With more trucking companies in the hunt for good drivers, more bonuses and benefits are being offered. With the competition for drivers at an all-time high, seems all large trucking companies are getting on board with attractive bonuses, added benefits, and semi truck lease purchase programs. How many of these pans out or how long do you have to stay with a company before you receive that promised $5,000 bonus?
It can be confusing for a new driver, especially those not familiar with the trucking industry. Many new drivers graduate from driving school with dollar signs in their eyes and get duped into a not so respectable company. I am not saying every company is dishonest, but I am telling a new driver to do his research and when in doubt don’t be afraid to talk with a veteran driver. Verify things that the slick driver recruiter told you in driving school.
Untrustworthy companies, brokers and recruiters have been around the industry for some time, but two events last week prompted me to write this short blog. The first being all the labor unrest that has been going on for some time at the Ports of Los Angeles and Long Beach, which has the Teamsters, trucking companies, contract drivers and company drivers all at odds over loads and pay. Another event took place last Wednesday in which the Supreme Court heard oral arguments in the case, New Prime Inc. v. Oliveira, No. 17-340, which pits business interests against labor groups.
The outcome of this case will have far-reaching consequences for the industry. It may finally solve the ongoing dispute about the meaning of contract labor, company drivers, and owner/operators. It will most assuredly change the way business is conducted in not only the trucking industry but all business in the United States that use contract labor.
US Supreme Court Decisions
In New Prime Inc. v. Oliveira, No. 17-340, the justices heard the case of Dominic Oliveira, a driver who filed a suit against New Prime Inc. three years ago, alleging that the company failed to pay minimum wage and at times even charged him for working. The Prime lease-purchase plan has been something that has been argued about since I can remember, but it has finally made it’s way to the Supreme Court. Maybe it can be settled or at least some clarification as to if these drivers who enter into these plans are company drivers or owner/operators.
The case pits business interests against labor groups in the first significant case of the term that could have consequences for hundreds of thousands of American workers and potentially millions of consumers. It could shape an industry that generates more than half a trillion dollars in annual revenue.
The case also raises questions about the use of the “independent contractor” designation to reduce pay and benefits for workers who perform essentially identical work as employees. On that front, the court’s decision could have ramifications for virtually every sector of the economy.
Labor unrest has been an issue for years at the Ports of Los Angeles and Long Beach, and the problems cropped up again last week as drayage drivers, warehouse workers, union organizers, and their supporters marched picket lines in Southern California. Barb Maynard, a spokeswoman for the local Teamsters 848, said the demonstrations occurred outside of XPO warehouse in Los Angeles and San Diego, and outside an NFI-owned warehouse close to the Port of Los Angeles.
At issue here is pay and benefits for company drivers and contract drivers. The unions are saying that all drivers should be classified as employees so they may receive benefits from their companies. Contract drivers are not considered employees, so they do not receive benefits and are paid more. Some say the Teamsters are only trying to increase their memberships rolls as they have been declining in recent years and the unions are losing money. The unions will state that they are trying to level the playing field because they feel contract drivers are taken advantage of by not receiving benefits but are paid more, thus creating tension with their co-workers who are employees.
One has to look at both sides of the issue here as they all have legitimate arguments. Some drivers would instead be contracting drivers because they do not want to be held to strict schedules and have more control in the operation of their trucks. Others do not want to be a contract driver because they do not want the added responsibilities associated with owning your vehicle.
The companies argue that having full-time drivers puts a burden on them because they have to pay benefits, sick pay, vacation, and health insurance. Their argument is the industry is never consistent and why should they have to pay benefits for employees who are not working, when things slow down?
Contract workers or contract drivers is something that has been debated for years now and possibly the Supreme Court will give us all some clarification, but I am not going to hold my breath. No matter the ruling it will leave something to dispute. When one reads the definition of contract labor in the IRS rules, it is hard to understand how many of these trucking companies can get by with classifying their drivers as owner/operators or contract drivers.
The IRS has some very detailed descriptions for determining how to classify a worker as an independent contractor or employee. They break it down into three categories – Behavioral Control, Financial Control, and Relationship of the Parties.
A worker is an employee if the business has the right to direct and control work performed by the worker. Training a worker on how to do a job, or periodic training is a strong indication that a worker is an employee. Does the business have a right to direct or control the financial and business aspects of a worker’s job? Unreimbursed expenses are a good example, and independent contractors are more likely to incur unreimbursed expenses than employees. An expectation that a relationship will continue endlessly, rather than for a specific project or period, is continuously seen as evidence that the purpose was to create an employer-employee relationship.
There are many more rules and classifications, and I just touched on a few, but it is evident that many of these companies are skirting the rules to keep from paying benefits. We need only to look at the case in the Supreme Court now about Prime Inc. Prime has been under scrutiny for many years because of their lease purchase program, but there are many more like that all with different variations. Some information above was taken from the IRS Website about understanding employee vs. contractor designation.
Supreme Court Ruling
It is difficult if not impossible to predict the outcome of a Supreme Court ruling, as all of you know. We have contract workers throughout all sectors and industries in America, but it is obvious the trucking industry is the most controversial.
When we look at the construction industry and see how many contractors are employed to build a house, it is obvious the difference. A framer is hired to frame the house, the only thing provided is the lumber, the contractor supplies all the help he may need, the tools and is not kept to a strict schedule as to when to get the job finished. However, it is to his benefit to get the work completed as soon as possible so to move on to other work or get other contracts from the builder.
What about Uber drivers? Uber provides them with an app that they must put on their iPhone, and that is about all the connections they have with being an employee. As far as when to work or where to work it is all up to the driver. They set their hours, days off or if they want a particular customer/ride; it is all left to them. It is the drivers’ responsibility to provide a suitable vehicle, pay for gas and insurance. I would classify Uber drivers and contract framers as true self-employed or contract labor.
There are very few what I call genuine owner/operators left in the industry today. O/Os like the old days when they were responsible for getting their loads, pay for fuel, maintenance, insurance, tolls, broker fees, and all the many other expenses associated with operating a truck. Owner/operator contracts today serves out to be an agreement between a driver where he provides the tractor, and a company pay part of there expenses and gets loads for them.
The case in front of the Supreme Court involves what I consider to be a more cautious type arrangement; lease purchase programs. I don’t think they are outright scams but organizations are not honest in how they operate and drivers should to be very careful when entering into these types of contracts. There are many types of lease purchase programs in the industry. Some pay part of the operating expenses, but in the end, a driver is responsible for maintenance, fuel and many other costs depending on how a contract is written. In most cases the driver ends up working way too many hours, running too many miles, having very little time at home, and making very little money.
Many will discourage drivers from entering into these contracts, especially new drivers who know very little about the industry. Many trucking companies operate these programs on a percentage basis, in other words, a driver is paid on a percentage of the load. Very seldom do they tell you the actual pay per mile, just that the load paid a certain amount and the driver gets his percentage. Not only does one need to understand all the expenses associated with operating a truck, but needs to have a good understanding of tax laws. In many cases at the end of a lease purchase contract, a driver winds up owning several hundred dollars in back taxes.
It may seem like I got a little off track here from my original subject, but I wanted to touch on all the ways companies have not to be completely honest with their drivers. Moreover, let me say most companies are legitimate and want to find stable drivers, but there are also several that are not entirely upfront and honest about their pay systems and benefits. It is difficult for new drivers to know about all the different ways they can get paid or if they are being paid a fair wage.
If you are a new company driver, it would be wise to talk with the recruiter and make sure they pay by the mile, percentage pay, in my opinion, is not the ideal situation. A company may tell you they will pay you 25% of the load, but there is no empty pay involved and what is 25 percent a percent of? Can you depend on a dispatcher to tell you the actual amount of what a load pays? That is why it is better to be paid by the mile; when it is agreed upon that a driver is paid .40 per mile for all miles driven, then there is no room for an argument.
The same could be said for owner/operators, as they also do not have a way to verify what a load pays. I would think most would want to be paid by the mile and not a percentage. O/Os have more to think about when working out a contract with a prospective company. Agreements should be made about fuel taxes, registrations and permits, tolls, lumpers, and many other things.
Lease purchase programs are a whole different ball game, and I don’t see why the IRS lets them continue. When a company has so much control over the driver and the truck, it is impossible to see how he can be considered self-employed. When we talk about scams in the industry, this could be viewed as the principal offender.
Yes, with all these companies struggling to hire drivers it is wise for a driver to check into all aspects of pay, bonuses, and benefits, it appears to me that many promises too much and will not be able to deliver on it. Drivers have a lot to think about in this industry, but I am hoping the Supreme Court ruling that will be out any time now will clarify some of the confusion we have in our industry.
Thank You for reading this article, and Your Comment Are Always Welcome!