Freight forwarding companies often call their drivers “independent contractors” for a variety of reasons. The first major reason is the tax benefit: independent entrepreneurs are responsible for all of their Medicare/Social Security taxes. They are exempt from workers` compensation by the state. There is also the doctrine of implied tort liability and the transport company is not legally liable for the actions of drivers. For three decades, California`s test for characterizing workers as employees or independent contractors was that set out in the 1989 California Supreme Court decision in S.G. Borello & Sons, Inc.c. Department of Industrial Relations (“Borello”). Borello formulated a multifactor equilibrium criterion for determining the classification of workers, including, among others: whether the employer has the right to control the mode and means of work; if the employee claims to be engaged in a profession or business different from that of the employer; whether the employer provides the tools, tools and the workplace; whether the service provided requires special skills; if the work is usually performed under the direction of the employer or by a specialist without supervision; and whether the employee`s activity was part of the regular activities of the hiring party. Borello allowed for a flexible and factual investigation without focusing on a specific factor. Borello`s test therefore left a lot of room for the determination of an independent entrepreneur relationship. “If the decision is upheld, auto transportation companies will likely have to rethink how they structure their relationship with drivers,” said Kyle Winnick, an attorney at Epstein Becker Green in Newark, New Jersey.
He noted that many motor carriers use independent contractors to transport goods and that some owner-operators in turn use their own subcontractors. The California legislature passed AB5 after the state Supreme Court approved the so-called ABC test in a 2018 decision (Dynamex Operations West, Inc. v Superior Court). The test, which covers many industries under AB5, requires that three criteria be met for an employee to be classified as an independent contractor. The worker must: In 2016, three truck drivers filed a class action lawsuit against PAM Transport, claiming that the freight company had not paid them at least the minimum wage. The truck drivers argued that even though they were not on duty, they still had job-related responsibilities. A truck driver can and often works as an independent contractor. While this is generally true, many truck drivers working today may be mistakenly classified as.
Learn more Work fully for the business. The work of independent contractors is often peripheral to the business; For example, an insurance agency would hire an IT professional to manage its networks (independent contractor). Since the work of the drivers is an integral part of the shipping company, there is clearly an employer-employee relationship. Truckers` misclassification lawsuits have always been successful in securing compensation for consumers. In January 2019, more than 20 California drivers received $6 million after the California Labor Commissioner determined they had been wrongly classified as independent contractors. Nearly 3,000 truck drivers joined the FSA`s pursuit. The victory would have affected several similar cases in which it should be clarified whether the truck drivers are independent contractors or employees. Cabral noted that many owner-operators have made significant investments in their own equipment so they can be self-employed. However, if an employer does not establish all three conditions, AB5 requires that the employee be considered an employee rather than an independent contractor.
Experts consider that the “B” criteria are the most difficult for independent contractors. The California Trucking Association (CTA) – which represented motor carriers that hire owner-operators – and two independent truckers filed a lawsuit to block the application of the ABC test against engine carriers because the “B” components jeopardized their business model. Because many states have their own labor laws and classifications regarding independent contractors, a truck driver`s employment status can vary from state to state. Among the things that may indicate whether a truck driver is wrongly classified as an independent contractor rather than an actual employee, there is the question of whether they are required to do so: The question of whether the truck driver with whom you have been involved in an accident is an employee or an independent contractor of a freight transportation company is very important in determining whether you have the right and possibly claim damages only from the driver of the truck himself or from the transport company. In some cases, companies may intentionally misclassify employees as independent contractors to avoid paying certain benefits to employees, such as Social Security and unemployment insurance taxes. In some routine payroll and hourly trials, airlines pay drivers millions of dollars for refunds after misclassifying them as independent contractors to avoid taxes. Many factors play a role in deciding whether a particular truck driver is an employee or independent contractor of a particular freight forwarding company. These factors must be applied on a case-by-case basis, and there are many gray areas where one factor points in one direction and another factor points in the opposite direction. That`s why hiring experienced truck accident lawyers can be so important to clarify this information. In recent years, many freight forwarding companies, just like ABC Trucking, have been reviewed by state and federal agencies. Agencies like the IRS or your state Workers` Compensation Board can and will challenge the classification of independent contractors. Once a driver is classified as an employee, the transportation company would be responsible for the employer`s share of the payroll tax (6.2% of Social Security, 1.45% of Health Insurance), paid holidays, disability, as well as the cost of employee compensation.
It`s no surprise that freight forwarding companies often like to call their drivers “independent contractors” because there is often no imputed responsibility and they are not legally responsible for the drivers` actions. The law knows that this classification is an advantage for transportation companies, so not only do they take the company`s word for it, but there are many factors involved in the decision whether a particular truck driver is really an employee of the transportation company. Freight forwarding companies can save a lot of money by wrongly classifying truck drivers as independent contractors, even if these savings come at the expense of drivers. In a blow to California`s trucking industry, the Ninth District recently ruled that California`s law, which addresses whether workers can be classified as employees, is not anticipated by the Federal Aviation Administration Authorization Act of 1994 (the “FAAAA”). As a result, according to the current test in California, it will remain difficult for transportation companies to establish an independent contractor relationship with their drivers, including owner-operators. When drivers are classified as employed by a court or regulatory body, they are eligible for certain wage and hourly protection provisions included in the California Labor Code, including overtime pay. “In practice, the most important conclusion for road transport companies and owner-operators is that they must comply with AB5, either by switching to traditional employee classifications or by adhering to one of the AB5 exemptions,” Cabral said. “The latter option is not for the faint of heart and should only be considered with the advice of a lawyer. Maintaining an independent contractor`s business model could result in significant potential liability and require a high level of risk tolerance. “If truckers can prove that a misclassification has occurred, it can result in significant monetary costs for freight forwarding companies. In one case, the California federal judge who led the case gave initial approval of a multi-million dollar settlement for 847 plaintiffs who had filed a lawsuit against XPO Logistics.
Independent contractors are individuals or businesses that are hired on a non-permanent basis for a particular project or job. They can usually do the work at the times they choose, as long as they meet the client`s deadline. Even if it is determined that a truck driver is an independent contractor, there are some cases where the freight forwarding company can still be held responsible for its actions. This is based on federal regulations that assign responsibility to a freight forwarding company if a truck driver (owner-operator) is “on shipment” and works under the operating authority of the road transport company (freight forwarding company). There are many grey areas when a driver is “on duty” or not, and an experienced truck accident lawyer can help determine whether this exception applies in a particular case. After a lengthy public debate, the California legislature passed Assembly Bill 5 (“AB-5”) in 2019, which codified the ABC test as Section 621(b) of the Labor Code. While the AB-5 exempted a number of professions from the ABC test — including doctors, accountants, and songwriters — it did not include an exception for commercial truckers. .
