Truck Law

A Transportation Law Blog from TransportationAttorneys.NET

Month: September, 2019

Requiem For The Independent Trucker

by gspencermynko

California democrats have effectively killed off the Independent Contractor business model in trucking. Come January 1, 2020, if you hire a bona-fide owner operator truck driver to haul a load under your authority, the state of California and plaintiff’s lawyers will be allowed to destroy your business, sue you back to the Stone Age, and, as an owner, director, or officer of a trucking company, take everything you own. Yeah, it’s that shitty.

California Democrats decide to take a bad idea and make it worse.

As I’m sure all of you know, in 2018 The California Supreme Court decided on their own to completely change independent contractor law by adopting the “ABC Test” to determine whether someone is an independent contractor. Apparently, they were so enamored with how the state of Massachusetts determines who is an independent contractor, they shit-canned decades of common law jurisprudence culminating in the “Borello” test, and committed some of the worst legislating from the bench in American history when they handed down the decision in Dynamex Operations v. Superior Court (2018) 4 Cal. 5th 903, and made the ABC test the law of the land.

The Democrat politicians in California went into unbridled orgiastic ecstasy and clearly felt that Dynamex wasn’t simply another court case, but something holy like The 10 Commandments God gave to Moses on top of Mount Sinai.

Unlike Moses, who probably had some humility and decided it wouldn’t be a good idea to fuck with God by changing the 10 Commandments, The Democrat politicians were undaunted and obviously believed they could improve on the divine edict as handed down in Dynamex and make it better than their Higher Power originally intended.

The Democrats have (another) orgy.

While the ABC test, as handed down by the Creator and relayed to humankind through His vessel The California Supreme Court, was a good start in the minds of the Democrats, they decided to broaden its reach after getting together and taking a bunch of ecstasy at a rave. Well, to be honest, I’m not sure the Democrats we’re high on ecstasy (or maybe LSD) when they created AB5 and proclaimed it “God’s law”, but until someone can give me a better explanation for their behavior, I am going to continue to float that theory.

Regardless of the status of their neurotransmitters and intoxicated brains, AB5 has been entered into the sacred text of California law in the book of Gavin. And while the Democrat politicians seem to be in a state of perpetual inebriation, owners and officers of trucking companies are headed for a shit storm that can only be described as the buzz-kill of the century. A word of advice to trucking company owners using ICs: don’t drink on New Year’s Eve, because do you really want to be hung over while attempting to come to grips with the fact that AB5 is now the law of the land? And if you plan on celebrating in Vegas, you may want to simply stay there and open a marijuana dispensary.

Let’s add a few more Commandments.

When the ABC test was handed down by God…. er, I mean the California Supreme Court…. it was limited to wage orders which, for practical purposes, limited the application of the test to such things as minimum wage, meal and rest breaks, and keeping accurate wage statements and time records, etc.
Despite the consecrated genius of its original form, the high priests of the Democrat Party expanded the ABC test to apply to the entire labor code and the entire unemployment insurance code. So regardless of what state agency is coming after you or what State sanctioned temple you are being held in to account for your sins, get prepared for some old testament justice meted out by Labor Board commissioners, tax auditors, plaintiff’s attorneys, and whoever else has been given the green-light to cut off your head.

So what do I do to keep myself out of the crucible of the Democrat Overlords?

Well, before I conclude that you’re fucked – which you are – allow me to elaborate on your shitty options which basically fall into two major categories: convert your independent contractors into employees by 1/1/20 (good luck with that); or continue to treat them as independent contractors (good luck with that).

The employee route:

OK, this is simple: convert all of your 1099 owner operators into employees for all purposes. Withhold taxes. Provide benefits. In addition to withholding, and on-boarding them as employees, be sure to comply with all of the requirements of the California labor code. So be sure to track all of the hours they work, pay at least minimum wage, make sure meal and rest breaks are provided, along with sick leave and family leave. Reimburse them for all expenses. Be sure to put up a California compliant poster in the break room. Make sure your wage statements are compliant and your time keeping records are meticulous.

Oh – yeah – one other little detail: get a work comp policy. I’m sure State Fund will be happy to sell you one at 25 to 30% of your payroll.

Then, after you have done all of that, you can bask in the gratitude and appreciation of your former independent contractors, who will be universally sympathetic to your plight and understanding in that you are simply trying to abide by the law.

But wait, isn’t there some exemption we can take advantage of?

Well, you are probably thinking of the “Business to Business” exception. Here, let me quote it verbatim:

1) If a business entity formed as a sole proprietorship, partnership, limited liability company, limited liability partnership, or corporation (‘business service provider’) contracts to provide services to another such business (‘contracting business’), the determination of employee or independent contractor status of the business services provider shall be governed by Borello, if the contracting business demonstrates that all of the following criteria are satisfied:

a) The business service provider is free from the control and direction of the contracting business entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.

b) The business service provider is providing services directly to the contracting business rather than to customers of the contracting business.

c) The contract with the business service provider is in writing.

d) If the work is performed in a jurisdiction that requires the business service provider to have a business license or business tax registration, the business service provider has the required business license or business tax registration.

e) The business service provider maintains a business location that is separate from the business or work location of the contracting business.

f) The business service provider is customarily engaged in an independently established business of the same nature as that involved in the work performed.

g) The business service provider actually contracts with other businesses to provide the same or similar services and maintains a clientele without restrictions from the hiring entity.

h) The business service provider advertises and holds itself out to the public as available to provide the same or similar services.

i) The business service provider provides its own tools, vehicles, and equipment to perform the services.

j) The business service provider can negotiate its own rates.

k) Consistent with the nature of the work, the business service provider can set its own hours and location of work.

l) The business service provider is not performing the type of work for which a license from the Contractors State License Board is required, pursuant to Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code.

I have this picture in my mind of the California Democrats who created this abomination sitting at the edge of a minefield, drinking lemonade and eating petit fours, while watching trucking company owners try to navigate the minefield that is the “Business to Business Exception”. Of course, they sit back and laugh while watching the trucking company owners and executives get blown to smithereens and smugly deride them for being so stupid as to classify anybody as an independent contractor.

Shades of Gray.

While the picture I paint is sort of black and black, there are about 10 or 11 options trucking companies can consider as they confront this horrible new reality. You may consider it worth your while to sit down with me and discuss these options, however, I will be blunt: they all suck.

So, I prepare to bid farewell to the independent contractor/owner operator truck driver: it’s been nice knowing you. I hope one day you arise from the ashes.

Contact Transportationattorneys.net today for all of your Transportation matters.

FMCSA HOS Changes + Will ICs Survive Friday the 13th?

by gspencermynko

In this article I’m writing about two substantially important potential developments in Trucking and Transportation. Neither of these matters have been finalized yet, however, because of their great importance and future implications, all trucking companies need to keep these matters on their radar because they could profoundly affect their businesses. And finally, I want to comment on a potential escape hatch should doomsday arrive this Friday.

The FMCSA May change hours of service much-maligned rules that have been in place since 1937

I might as well start off this article with some good news: The FMCSA has proposed five changes to the hours – of – service rules. Back in the days before Big Brother and his ELD gizmo decided to catch a ride with every long-haul trucker in America, outlaw truckers utilized numerous creative ways flout HOS rules. As we all know, those days came to a crashing halt with ELD’s.
However, The ELD mandate resulted in numerous criticisms and real-world problems faced by the people in the driver’s seat. The bulk of these complaints related to safety and flexibility, such as being forced to park in unsafe places and recklessly trying to beat the clock. Apparently, the FMCSA has listened and has laid out a new proposal.

“This proposed rule seeks to enhance safety by giving America’s commercial drivers more flexibility while maintaining the safety limits on driving time,” said U.S. Transportation Secretary Elaine L. Chao.

“Based on the detailed public comments, FMCSA’s proposed rule on hours of service offers five key revisions to the existing HOS rules:

The Agency proposes to increase safety and flexibility for the 30 minute break rule by tying the break requirement to eight hours of driving time without an interruption for at least 30 minutes, and allowing the break to be satisfied by a driver using on duty, not driving status, rather than off duty.

The Agency proposes to modify the sleeper-berth exception to allow drivers to split their required 10 hours off duty into two periods: one period of at least seven consecutive hours in the sleeper berth and the other period of not less than two consecutive hours, either off duty or in the sleeper berth. Neither period would count against the driver’s 14-hour driving window.

The Agency proposes to allow one off-duty break of at least 30 minutes, but not more than three hours, that would pause a truck driver’s 14-hour driving window, provided the driver takes 10 consecutive hours off-duty at the end of the work shift.

The Agency proposes to modify the adverse driving conditions exception by extending by two hours the maximum window during which driving is permitted.

The Agency proposes a change to the short-haul exception available to certain commercial drivers by lengthening the drivers’ maximum on-duty period from 12 to 14 hours and extending the distance limit within which the driver may operate from 100 air miles to 150 air miles.”
The new rules “would not increase driving time and would continue to prevent CMV operators from driving for more than eight consecutive hours without at least a 30-minute change in duty status.”

See https://www.fmcsa.dot.gov/newsroom/federal-motor-carrier-safety-administration-publishes-hours-service-proposal-improve-safety.

People wishing to submit comments before the window soon closes can look here: https://www.federalregister.gov/documents/2019/08/22/2019-17810/hours-of-service-of-drivers.

The day of reckoning is upon us: Will the Dynamex ABC test become law this week and turn Owner-Operators and the trucking companies who use them into criminals?

After The California Supreme Court radically changed the definition of an independent contractor in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, trucking companies were thrown into a state of turmoil, but our politicians were thrown into a state of ecstasy. Indeed, California democrat politicians felt the court’s decision was the greatest thing since sliced bread. As such, they quickly went to work to “codify” the extremely restrictive ABC test. Notably, The court’s decision only applied to Industrial Welfare Commission Wage Orders, and excluded claims brought under the Labor Code or Unemployment Insurance Code. Undaunted, California politicians felt they could make a “good” idea even “better” by making sure AB 5 will apply in any circumstance and criminalize the behavior of the majority of trucking companies and truck drivers in California.

While doctors, dentists, lawyers and other professionals were able to secure an exception to the “ABC Test” in AB 5, The trucking industry has not been successful in securing an exception. And it looks like they won’t. AB 5 cleared a committee last Friday in the state Senate and it is expected to pass both houses of the legislature before lawmakers adjourn Friday, September 13. Furthermore, governor Newsom has promised to sign the bill into law.

Unfortunately, this will likely drive owner-operators and the businesses who rely on them out of business or force them to operate illegally until they get caught.

“The light at the end of the tunnel is just the light of an oncoming train.” Robert Lowell.

On that pessimistic note, I urge my readers to take what I am about to say next with reluctant optimism. Is there language in AB 5 that owner-operators, and the trucking companies who rely on them, can exploit to exempt O-Os from the ABC test? Specifically, there is language in AB5 which states the holding in Dynamex will not apply to bona-fide business-to-business contracting relationships between sole proprietors, partnerships, LLCs, and corporations. In such cases, the old Borello or “common law” test will determine whether someone is an employee or independent contractor. However, this will only apply if certain criteria are satisfied, which include:

(A) The business service provider is free from the control and direction of the contracting business entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.

(B) The business service provider is providing services directly to the contracting business rather than to customers of the contracting business.

(C) The contract with the business service provider is in writing.

(D) If the work is performed in a jurisdiction that requires the business service provider to have a business license or business tax registration, the business service provider has the required business license or business tax registration.

(E) The business service provider maintains a business location that is separate from the business or work location of the contracting business.

(F) The business service provider is customarily engaged in an independently established business of the same nature as that involved in the work performed.

(G) The business service provider actually contracts with other businesses to provide the same or similar services and maintains a clientele without restrictions from the hiring entity.

(H) The business service provider advertises and holds itself out to the public as available to provide the same or similar services.

(I) The business service provider provides its own tools, vehicles, and equipment to perform the services.

(J) The business service provider can negotiate its own rates.

(K) Consistent with the nature of the work, the business service provider can set its own hours and location of work.

(L) The business service provider is not performing the type of work for which a license from the Contractor’s State License Board is required.

Uhhh, OK – that’s about as clear as mud and will ensure years of costly litigation fighting over this. My opinion is that until the Feds or the US Supreme Court step in and preempt California law, the days of legal ICs in trucking will effectively come to an end this week. Stay in touch with Transportation Attorneys for future guidance.