As we all know, transportation regulations are created with good intent, always looking for ways to make the transportation process safe and fair. But many conflicting regulations make it harder for transportation companies to move freight and avoid legal actions against them.
To discuss this topic, Cassandra sat down with Kristen Johnson, a transportation law expert, who talked about these regulations and how to navigate through them.
Is there a difference between independent contractors and owner operators?
Before diving into the topic, let's differentiate between owner-operators and independent contractors.
Owner-operators could be considered independent contractors, but as the name suggests, they own and operate their vehicles. Other independent contractors do not have their own equipment. For instance, independent contractor drivers. Usually, owner-operators run under the carrier's DOT number.
Therefore, the carrier that hires an owner-operator and has them under their authority will be entirely responsible for what that owner-operator does.
Conflicting Laws for Motor Carriers
There are a lot of conflicting laws that govern what you’re supposed to do when you’re a motor carrier. Take the image above as an example. As a motor carrier, you’re required by the FMCSA to prioritize safety, and there are many regulations you must comply with. But as a motor carrier, you must find the capacity to transport freight, especially when demands are high. In trying to do so, many carriers hire independent contractors.
Once you hire an independent contractor, you must consider an entire layer of additional regulations. The issue is that these regulations do not match the FMCSA safety regulations. This happens because these regulations come from a different interest, and it is checking that these independent contractors are a company and not employees of a specific company pretending to be so.
The “Exercising Control” Issue
One of the first conflicting rules of the relationship between motor carriers and independent contractors is that motor carriers cannot exercise control over those independent contractors.
Many questions arise when thinking about this statement, like how can motor carriers be sure these independent contractors are safe without telling them to be safe? Are they not allowed to recommend specific safety monitoring equipment? Or what exactly is an exercise of control?
Here’s where carriers start to feel conflicted between encouraging certain safety levels and not wanting to have any legal issues with the independent contractors for “exercising control” over them.
Carriers must balance between not exercising control and ensuring certain levels of safety and quality to avoid legal issues.
Should carriers prioritize safety and quality or avoid “exercising control”?
Even though this is a balance game, safety is number one.
Let’s say a company tries to bring up a misclassification case, and their crucial piece of evidence is that the carrier exerted too much safety control over the independent contractor; there will probably be a lawyer that would defend this as a “condition of contract” and not an exertion of control. This means that the carrier, in their contract, determines that they won’t work with any independent contractors that do not meet specific safety standards. Standards that are recommended and required by the FMCSA.
The broker perspective
Another aspect of the equation is brokerage. There’s debate on how much brokers need to exercise safety and other requirements when selecting carriers for their shippers. Some think brokers need to exercise care when choosing a carrier, but the issue here is that brokers are in a different line of business; they are the ones selecting the carriers, which ultimately can be defended in many ways in case of legal action.
There are cases where brokers work very closely with the carriers. So much so that they often pay the carrier’s drivers directly or they are the carrier’s sole source of revenue. This definitely could become an issue and cause legal action, but, as mentioned above, lines of business are different. Brokers are not in the business of actually transporting freight; they arrange transportation.
Leasing Regulations that apply to Owner Operators
These regulations have many requirements on the way leases are structured and structures in which owner-operators are paid when leasing vehicles.
One of the requirements is that the leasing entity, the motor carrier leasing from the owner-operator, cannot require the owner-operator to purchase or lease equipment from the motor carrier.
When trying to implement and use standard safety equipment across all your vehicles, this becomes a problem. For instance, equipment is now being used to monitor drivers' habits. According to this regulation, you cannot implement this type of equipment because you cannot require that equipment from the motor carrier.
What are carriers responsible for when they work with an owner operator?
- Onboarding and vetting the owner operator.
- Performance and safety of those who are leasing under their authority.
There are many regulations to consider when transporting freight and working with owner-operators and independent contractors that carriers must consider when trying to avoid legal troubles. You must understand these regulations and work with experts to help you navigate these conflicting laws and ways to continue providing safe and high-quality services for your clients.