“This stuff is not going to go away,” attorney R. Eddie Wayland told an audience about lawsuits over independent contractor status. “A lot of lawyers are making way too much money.”
And given that, how a trucking company can protect itself from suits over that status was the focus of Wayland and Mark Hunt, both of them partners at the Nashville law firm of King & Ballow, speaking at the Truckload Carriers Association annual meeting in Las Vegas this week.
The primary message driven home by Hunt and Wayland was that a tremendous amount of up-front diligence is going to be necessary at trucking companies that use independent contractors (ICs) if they don’t want to find themselves on the losing end of a suit that rules those drivers to actually have been employees.
But the diligence also needs to come with clarity and brevity. As Hunt said of the IC contract that is signed by both company and driver, “if it has a table of contents, it is too long.”
Hunt’s reviews of what should be in the relationship between an IC and a trucking company were as much a list of what not to do rather than what a carrier should do in order to clearly delineate ICs from fleet drivers.
For example, Hunt said, keep orientation separate. “Contract drivers should not receive the same orientation or training as employee or company drivers,” he said.
And don’t give an IC the same company handbook that a fleet gives to an employee driver, Hunt said. That can be viewed as evidence that the ICs are not truly independent.
Keeping the two of them separate starts with recruiting, according to Hunt. Putting out an advertisement that says something like “be your own boss and build your business” does help separate ICs from employees, he said, and if that is done, “it really enforces that you are a contractor.”
There are other practices that need to be followed to help strengthen a legal argument that the ICs were truly independent, Hunt said. For example, a company should offer an IC multiple loads, rather than attempt to steer an independent driver toward one particular shipment. “They can track it, and if you get into litigation, you’ve got this proof,” he said.
Hunt raised the specter of the $100 million settlement agreed to by Knight-Swift in 2019 after Swift Transportation lost a driver classification lawsuit that went back to before Swift was acquired by Knight in 2017. He referred to the case as the “big kahuna.”
Hunt ticked off a list of terms of employment that courts in the federal case, originally filed as John Doe v. Swift, saw as pointing to more of an employee relationship with the drivers rather than a true IC classification.
For example, Hunt said Swift had the right to terminate IC agreements without cause on 10 days’ notice. “That looks a lot like control,” he said, a reference to the fact that in determining whether a worker is a true IC or is more of an employee, legal definitions found in the ABC test or the long-standing standard known as Borello look to the degree of “control” the carrier has over the driver.
Another potential problem: having a driver sign an IC agreement and a financial lease with what amounts to the same entity.
Hunt noted the leasing company used by many of the drivers in the Swift lawsuit was a wholly owned subsidiary of Swift. Meanwhile, the IC relationship also was with Swift, raising the question of control.
Hunt noted that signing on an IC who is leasing a vehicle through a true third party can help avoid that issue.
The control that Swift had over the drivers was also exhibited in its approach toward illness, Hunt said. What was theoretically an independent contractor, if he or she was ill, had to find a replacement to deliver an agreed-upon load. “The court said that is control,” he said.
Notably, Hunt also suggested a series of steps that involved giving IC drivers less support, not more, in order to be able to prove later that they were truly independent.
For example, a company should ensure that the driver is paying for equipment it needs. “You don’t want to give stuff for free to drivers who are ICs,” Hunt said. “They should pay something for it or rent it. They are not employees.”
And while the trend in safety is to put a growing number of cameras on the vehicle, Hunt recommended the opposite in order to keep an IC independent. “If you tell them they are going to have a camera, that is not good,” Hunt said, adding that camera adoption can be incentivized, but a company should avoid doing anything where it is required.
Wayland, in comments following Hunt’s presentation, said that while some of the IC classification lawsuits are being brought by “hacks looking for a quick buck,” there is a group of attorneys who are “very sophisticated.” King & Ballow has gone up against many of them, Wayland said, and they find that many have their own in-house experts on the complicated relationship among ICs, employee drivers and the companies that use the services of both.
Just being the target of such a lawsuit is going to cost a carrier anywhere from $250,000 to $1 million for activities such as hiring experts and conducting electronic searches, Wayland said.