The above sensational headline appeared recently in a trucking trade journal. It was no doubt meant to grab your attention and that of the hundreds of thousands of independent contractors in trucking. It got mine.
The article went on to sensationalize and to greatly distort the issue. You don’t have to take my word for it; here is an example:
“At the federal level, a bill currently before Congress (HR5804) would repeal a 1978 law that protects independent contractors from ‘overzealous’ IRS actions.”
Actually, the 1978 law offered its protections to those that employ or utilize contractors, not the independent contractors themselves. The motive of Congress in passing what is referred to as the 1978 “safe harbor” legislation was to basically scold a company that may have inadvertently misclassified workers – not to extract a hefty penalty.
As you might expect, the article concludes with its author plugging his own business of protecting “independent contracting” from the heavy hand of government (note: contracting – not contractors).
There can be no doubt that contractors are used in trucking because carrier costs can be shifted to contractors. Whether this is a threat to many in trucking is totally dependent on where you sit.
For instance, I doubt that UPS shed any tears over FedEx’s troubles with the IRS for using contractor drivers instead of employees for P&D routes. For the truckload industry, however, where owner-operators are a big part of many motor carriers’ fleets, it is a different matter.
At a minimum, the scrutiny on the independent contractor arrangement should be a resounding wake-up call.
Being an independent contractor doesn’t work without real independence for the contractor. Over the past 25 years or so, as carriers that use contractors have maneuvered these arrangements into profit centers, the independence has faded along with the opportunity for profit. For example, many lease-purchase plans look more like indentured servitude than entrepreneurship.
For there to be a legitimate independent contractor arrangement, there has to be an arm’s length relationship between the contractor and the carrier. Those that abuse the system are the bigger threat, and they threaten the entire industry in numerous ways. It’s time for those who do it right to stand up and speak out about those who don’t and to think further down the road than the next quarterly statement.
The perennial turnover rate of 120 percent of drivers each year among truckload carriers speaks volumes about how human capital in drivers is squandered.
The interest among states over independent contractor issues isn’t going away soon. Their motives are economic and in some ways legitimate (i.e. when a driver is injured). The same is true with the feds; only they have recognized that many independent contracting arrangements are simply a way to introduce undocumented (illegal) workers into the workplace.
The legislation from the previous Congress – HR5804 and S2044 – didn’t go anywhere, but you can be confident that similar bills will be introduced this year.
It’s time for the feds to step up and establish clear guidelines for independent contractors in trucking with an emphasis on independent – guidelines that states can follow, too. LL