(a) The extent of control which, by the agreement, the master may exercise over the details of the work.
(b) Whether or not the one employed is engaged in a distinct occupation or business.
(c) The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision.
(d) The skill required in the particular occupation.
(e) Whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work.
(f) The length of time for which the person is employed.
(g) The method of payment, whether by the time or by the job.
(h) Whether or not the work is part of the regular business of the employer. (i) Whether or not the parties believe they are creating the relation of master and servant.
(j) Whether the principal is or is not in the business.
Courts will also consider whether the individual is, in fact, providing services as an independent business, i.e., whether the individual has a significant, actual(as opposed to theoretical) entrepreneurial opportunity to enjoy profits or suffer losses, a realistic ability to work for other companies, a proprietary or ownership interest in the work, and an ability to control important business decisions such as scheduling, hiring, selection, and assignment of employees, purchase and use of equipment, and commitment of capital.
The matter of whether Truck Drivers are actually in business for themselves, have invested their own money, and have entrepreneurial opportunity for gain or loss is scrutinized by courts as much as, if not more than, the “Right of Control” doctrine.
So with these time tested principles in mind, here’s what I suggest companies do:
Work with owner-operators that actually own their own trucks. Even better, work with companies that own their own trucks; i.e.: work with owner-operators who have incorporated or formed an LLC, and the corporation actually owns the truck.
A lease better be a true lease. If you choose to lease trucks to independent contractors, be prepared for a high level of scrutiny and skepticism. So if you lease a truck to an independent contractor, make it look like a true lease. First of all, the truck should be registered in the owner-operator’s name, with a lien held by the company. Make the lease payment independent of the independent contractor’s income. I advise clients to not to deduct lease payments from their settlements, but instead require the independent contractor to make monthly lease payments from their own business accounts. Of course, if the IC can lease a truck from a leasing company that is truly independent from the carrier, that is the best way to go.
The IC decides how, when, and for what purposes the equipment is used for.If the driver is truly an independent contractor leasing a truck, then he or she should be able and entitled to to use that truck as he or she pleases: that means driving for other companies if the contractor wishes to. Furthermore, the independent contractor can put his own employee drivers in the truck if he wishes to. If the carrier exerts heavy control over the use of the truck, they are simply courting disaster.
Option to buy. Make sure the independent contractor is in a lease-to-own contract with an option to purchase or one that has a defined buy-out payment at the end. In other words, I like it when the IC is actually gaining equity in the truck.
Fuel, Maintenance, Insurance are the IC’s responsibility. Make it clear that the independent contractor pays for his fuel, maintenance, and insurance.
No exclusivity. Work with owner-operators that drive for other companies.
Don’t work with individuals, work with companies. Work with owner-operators who are incorporated and have a federal EIN number. Remember: a corporation can’t file for unemployment, can’t claim disability, and can’t file a workers’ compensation claim.
An Independent Contractor is a business, not an person. Work with IC’s that look like an actual business. I recommend that companies work with owner operators who have their own authority, a business license, business cards, a website, business email, business fax numbers, and anything else that makes them look like an independent business. If possible, work with ICs that have their own place to park the truck when it’s not in use.
Don’t pay John Smith: pay John Smith Trucking Inc. Cut checks to the business, not the individual. This obviously makes it clear that you’re dealing with a business and not an individual, and makes it more likely that the money will be deposited into a business account instead of a personal account. And always only pay per job, with no guarantee that another job is forthcoming.
Remember the Aflac duck (sorry – I couldn’t resist). This is serious: Work with owner operators that carry occupational accident insurance. I can’t stress this enough. God forbid a driver gets hurt, but if they do, you will be relieved if their Occupational Accident Insurance Carrier picks up the tab for their medical bills and lost wages.
Let Go. Don’t micromanage the independent contractor: as far as you’re concerned it’s the independent contractor’s responsibility to get from point A to point B. I advise clients to not require independent contractors to check in or track independent contractors with GPS devices, follow company policies, be required to sign off on an employee hand book, or follow company protocols. I have seen authorities interpret such actions as exerting control over the drivers . Again, remember that the independent contractor should appear to be engaged in a distinct and separate business – not your business.
Talk to a knowledgeable lawyer about contracts. Don’t use contracts that give your company unnecessary and over-burdensome control over the independent contractor and the ability to direct the results and the method of the work or services of the independent contractor. This requires a contract that is artfully and carefully drafted. I’ve seen bad contracts be the final nail in the coffin of misclassification cases that go bad for the carrier.
While I realize some of this may be difficult to accept, this is reality trucking companies face if they wish to continue using an Independent Contractor business model.
We hope that once you utilize Transportation Attorneys
to help you get your IC agreements and business model set up, you’ll enjoy many miles of trouble-free trucking. Worker misclassification is a big deal in California. Trucking companies who use independent contractors should carefully review their contracts and practices in order to comply with the law. We are one of the few law firms
that focuses on trucking, transportation and logistics with the knowledge and experience to competently guide you through these ever present hazards. We are very experienced in dealing with the distinctions between independent contractors and employees.