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December 10, 2007 8:00 AM, EST

ATA to Defend Owner-Operator System

Group to Seek State Waivers for Drivers
By Daniel P. Bearth, Staff Writer
This story appears in the Dec. 10 print edition of Transport Topics.
American Trucking Associations has launched a campaign to protect the trucking industry’s use of independent contractors, a move officials said is needed to counter recent court decisions and an increasingly “hostile” legislative environment.
Robert Digges Jr., deputy general counsel of ATA, said the federation would attempt to change state laws to exempt trucking firms that use owner-operators from obligations to fund workers’ compensation and unemployment insurance benefits. About 20 states have such exemptions now.
“We want to get all states to adopt [an exemption],” said Greg Feary, managing partner of Scopelitis, Garvin, Light, Hanson & Feary in Indianapolis, who worked with ATA on the campaign. “In the last 10 years, there has been a siege against the owner-operator business model.”
Truck owner-operators provide power units for a large section of the over-the-road trucking industry and independent contractors provide pickup-and-delivery services for as many as 80% of the nation’s package carriers and couriers, according to industry analysts.
Last week, ATA issued model legislative language for state trucking associations to use in their pursuit of changes in state laws.
Digges said that while a blanket exemption for trucking would be “preferable,” the next-best option would be for states to adopt “fact-based” criteria for classifying independent contractors.
ATA considered seeking federal legislation on the issue of independent contractors, but, according to Digges, such proposals might be viewed as “anti-labor.”
“Consensus of opinion was that it was not the time to go to Congress,” Digges said. “The legislative environment is more hostile to the use of owner-operators.”
Don Oren, chairman of Dart Transit Co., Eagan, Minn., a truckload carrier that operates almost exclusively through the use of contractors, said an increasing number of legal and regulatory challenges to the use of contractors is “troubling.”
Oren said a bill proposed by Sens. Barack Obama and Richard Durbin, both Illinois Democrats, would eliminate “safe harbor” provisions in the tax code for independent contractors and, if passed into law, could force companies to abandon the owner-operator business model.
“There may be abuses in the independent contract arena, but generally it does not involve trucking,” Oren said. “In trucking, there is a clear choice between being a driver or a contractor. No one is forced into it.”
Bob DeCaprio, executive director of the Messenger Courier Association of the Americas, based in Washington, D.C., said current classification rules are “vague and overlapping,” making it more difficult for fleet operators to make use of independent contractors.
DeCaprio said the situation in California is most challenging, and that as many as 400 member companies have been targeted for audits.
In California, the state supreme court let stand a verdict against FedEx Corp. in a case in which drivers for FedEx Ground argued they should be treated as employees, not independent contractors. The drivers were awarded $11.3 million in damages (12-3, p. 4).
The court said, “FedEx’s control over every exquisite detail of the drivers’ performance, including the color of their socks and the style of their hair, supports the trial court’s conclusion that the drivers are employees, not independent contractors.”
However, FedEx Chairman Fred Smith has previously said the company would offer incentives for its 15,000 contractors to become
multiple-route owners in response to legal and regulatory pressures in California and other states (10-8, p. 4).
The company believes that such multiple routes would make it clear the contractors are small trucking companies that employ other drivers, and not employees.
On another legal front, ATA joined the Chamber of Commerce in an appeal of a decision by the National Labor Relations Board certifying a vote by contractors for FedEx Home Delivery in Connecticut to be represented by the Teamsters union.
ATA said the factors bearing upon the independent contractor determination “could have far-reaching consequences throughout the industry as a whole.”
FedEx is also fighting results of a vote to join the Teamsters by drivers at a FedEx Ground facility in Windsor, Conn. In Illinois, a new law that takes effect Jan. 1 provides for stiff penalties for firms the state determines have misclassified workers as independent contractors on construction-related projects.
Nancy Joerg, a senior attorney for Wessels & Pautsch, said the new law could be “disastrous.”
“Construction and trucking companies need to make important defensive changes in order to lower their liability in using independent contractors,” she said.