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O/O for Schneider described as employee as appeals court kicks case back to lower court

Appellate court reverses decision on independent contractor status

Photo: Jim Allen/FreightWaves

(Editor’s note: Following discussions with Schneider, the original headline and article have been changed to emphasize that the final determination of the worker’s status will be at the lower court level.)

In the midst of numerous battles regarding independent contractor status, a federal district court has sided with a driver who claimed in a lawsuit against Schneider National that he was effectively an employee rather than an independent owner-operator.

The suit was filed in July 2020 by Eric Brant, who drove for Schneider on a lease arrangement between December 2018 and August 2019. The decision from the U.S. Court of Appeals for the 7th Circuit comes down almost completely on the side of Brant, whose allegations are the core of the criticism that has been leveled for years over the status of owner-operators under lease to a carrier.

The appellate court ordered the case back to the district court.  The higher court’s decision’s solely moves the case to the lower court; its repeated references to Brant being an employee do not have the force of law.

A lower court in May 2021 had ruled in favor of the trucking company “by giving decisive effect to the terms of Schneider’s contract,” according to the appeals court decision. Such an approach by the lower court “in many areas of law … would be sound. … But not under the Fair Labor Standards Act (FLSA).”

Independent contractor status under the FLSA is one area of the battle as the National Labor Relations Board considers whether to move away from what is known as the Super Shuttle precedent and substitute the Federal Express standard that was in place a few years earlier. That move would be more favorable to defining workers as employees rather than independent contractors. 

The definition of independent contractor status also is in limbo at the Department of Labor, where the Wage and Hour Division, after having been rebuffed once in an effort to withdraw a Trump administration rule on independent contractor status, is now seeking input on a new rule. 

And the ABC test in California looms as an appellate court decision rejecting legal efforts to keep AB5 from being implemented in that state means it is on the verge of becoming law. That comes after the Supreme Court declined to hear an appeal from the California Trucking Association.

In the middle of all that, there is now a federal appeals court decision that is mostly unsparing in rejecting Schneider’s defense of the independent owner-operator arrangement it had with Brant.

In its decision earlier this month, the 7th Circuit turned to the “economic realities” test to determine whether Brant was truly independent. The economic realities test is a multipronged test used by courts to help determine independent contractor status. It is flexible; the Trump administration rule on independent contractor status that for now remains on the books at the Wage and Hour Division of the Department of Labor looks to the economic realities test but highlights several of them as “core,” and failure to not reach all of them doesn’t automatically render the worker as an employee. 

According to the court’s recap of the Brant-Schneider relationship, the lease involved Brant leasing a “relatively new” Freightliner and an operating agreement in which Brant leased the truck back to Green Bay, Wisconsin-headquartered Schneider and got 65% of the gross revenue for freight he hauled for the company. 

“The operating agreement purported to give Brant substantial control over his work,” the decision said. “It also included provisions permitting him to haul loads for other carriers and to hire other drivers to assist if he desired.” 

But the court noted that Schneider “retained sole discretion … to deny him permission to haul loads for other carriers.”

The two sides “provide starkly different accounts of Brant’s actual work,” the court said. 

Among the charges that Brant made in his original lawsuit:

  • He could not act independently. “He simply had to say yes to as many loads from Schneider as he could, even when they were highly undesirable.” The court said Brant claimed that during the week of May 2, 2019, he drove five times for 3,000 miles and his paycheck after expenses was zero.
  • He tried to end his operating agreement so he could haul for other carriers and was presented with a bill for a security deposit that was so high as to be unaffordable.
  • “Schneider controlled him in the manner of an employee without respecting his rights under federal and state employment laws,” according to the court’s recap of Brant’s arguments.

The court’s recap of Schneider’s view was:

  • Brant had “freely engaged to haul freight for the carrier and was free to accept or reject the shipments he was offered while retaining total operational control of his business.” 
  • “To Schneider, the operating agreement and lease show that Brant was an independent contractor whom Schneider enabled to manage his own operations, to hire additional drivers or to haul loads for other carriers.”

But the court ultimately held for Brant on almost all of the charges in his original suit. The driver alleged that Schneider didn’t pay him minimum wage under the Fair Labor Standards Act and Wisconsin law; the contracts were “unconscionable”; Schneider “unjustly enriched itself” through deductions from Brant’s pay; and the contracts violated truth-in-leasing regulations. 

On most of the points, the appellate court came down for Brant with little ambiguity. As to the charge that there were weeks when Brant didn’t even make a minimum wage, “Brant satisfies the point easily.” Brant’s claims that he had no control over his job — a significant point under the economic realities test — “weighs in favor of finding Brant was an employee of Schneider.” 

Despite provisions in the contract that on the surface seem to allow Brant the ability to profit from the lease arrangement beyond what he was hauling for Schneider, “Brant had no realistic option other than to take the shipments that Schneider offered, even when they were unprofitable” is how the court sums up Brant’s claim. “This factor also weighs in favor of considering Brant to have been an employee of Schneider.”

The 40-page decision has numerous recaps of Brant’s charges and in almost all of them it concludes that the evidence favors finding Brant as an employee, not an independent contractor under the economic realities test.

“Based on the facts alleged in the complaint, Brant had little true control over the conduct of his work and was totally dependent on Schneider to turn a profit,” the court wrote. What the court sees as the facts of the case means that “he must be considered an employee as a matter of economic reality.”

A representative from Schneider had not responded to an email from FreightWaves by publication time. 

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  1. Paul Barager

    I leased a truck from Schneider and then contracted with them for freight. Running your own business is hard. I paid the payoff after 4 years and now own the truck. I work harder than ever in my life but make more money and have more freedom than ever. I am very successful at what I do. I guess I should hire myself out as a business and financial Genius.

  2. Heathen

    Saying you have the ability to haul for other carriers, but requiring a 10k deposit to move the truck, while every load in any area pays the same on the Schneider boards.
    These lease purchase companies are going to need to change up their strategy if they want to stay out of court. Either make it profitable for both parties, or get ready to have fines and rulings negating those profits.

  3. Wisconsin

    The first failing is in Brant not having an attorney review the lease. You can’t say you’re “in business” if you did not pay for legal advice. Caveat emptor.

  4. Terry G

    I thought these things were common knowledge for “lease/operators”. I’ve seen and heard these horror stories with Prime Springfield, MO and CR England in Salt Lake City, UT. These trucking companies with Lease/Operator options ALWAYS have the advantage.

  5. Charles Walker

    Some people seem to missing the judgement of the court. “The driver was ‘not’ truly an independent contractor”. All this other stuff about his failings, or wrong decision to lease, was not decided. A true independent worker in most any profession, makes their own decisions and has the ability to walk-off w/o penalty. Thats not how truck leasing works. All this other noise, isnt relevant.

  6. Travis

    That is great news these big trucking companies have been sticking it hard working truckers for decades.
    You have to be not of your right mind to lease a used beat up truck from these companies.

Comments are closed.

John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.