business Entity
 Creating an entity is fairly simple
 Do not pay the owner operator’s registration fee
for creating the entity
 Require an FEIN that is not the individual’s social
security number
113

 Promote Opportunity for Profit or Loss
 Set up real opportunities for negotiating rates
 Allow the owner operator to establish the delivery
order
 Allow the owner operator flexibility in pick-up and
delivery times
 Allow owner operators to decline loads
 Avoid being overly restrictive on the type of truck
 Allow the owner operator to choose where and how
to maintain and repair equipment
 Do not provide free service or equipment usage in the
event of a breakdown
114

 Promote Opportunity for Profit or Loss (cont’d)
 Allow the owner operator to use multiple trucks
 Allow the owner operator to hire helpers or substitute
drivers
 Limit company involvement to DOT qualification and customer
requirements
 Indicate owner operator’s employees are “qualified” or “not
qualified” as opposed to “approved” or “hired”
 Pay attention to owner operator opportunities to use
their trucks outside of your business
 Trip leasing
 Personal use
 Document those opportunities as they occur
115

 Encourage Independence in the Manner and
Means of Performance
 Allow the owner operator to choose the route
 Allow the owner operator to use discretion with
respect to weather and traffic issues
 Avoid over-involvement in the process of the
movement
 Focus on the end result
116

 Make Sure Your Documents Further The
Independent Contractor Relationship
 No employment application
 No immigration (I-9) forms
 No IRS w-2 or w-4 forms
 No disciplinary notices or written warnings
 No documents identifying a “supervisor” or
“manager”
117

 Talk In Owner Operator Terminology, Avoiding
Employment Terms
 Driver qualification file v. personnel file
 Driver application v. employment application
 Settlement check v. paycheck
 Contract/regulatory/customer requirements v.
company policies/duties
 Orientation v. training
 IC coordinator v. supervisor/manager
 Out of service v. vacation/holiday
 Contract termination v. Fire/discharge
118

 Respond to Inquiries in Owner Operator
Terminology
 Employment history requests
 Tax levies
 Court garnishment orders
119

 Create Separation Between Owner Operators and
Company Drivers
 Separate functions or lanes
 E.g., over the road v. local drivers
 E.g., use company drivers first, then owner operators
 Separate dispatchers
 Separate driver manuals
 Owner operator manual should focus on drug and alcohol testing
protocols and similar issues
 Owner operator manual should not include fringe benefit
references or disciplinary policies
 Do not provide owner operators with fringe benefits or light
duty assignments while recovering from an injury
 No credit cards for owner operators
120

 Pay the Owner Operator Like an Independent
Contractor
 Issue settlements
 No tax withholdings
 Issue 1099
 Issue the settlements to the business entity’s
name and FEIN
121

 Train Managers
 Ensure managers know the functional difference
between employees and owner operators
 Ensure dispatchers understand owner operators
are free to reject loads
122

 Take Precautions
 Make sure owner operators are offered interstate
loads on a regular basis.
 A misclassification inquiry often begins when a driver
believes he or she has missed out on significant overtime
compensation
 Drivers who carry interstate loads would be exempt from
overtime even if they were employees
 Keep a record of on duty hours
 In the event of reclassification, such a record will prevent a
driver from making unfounded claims as to the number of
hours worked
123

 Final Word
 Continually audit practices and remain diligent
 It is often more convenient to treat owner
operators like company drivers
 Doing so, particularly in the current climate, can
have devastating effects
124

Owner Operator Landscape
 Questions?
125

126
TAKE THE WHEEL.

127
TAKE THE WHEEL.

128
Agenda
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•
•
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132
TAKE THE WHEEL.

133
TAKE THE WHEEL.

Driver Recruiting Summit: The Risks & Opportunities of Filling Your Fleet

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