Some businesses create an Independent Contractor Agreement, have a driver sign it and think they are protected against any action by the driver or department of labor to be reclassified as an employee. It is important to know that the Labor Commissioner and courts look behind any contract to review the facts surrounding the relationship between the “contractor” and the company. For trucking companies, the most important factor is the level of control the company has over the driver. Does the company have the right to control the manner and means of accomplishing the desired result? Some examples of this control are requiring the driver to change the scheduled route, telling the driver where to have the truck maintained, providing instructions to the driver on how to deliver loads, monitoring the truck location via GPS and mandating the driver hold required licenses in the company name.
There are other examples of facts or circumstances that would give weight to a higher level ofcontrol, but the existence of one or more of these facts will give weight to the Court finding that an employer/employee relationship exists. Some critical elements to support an independent contractor relationship are: the driver works under minimal supervision, the driver can haul for other companies and is not exclusive, the driver determines his own schedule and can select whichever route he determines is best and the required licenses are in the name of the driver only.
In additional to the level of control, other factors that are tested to properly classify drivers are the type of work, if the work performed is part of the regular business of the trucking company, the place of work and the equipment used belongs to the company, the skills required (the higher the skill level, the less likely driver is an employee), duration of services performed (project by project vs. hired without any set haul), the method of payment (project vs. salary).
In 2011, California passed into law SB459 which imposes severe monetary penalties for“willfully misclassifying” an employee as an independent contractor.
White Nelson Diehl Evans experts can make sure your company is not held liable for driversmisclassified as independent contractors when instead they are “under dispatch” and employees of the company. The IRS taxes this issue seriously and can impose significant fines which is why we work with our clients to make sure compliance aligns with their business objectives.