PRASAD SHARMASVP AND GENERAL COUNSEL

AMERICAN TRUCKING ASSOCIATIONS

• “UBER MAY BECOME AN ISSUE IN THE US PRESIDENTIAL RACE AS HILLARY CLINTON VOWS TO CRACK DOWN ON WORKER 'MISCLASSIFICATION‘” – BUSINESS INSIDER HEADLINE 7/13/15

• “A GROWING WAY TO CUT PAY: COMPANIES TREATING WORKERS AS CONTRACTORS” – CHICAGO TRIBUNE 6/24/15

• “BOSSES RECLASSIFY WORKERS TO CUT COSTS” – WALL STREET JOURNAL 6/30/15

• “IN INDUSTRY WHERE FEW WORKERS ARE ‘EMPLOYEES,’ TEAMSTERS MOUNT MULTI-FRONT ATTACK” – THE NATION 7/25/13

• LABOR’S EFFORTS• NATIONAL EMPLOYMENT LAW PROJECT REPORT (2010) – OUR “ANALYSIS

CONCLUDES THAT THE TYPICAL PORT TRUCK DRIVER IS MISCLASSIFIED AS AN INDEPENDENT CONTRACTOR.”

• “LIKE MILLIONS OF WORKERS, DRIVERS ARE TREATED LIKE REGULAR EMPLOYEES BUT ILLEGALLY COMPENSATED AS INDEPENDENT CONTRACTORS. THE TEAMSTERS ARE COMMITTED TO WORKING WITH DRIVERS AND THEIR ALLIES TO STOP WAGE THEFT IN THE PORT TRUCKING INDUSTRY. JUSTICE FOR PORT DRIVERS MEANS JUSTICE FOR ALL AMERICAN WORKERS.” – JIMMY HOFFA, GENERAL PRESIDENT

• STATE EFFORTS• USDOL SIGNED MOU WITH 19 STATES (INCLUDING FLORIDA EARLIER THIS

YEAR) TO COORDINATE INFORMATION SHARING AND ENFORCEMENT EFFORTS TO COMBAT INSTANCES OF WORKER MISCLASSIFICATION

• Independent contractors are frequently highly motivated, experienced, skilled drivers

• Provide needed equipment and capacity at considerable cost savings

• Provide ability to meet fluctuation in demand for transportation services

• Help address shortage in experienced drivers

• Allows individuals the opportunity to be entrepreneurs and own their own business; springboard for small business creation

• Increased work flexibility, independence, and control of their own destiny

• High levels of job satisfaction• For ICs in general, only 1 in 7 said independent status was due

to factors beyond their control• 2012 Univ. of Arkansas survey of owner-operators found 67%

said it would be “very easy” and another 13% said it would be “easy” to find an employee driver job

• Typically outearn similarly situated employee drivers

• For workers’ comp purposes, an employee does not include:

AN OWNER-OPERATOR OF A MOTOR VEHICLE WHO TRANSPORTS PROPERTY UNDER A WRITTEN CONTRACT WITH A MOTOR CARRIER WHICH EVIDENCES A RELATIONSHIP BY WHICH THE OWNER-OPERATOR ASSUMES THE RESPONSIBILITY OF AN EMPLOYER FOR THE PERFORMANCE OF THE CONTRACT, IF THE OWNER-OPERATOR IS REQUIRED TO FURNISH MOTOR VEHICLE EQUIPMENT AS IDENTIFIED IN THE WRITTEN CONTRACT AND THE PRINCIPAL COSTS INCIDENTAL TO THE PERFORMANCE OF THE CONTRACT, INCLUDING, BUT NOT LIMITED TO, FUEL AND REPAIRS, PROVIDED A MOTOR CARRIER’S ADVANCE OF COSTS TO THE OWNER-OPERATOR WHEN A WRITTEN CONTRACT EVIDENCES THE OWNER-OPERATOR’S OBLIGATION TO REIMBURSE SUCH ADVANCE SHALL BE TREATED AS THE OWNER-OPERATOR FURNISHING SUCH COST AND THE OWNER-OPERATOR IS NOT PAID BY THE HOUR OR ON SOME OTHER TIME-MEASURED BASIS.

FLA. STAT. § 440.02

• IRS, for employment tax purposes, uses the right to control test, which focuses on right to control manner and means of performance, not simply the end result

• To guide its analysis, IRS uses a multiple factor test (used to be 20; now technically 11 but essentially covers the prior 20) grouped into 3 categories:

• Behavioral control (e.g., training, reporting/monitoring, etc)• Financial control (e.g., method of pay, who pays for what)• Type of relationship (e.g., right to terminate, term)

• USDOL, for FLSA and SSA purposes, uses the economic realities test. The factors to consider:

1. Degree of control2. Relative investments of the parties3. Degree to which worker’s managerial skills affect opportunity

for profit or loss4. Skill and initiative required of the worker5. Permanency of the relationship6. Extent to which work performed is an integral part of the

“employer’s” business• DOL issued guidance on July 15, 2015

• This test presumes a worker is an employee unless the worker:

A. Is free from control or direction over the performance of the services;

B. Performs the services outside the usual course of business of the putative employer or outside the places of business of the putative employer; and

C. Is customarily engaged in an independently established trade or business.

• Simply having a written agreement that say it establishes an IC relationship and issuing 1099s no longer assures IC status

• But do have a written agreement and do issue 1099s• Ensuring joint satisfaction of customer expectations is useful

• Federal leasing regs – “exclusive possession and control”

• Uniforms and grooming/appearance rules viewed as evidence of control

• Monitoring/supervision/coaching viewed as evidence of control

• Working for only one carrier/restrictions on use of the truck

• Equipment leasing arrangements (extra scrutiny in CO, CT, IL, LA, MD, MN, NJ, OK, OR, SC, VA, WV, WI)

• Renewal and termination provisions of IC agreement• Employee-like language in handbooks/manuals

• TREAT THE IC AS A BUSINESS• Allow some points of negotiation• Facilitate opportunities for owner-operator to make business

decisions and to realize profit or loss (this means avoiding financial assistance that keeps operator from suffering loss/failing)

• ENSURE THE OPPORTUNITY TO HAUL FOR OTHER CARRIERS (both in IC agreement and equipment agreement)

• MC identification should be easily removable• AVOID APPEARANCE OF FORCED DISPATCH

• Rejecting one load ≠ termination

• AGREEMENTS SHOULD BE ARMS LENGTH AND ON COMMERCIALLY REASONABLE TERMS

• Avoid the appearance of financial assistance and be careful of using MC’s creditworthiness to impart a sweetheart deal to owner-operator

• INCENTIVIZE BEHAVIOR AND ADOPTION OF EQUIPMENT

• BE MINDFUL OF TERMINOLOGY USED THROUGHOUT THE COMPANY INTERNALLY

• CONSIDER ESTABLISHING A CONTRACT RENEWAL PROCESS AND ALLOW FOR MUTUAL TERMINATION RIGHTS

• PROVIDES MORE PREDICTABLE CAPACITY AND OFTENTIMES ENGENDERS MORE LOYALTY

• HAVE MORE CONTROL

• CONTROL = MORE TRAINING, EASIER DEPLOYMENT OF TECHNOLOGY

• COMPANY PROVIDES VEHICLES, SO MORE UNIFORMITY

• DRIVER SHORTAGE

• THE POTENTIAL FOR UNIONIZATION AND THE NLRB• AMBUSH ELECTION RULE

• COMPLIANCE WITH MYRIAD LAWS• PAYMENT OF EMPLOYMENT TAX, UNEMPLOYMENT,

WORKERS’ COMP• WHILE EXEMPT FROM OVERTIME UNDER FEDERAL LAW,

MAYBE NOT UNDER STATE LAW• HEALTH CARE, PAID SICK LEAVE, MEAL AND REST BREAK

LAWS

Source: ATA

9596979899

100101102103104105

2014 Fe

b

Mar

Apr

May Jun Jul

Aug

Sep

Oct

Nov

Dec

2015 Fe

b

Mar

Apr

May

I.C.sEmployee Tractors

TRUCKLOAD INDUSTRY STRUGGLES WITH INDEPENDENT

CONTRACTORS INDEX: JANUARY 2014 = 100

+3%

-4.7%

Percent change (May ‘15 vs Jan ‘14)