• Henry Seaton

Getting the name right

The term “owner-operator” is nowhere defined in federal regulation. In fact, the Federal Motor Carrier Safety Administration acknowledges as much in guidance related to definitions in drug and alcohol program regulations (§382.107): The guidance states:

Question 1: What is an owner-operator?

The [DOT] neither defines the term "owner-operator" nor uses it in regulation. The [DOT] regulates "employers" and "drivers." An owner-operator may act as both an employer and a driver at certain times, or as a driver for another employer at other times depending on contractual arrangements and operational structure.

The leasing regulations contemplate that the “lessor of equipment with driver” to licensed motor carrier may be an independent contractor solely responsible for retaining and compensating the driver it provides, regardless of whether that driver is a lessor/proprietor or a corporation or limited liability company (LLC) owned by a driver. In fact, the regulations make clear that the control the authorized carrier must exercise over the operations conducted with leased equipment in compliance with safety and insurance requirements shall not contaminate the independent contractor status of the lessor. See §376.12(4). There is a pernicious attempt by plaintiff’s bar to misinterpret the leasing regulations to deprive blue collar entrepreneurs of the right to enjoy the benefits of independent contractor status when they lease power units with drivers to authorized carriers. A recent hatchet job by USA Today based upon the bad experience of a few California port drayage operators is – not surprisingly – very one-sided. The independent contractor model is portrayed as involuntary servitude without benefits and as a scheme designed by captains of industry to deprive truck drivers of state and federal welfare programs they otherwise deserve as employees. Unfortunately, the compelling argument has not been made in the press or in litigation that the leasing regulations are intended to present a viable entrepreneurial opportunity – not to stifle working people. Consistent with the National Transportation Policy, the leasing regulations have promoted competitive and efficient truckload service, allowed the most productive use of equipment, and helped maintain a sound, safe and competitive privately owned motor carrier system. If a qualified driver wants a job as an employee, he can easily get it. If he wants to work hard, make a modest investment to start a business with one tractor and grow to become a multi-truck fleet with his own authority, the federal leasing regulations and independent contractor tax status encourage that. The so-called “owner-operator misclassification” agenda at the state and federal levels would stifle this important entrepreneurial alternative. There are about 800,000 small blue collar businesses that rely on independent contractor treatment to successfully own and operate fewer than five trucks. Whether they operate under their own motor carrier authority or lease equipment with drivers to larger carriers, they do it as a choice and as an opportunity.

Henry Seaton is senior partner of the law firm Seaton & Husk, which specializes in transportation law, and author of Rules of the Road: A Practical Guide to Legal Issues in Truck Transportation.

For an analysis of a recent Trump administration action related to independent contractor status, click here.

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