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trucking regulations and driver misclassification

Driver misclassification is not a new problem as part of trucking regulations. If a driver fills the role of a company driver, but the employer pays them with a 1099 as an independent contractor, there’s a problem. That driver is likely misclassified, an error that employers can face serious consequences for. Recent Legislation, such as the PRO Act, was developed to help combat driver misclassification. Unfortunately, it also effectively eliminates the owner operator business model. Here’s what you need to know about the state of the PRO Act in Congress and driver misclassification.

What Is the PRO Act?

If you follow political or legal developments in trucking regulations, you’ve likely been following the PRO Act. This bill, formally known as the Protecting the Right to Organize Act, intends to protect workers from unethical employment practices, but it has alarming consequences for the owner operator business model. The PRO Act is similar to California’s Assembly Bill 5 (AB5), and it sets very specific criteria for gig workers. Unfortunately, in trucking, this also applies to owner operators. 

Under the PRO Act, for a company to employ an independent contractor (like an owner operator), the partnership must pass an ABC test. According to the PRO ACT, an independent contractor must meet the following criteria:

“(A) the individual is free from control and direction in connection with the performance of the service, both under the contract for the performance of service and in fact;

(B) the service is performed outside the usual course of the business of the employer; and

(C) the individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed.”

As part of trucking regulations, the B prong is usually the hardest to satisfy. Section B requires that independent contractors must be doing work outside of the scope of normal business. Unfortunately, in an owner operator model, those drivers are at the heart of a successful operation. Trucking experts are raising concerns that the PRO Act may effectively eliminate the current owner operator model. To date, the PRO Act has passed in the House of Representatives but has not made it to the Senate floor for discussion yet.

What Is the PRO Act Trying to Solve?

truck driverMany trucking regulations experts are strongly opposed to the PRO Act, but there is an underlying problem that this Act brings to the surface. The PRO Act tries to prevent companies from “employing” workers without offering benefits AKA misclassifying drivers. In many cases, this pushes the cost burden to the individual driver. However, owner operators are business owners, and many enjoy the freedom, income potential, and flexibility that comes with their role.

While the owner operator model works well for many truck drivers and carriers, driver misclassification is still prevalent in the industry. Misclassified drivers include those who earn pay as independent contractors and do not have guaranteed work but work like company drivers. There is a difference between owner operators who run under their own authority and misclassified truck drivers, however, the PRO Act includes both. 

What Is Driver Misclassification?

Driver misclassification occurs when fleets try to pay company drivers as independent contractors. By classifying company drivers as 1099 employees, carriers illegally avoid paying full benefits to their drivers. Owner operators are a different business model. They are independent contractors. True owner operators run their own business. They partner with carriers based on a mutually agreeable contract and may run for multiple carriers simultaneously. 

If you are uncertain about the appropriate driver classification for your fleet, there are ways to check.

Does the driver:

  1. Do their job under their own direction? For example, can drivers refuse loads if it doesn’t meet their criteria?
  2. Pay lease, maintenance, and insurance costs? Have proof of vehicle registration in their name?
  3. Have the ability to work for another company?

If you said “no” to any of these questions, you are employing a company driver. In that case, the driver should earn pay as a W2 employee and be eligible for benefits.

Brian Dershaw

Brian Dershaw, Partner at Taft Law

We spoke with Brian Dershaw, Partner at Taft Law, and he shared Taft’s response to companies with concerns about misclassification:

“In many instances, contractor classification may be an essential component of the company; the consequences of misclassification could be detrimental. With that in mind, we continuously navigate the federal and state tests in this area. This includes guiding clients in ways to maintain their independent contractor classification and, if appropriate, advising on the transition to an employer-employee model.”     

Paying a company driver as a 1099 employee is illegal and can lead to serious consequences, but there are legal resources, such as Taft Law or other firms, that can help.

What Are the Penalties for Driver Misclassification?

The legal ramifications for driver misclassification can vary based on the situation. In some cases, the company is required to pay back the money owed to the driver based on the loss of income and benefits. In severe cases, companies may face additional fines or time if the misclassification is found to be deliberate.

When asked about driver misclassification penalties, Taft Law’s Brian Dershaw, shared:

“If an employee is misclassified as an independent contractor, that can raise serious issues across the employment spectrum. These include wage and hour issues such as overtime under the FLSA and state laws, unemployment compensation, workers’ compensation, health insurance benefits, and employee-specific anti-discrimination and leave laws (e.g., ADA, Title VII, ADEA, and FMLA). Misclassification can result in steep financial penalties and other damages.”

Misclassifying drivers as independent contractors when their role is as a company driver is a serious offense. The PRO Act may not be an effective solution to driver misclassification in the trucking industry because of its reaching consequences for owner operators. However, driver misclassification is a serious problem, and carriers should take immediate action to rectify any misclassification in their fleet to avoid legal consequences.

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box truck owner operators
Josh Massay is a CDL B licensed box truck owner operator with three years of driving experience. He drove as a non-CDL delivery driver for two years and then decided he needed a better-paying job to support his wife and his 3-year-old daughter, Emma. Josh didn’t plan on a trucking career, but he decided to get his CDL B, and he’s proud of his trucking work. So, he put his independent streak and business sense to good use on his newest venture: becoming a box truck owner operator. Now, 1 year into being one of FedEx’s box truck owner operators, Josh is looking for his next job.

Would you partner with Josh? Would Josh partner with your organization?

Josh isn’t real, but your open job is. There are many box truck owner operators just like Josh ready to be hired. Make sure you connect with the right drivers to make the hires you need.

1. Know Your Drivers

The cardinal rule of partnering with box truck owner operators is to know your drivers. It’s number one for a reason. Having a clear image of the drivers you want to reach sets the tone for your job offerings, the position description, and all recruiting efforts. Drivers with some experience and a CDL A, like Josh Massay, may expect higher pay. Drivers who have a CDL C may need additional training if they will be hauling an atypical load.

delivery truck driver

While every box truck owner operator will be different, there are a few common traits that you can expect. Like most CDL owner operators, box truck owner operators are likely to be independent. Many became owner operators to be their own boss. Similarly, you can expect box truck owner operators to be business savvy. Even the newest owner operators must quickly learn the ropes if they want to stay afloat. Once you have a distinct driver persona, use your employee value proposition to connect.

On the technical side, box truck owner operators are probably not new to the driver’s seat. Many will have several years of driving experience, though that may not be as a box truck driver. On the other hand, some great box truck drivers may have only a CDL C or CDL B. They’re not your typical CDL A truck driver, but they can be a great fit for other box truck driving jobs.

2. Write Job Descriptions and Ads That Work

Posting a new job description can feel like searching for a needle in a haystack. Far too many job applicants are unqualified or a poor position fit. Hiring managers lose precious hours wading through applicants for a few good candidates. In addition, the dramatic rise in e-commerce demands means competition from shipping giants like Amazon and FedEx is extremely high. Better job descriptions can help you get the right drivers into your hiring pipeline faster with fewer unqualified applicants. 

Driver applicants should be crystal clear on the job based on the description. No surprises. If you have specific criteria for the job, it must be in the position description. Have specific vehicle criteria? Are 3+ years of experience required? Looking in a specific hiring radius? Tell drivers in the job description. Similarly, be upfront about what you can offer drivers.

Drivers will self-select whether the job is right for them. If drivers are interested, they’ll apply. If not, they’ll stay away and save you time. 

A good job description does nothing for drivers who don’t see it. Box truck owner operator positions should be posted through a variety of distribution channels. Start with online resources such as e-newsletters, social media, and online forums. Since many box truck owner operators are doing local or regional work, consider advertising in local newspapers or other print sources near you as well. Tracking efficacy through print channels can be difficult and costly, so make sure you have a set budget before you start advertising. If you have a physical store in a visible location, post signs to let drivers know that you’re hiring. As you start reviewing candidates, track their application source. Continue using a multi-pronged advertising strategy, but prioritize the channels that are generating the best candidates.

3. Consider it a Partnership

box truck driverOwner operators have a big decision to make in joining your company. Make sure it’s a mutually good fit. Consider the driver from the start, Josh Massay. He is running a business and takes pride in his job as an owner operator, and he expects respect and reliability from the companies he works with. As an employer, find the balance between setting clear guidelines without over-managing. Owner operators can choose to find other work if things aren’t going well, so maintaining a positive business relationship is critical to reducing turnover.

Treat owner operators as respected partners, and they’ll be happy to step in when you need them year after year.

owner operator job description template

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Owner Operator Job Description

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Working with owner operators in the trucking industry is much different than working with company drivers. If you’re hiring owner operators, the benefits include not having the responsibility of purchasing and maintaining the rigs. Owner operators are also often more experienced drivers and have better safety records. The drawbacks are that it is much more expensive to hire owner operators, with the average salary around $140,000 per year.

Owner operators have different values and personalities than most company drivers. They are more independent, entrepreneurial-minded, and adventurous than the average company driver. Therefore, recruiting owner operators to your company is a whole other ball game from recruiting company drivers. Here are three tips for recruiting owner operators to your fleet.

1. Reach Owner Operators

To recruit the best drivers, you have to reach them where they are. This also applies when recruiting owner operators as well.

There are important differences between owner operators and company drivers in terms of driving experience and media usage.

According to the Overdrive 2016 Connectivity Study, owner operators are about the same age as company drivers, but a higher percentage of them have more years of experience driving. Additionally, owner operators lean more towards consuming printed magazines while company drivers read email newsletters. Shifting your advertising towards printed media outlets will reach more owner operators.

Don’t put all your eggs in one basket though, because there are other ways to reach owner operators. It would be unwise to limit advertising to just one source. The study also showed that owner operators heavily use Facebook just as much as company drivers do. Complement print ads with the usual mix of other recruiting channels and platforms such as job boards, e-newsletters, and online forums, including Facebook. According to the survey, owner operators rely heavily on word of mouth, so your job referral program should reflect this insight.

2. Have an Open Conversation

Once you’ve found them, the recruitment process for owner operators will be slightly trickier than for company drivers. You’ll need to be more patient and wait longer for owner operators to decide whether they’d like to sign on. Being honest and straightforward during the recruitment process is important for all candidates, but especially for owner operators. These entrepreneurs are making a big decision to work with your company and need to be confident about that choice.

Not every driver will be right for your company, and not every company will be right for the owner operator.

Take the additional time to make sure it is a good match for both parties before investing in the relationship. If it doesn’t work out, make sure you part on good terms so that it doesn’t affect company reputation adversely.

When trying to match with owner operators, play the long game. While it is usually good to recruit sooner rather than later, you’ll want to take your time a bit more with owner operators. Get to know what job factors will be important to them. If there is a sticking point, like amount of home time, or pay and benefits, then let them know that you can work on it and get back to them. There may be more negotiation and compromise required on the company’s part when working with owner operators. Have realistic expectations of how long the recruitment process will take, and what the relationship will look like once they are on board.

3. Be Consistent and Predictable

There are few things that will irk owner operations as much as recruiters changing their messaging during the process. There shouldn’t be one message from the company during the initial advertising, something different during a recruitment call, and something else entirely during the meeting. In addition to building distrust with the owner operator, it will build a negative reputation which will find its way around to other drivers as well. While it is acceptable to improve the terms during the recruitment process, it shouldn’t be acceptable for recruiters to go back on something that was previously promised.

Owner operators will value clarity and consistency from your company to help them make the decision.

Once drivers are onboarded, predictability will also be valued on the job. Owner operators are more independent minded than the average company driver and will be less adaptable to changing conditions by the company. They want to have the freedom of when to work and being able to choose the loads which they prefer. Owner operators do not look kindly upon too much oversight. They will be looking for some of the same factors which other drivers consider: pay and benefits, communication with dispatchers and others, home time, consistent freight etc. While company drivers may be more forgiving of changes to these preferences, owner operators will value predictability and reliability from the company.

Owner operators can be an attractive option for companies to pursue. There are many advantages of working with them which offset the higher costs and logistics. Knowing what they have in common and where they differ from company drivers can be helpful to recruiters. We know that owner operators are more independent and have different values, and this will affect the recruitment dynamics. Keep in mind these three tips when you’re recruiting owner operators.

owner operator job description template

FREE TEMPLATE

Owner Operator Job Description

Writing an effective job description for owner operators is the key to attracting the right applicants for your company. Download this free template to start optimizing your posts.

Get the Template