Driver classification is an increasingly complex issue in the trucking industry. Some drivers work as employees for a company, whereas others are independent contractors.
However, some drivers may be misclassified, either intentionally or accidentally. Misclassification of an employee, independent contractor, or employee operator may be a violation of the Federal Labor Standards Act (FLSA).
What Is the Difference between Owner Operators and Independent Contractors?
All owner operators are independent contractors, but not all independent contractors are owner operators.
Contractors are not employees of a company and do not receive the same benefits that an employee does. Independent contractors who are not owner operators lease equipment from an employer or from another company. Owner operators, by definition, own their equipment and use it for jobs performed by other companies.
How Much Do Owner Operators Make?
Independent truck drivers can make an average of between $50,000 to $60,000 net annual income, according to Haulhound. There are two ways in which owner operator pay can be generated. She or he can either charge for mileage or collect a percentage of the value of the load that they haul. If you are willing to take risks, owner operator trucking can pay well.
Why Is Employee vs. Contractor Classification Significant?
Transport Topics reports that over the last ten years, more motor carriers have independent contractors and owner-operators driving for them than employees. This transition reportedly was made in an effort by companies to shift costs onto their drivers.
In addition to not receiving benefits, these contractors have to insure themselves against damage, disability, and other possible losses.
However, in some cases, employers have been accused of misclassifying drivers as independent contractors, in an effort to cut costs, when the drivers are really employees. This may not be fair to the driver and indeed has led to lawsuits in some states.
In some cases, independent truck drivers may be misclassified as owner operators by companies for whom they drive, because an employer may try to get out of properly insuring equipment.
The Department for Professional Employees notes that the tax savings of classifying a worker as an independent contractor and not an employee, “as well as savings from income and income and Medicare taxes results in employers saving between 20 to 40 percent on labor costs.”
How Do I Know if I Am Being Misclassified?
Certain levels of control over how work is being performed can help a driver know if they are being classified as an employee or as a contractor.
In some cases, a driver may be expected to perform work as if they are an employee, but do not receive the benefits of being such. For example, if an independent contractor is expected to control the manner in which the work is performed, or if the work is performed as part of the regular business of the company, the work status is being misclassified.
In other cases, if an owner operator furnishes the tools, supplies, or materials necessary for the work, or if they are prohibited from using substitutes or assistants, they may also be a misclassified truck driver.
If you are a contractor or owner operator but you are required to do any of the following, you may be misclassified:
- Purchase or lease the truck
- Pay for fuel
- Pay fuel taxes
- Provide insurance
- Pay licensing fees
- Pay for maintenance of equipment
Drivers who are mandated to attend training classes, work exclusively for a company, wear a company uniform or expected to maintain their schedule with the dispatching office should be classified as employees and are not owner operator truck drivers.
Owner operators or independent contractors who have been misclassified may be owed wages and benefits. A qualified labor attorney can answer any questions an owner operator may have.
How Do Employers Determine How a Worker Is Classified?
Mazars, an industry publication, explains that part of why the problem of truck driver misclassification is so complicated is that there are different tests to determine whether a worker should be classified as an employee or a contractor.
Mazars says that the IRS uses what is called a multifactor test to determine how a worker should be classified, which takes into account how much control an employer has over a worker, how much financial control an employer has over a worker, and what type of relationship the worker has with an employer.
In contrast, some employers may just use the “right to control” test, which investigates who has control over how the worker performs their work — whether that is the worker or the employer. Mazars notes the challenge with this test is that it is very specific to the work, and examines multiple factors at play.
Another test is the “economic realities” test, which looks the economic reality of the relationship between the worker and employer — this reportedly involves examining to what degree an employer dictates the opportunity for profit or loss. Owner operator pay, on the other hand, is more flexible in that the driver may have more control over their profit or loss.
Mazars goes on to delineate a number of other tests that are variations on the preceding test. In sum, employers may consider a range of factors in examining how a worker should be classified. Additionally, these factors may be given different importance in how the distinction between employees and owner operator truck drivers is made, depending on the businesses and parties at play.
However, it is important that how an employer classifies workers is systematized and well-reasoned.
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If you have worked as a contract truck driver and believe your carrier has failed to pay you minimum wage or overtime, or otherwise might not have honored a contract with you, you may qualify to file a truck driver lawsuit or class action lawsuit.
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