Are Owner Operators Independent Contractors?

Driver classification is an increasingly complex issue in the trucking industry — some drivers work as employees for a company, while 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 Fair Labor Standards Act (FLSA).

What Is an Owner Operator?

Company truck drivers, also called professional employee drivers, do not own their truck and trailer. Instead, they work for a carrier as a truck driver and employee. 

In contrast, owner operators — as the title implies — own and operate their trucking business. They may operate under their own authority or they may lease to a carrier company. According to the Owner Operator Independent Drivers Association, about 350,000 owner operators are registered with the U.S. Department of Transportation.

From a day-to-day perspective, owner operators and employee drivers may seem to do similar jobs. However, owner operators have additional responsibilities, such as maintaining their trucks, securing licenses and insurance, and more. While there is a tremendous amount of responsibility for owner operators, they also have the freedom to set their own schedule and rates, along with other benefits employee drivers are not given.

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 an employee does. Independent contractors who are not owner operators lease equipment from an employer or another company. Owner operators, by definition, own their equipment and use it to perform work for others. 

How Much Do Owner Operators Make?

Independent truck drivers average between $50,000 and $60,000 net annual income, according to Haulhound. There are two ways in which owner operator pay can be generated: He or she can either charge for mileage or collect a percentage of the value of the load they haul.

For those who are willing to take risks, owner operator trucking can pay well.

Why Is Employee vs. Contractor Classification Significant?

More motor carriers have shifted toward having more independent contractors and owner operators driving for them than employees between 2009 and 2019, Transport Topics reported. This transition reportedly was made in an effort by companies to shift costs onto their drivers.

In addition to not receiving benefits, from overtime to meal breaks and more, 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 — when they actually are employees — in an effort to cut costs. This may not be fair to the driver and 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 tax savings of classifying a worker as an independent contractor and not an employee, in addition to “savings from income and Medicare taxes, results in employers saving between 20 to 40 percent on labor costs,” according to the Department for Professional Employees.

Due to the financial burden of misclassification, some Californian truckers have gone on strike. On April 12, port truck drivers for Universal Logistics Holdings (ULH)—one of the largest trucking companies in Southern California—went on strike for alleged labor law violations. According to the drivers, ULH illegally fired workers who voted to form a union and routinely misclassifies its drivers as independent contractors instead of employees.

How Do I Know If I Am Being Misclassified?

Certain levels of control over how work is being performed can help a driver know whether 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 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?

The problem of truck driver misclassification is complicated because there are different tests to determine whether a worker should be classified as an employee or a contractor, according to Mazars, an industry publication.

Mazars says the Internal Revenue Service (IRS) uses what is called a multifactor test to determine how a worker should be classified. A multifactor test 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 specific to the work and examines multiple factors at play.

Another method is the “economic realities” test, which looks at the economic reality of the relationship between the worker and employer, 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 has 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. 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 involved.

However, it’s important that the way an employer classifies workers is systematized and well-reasoned. Failure to properly classify employees could expose a company to legal challenges.

California, in particular, has strict labor laws which may impact truck drivers and their classification as independent contractors, and has introduced new rules with Assembly Bill 5 (AB5) for classifying workers as independent contractors or employees.

In February 2019, the California Labor Commissioner awarded 24 truckers nearly $6 million after determining that they were wrongfully denied employee status. The miscalculation is considered wage theft against the drivers.

A driver who thinks they may have been misclassified as an independent contractor may be eligible to file a lawsuit and pursue compensation. A qualified attorney can review individual cases and see if drivers are eligible for back pay or other benefits.

Join a Free Trucker Overtime Class Action Lawsuit Investigation

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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