Staffing agencies lease drivers to fleets stymied by employment regulations.
Over the past 13 years, Trillium Driver Solutions, a staffing agency for the trucking industry, has grown from six branches to 40. The company employs up to 2,000 drivers per day, supplying workers to private fleets, third-party logistics companies, and for-hire and less-than-truckload (LTL) carriers throughout the country.
“If you’re not used to having employees and you need help managing challenging labor laws in California, the driver staffing industry can step in and help,” said Brian Howard, divisional vice president for Trillium.
Truck driver staffing companies have been around for decades, ranging from large nationwide players like TransForce to small local agencies. But these business models — and there are several — are getting more attention with the passage of AB5, the California labor law that limits the use of independent contractors, known as owner-operators in the trucking sector.
Although a federal court has indefinitely blocked AB5 from taking effect in the California trucking market, the law, as well as similar legislation emerging in other states, has more freight companies looking for solutions.
Goodyear, Arizona-based Contracted Driver Services (CDS) has been approached by several carriers that previously worked in California with 100% owner-operators, according to April Ray, vice president of marketing.
CDS “definitely has our eyes on AB5,” she said. The law would increase the company’s engagement in California, according to Ray, “since a lot of carriers will need to replace carriers with W2 employees.”
Like many staffing agencies, CDS hires drivers as employees who are eligible for healthcare and other benefits.
Several “alternative” staffing models could be useful for trucking companies looking to solve the independent contractor conundrum, said Gary Feary, president of the trucking law firm Scopelitis, Garvin, Light, Hanson & Feary.
One option is an entity known as a professional employment organization (PEO). These organizations function essentially as outsourced human resources, payroll and compliance departments, and can serve as “co-employers” with the fleet owner.
Say a motor carrier is doing business with a fleet owner, and because of AB5 that carrier will only continue the relationship if the fleet owner has employees. In that case, the fleet operator might enter into an agreement with a PEO that includes leasing the PEO’s drivers “to comply with California law,” Feary said.
“Now the motor carrier is doing business with a business, and that business has employees,” he explained. “So the question of whether the driver is an independent contractor or an employee is taken off the table.”
Driver leasing comes with caveats, Feary warned. A major sticking point for companies considering transitioning owner-operators to leased drivers revolves around what happens with the trucks. Fleets may be able to rent the vehicles, but generally speaking a framework for managing trucks as well as drivers has yet to be developed.
If there is an uptick in driver leasing as a result of AB5, Feary speculated, “the PEOs that have figured out the truck part of that will have the advantage.”
Trillium’s Howard echoed that sentiment.
“If you’re a manufacturer and have trucks of your own and 10 owner-operators, driver leasing may be a chance to transition the fleet,” he said. Nevertheless, leasing “is the right fit for some, not for others,” Howard said. “They may say it’s not worth it, and the equipment is a challenge.”
Laws tightening restrictions on owner-operators aren’t the only reason staffing firms are seeing an uptick in business. As consumer expectations for fast shipping increase and the supply chain gets bigger and more complicated, the “need for quick access to talent has never been greater,” Howard said.
Quality Driving Solutions, a subsidiary of trucking personnel supplier CPC Logistics, has grown from a few offices four or five years ago to nearly 15 in the past few years, according to Jeff Hart, CPC’s vice president for North American sales.
The subsidiary works with every segment of trucking — dedicated, private fleets and trucking companies — mostly supplying drivers on a temporary basis.
CPC’s biggest growth driver, according to Hart, comes from supplying thousands of permanent drivers to private fleet operations.
“Because of the dynamics in the marketplace, more companies have chosen to start private fleets with us this past year,” Hart said, noting that 2019 was a record year in CPC’s 45-year history.
He cited higher costs, market volatility, service challenges and meal period laws as reasons shippers “have decided to bring those functions in-house through us.”
Intensifying regulatory and administrative challenges in the trucking industry come with a “silver lining,” said Hart, whose arsenal includes a full slate of recruiting managers and in-house counsel. “They are not a burden to us because that’s all we do.”
Olivia
Great Information Linda.
Alex joseph
very informative, thank you
Royce
The true core of the issue is who has control of the drivers duties. If the driver is under contract with the carrier then the carrier should be hiring as as W2 employee and treated as such. If the driver owns their own equipment and is only under contract for that particular assignment, this a independent 1099 Contractor.
When the carrier is supplying the equipment, and hiring the driver to operate their equipment (leased, rented,or owned), and the driver has no choice in the assignments given by the carrier, then the driver is an employee.
If the driver holds the right to set their own schedule, and assignments, theycanbe treated as a contractor.
The carriers that hold control over the contractor’s at all times, are just cheating the system to avoid the cost of payroll, employer payroll taxes, insurance, and other benefits due their employee’s.
Glen
Royce, your statements are correct.
When the carrier does not supply a written contract, add liability
insurance to the cost the 1099 contractor should carry as jury settlements on these large accidents will eventually come into play under Tort law. Lawyers are not stupid, so why not sue the carrier and the 1099 contractor separately?
“When the carrier is supplying the equipment, and hiring the driver to operate their equipment (leased, rented,or owned), and the driver has no choice in the assignments given by the carrier, then the driver is an employee.”, is where AB5 is meant to protect the employee scenario.
The contractor is not wanting to pay workmans comp,ssi, payroll taxes, so the contractor goes cheap, and keeps the bottom line, which is money. But if the said supposed 1099 contractor has no supplied “contract” specifically stating the contractor is providing vehicle insurance coverages for operating contractors equipment, then there
are no” liability to pay damages” guaranteed by the contractor. The 1099 contractor can be held so;ely liable for damages, including for the equipment operated.
That then requires the 1099 contractor to go to the state to establish, through hiring law, that said 1099 contractor is in fact, by your quoted definition of what constitutes an “employee”, was in fact an employee.by definition of law.
Cliff
No different than my particular model. I own the company, a LLC with an S Corp tax structure. I have myself as a W-2 employee driver of my company with monthly payroll, tax withholding, and health insurance. My company is just a one truck operation that both equipment and driver are used by a carrier. All paperwork and contract with the carrier are in the LLC name, not my personal name. Cost me all of $150 to set it up. Has been in operation for 12 years..
Vinitha
Very Useful Information Linda Baker. I came to know many things with your article.
Noble1
TOLD YOU !
YOU SEE ! PROOF that the concept of creating a truck driver employment agency subsidiary within the Truck Driver Alliance would be a prosperous subsidiary OWNED collectively by truck drivers !!! CUT OUT THE MIDDELMAN truck driver agencies ! You lease some of yourselves to carriers ,another middleman while contemplating taking over CARRIERS(middleman) . The point is to render it impossible for carriers to obtain a truck driver without going through the Alliance until the Alliance manages to REPLACE THEM ! Through such an employment agency it costs the carrier more to hire a truck driver , but less than to have them directly on their payroll . However, drivers ARE UNITED and paid more through their collectively owned Alliance ! This is a no brainer !!! YOU NEVER WORK DIRECTLY FOR A CARRIER . You make them go through the Alliance until they are replaced by the Alliance .
NO LONGER CONTROLLED BY OUTSIDERS ! Due to volume and labour laws , you have them coming to you and eating out of YOUR hand . Not the other way around !
In my opinion !