But carriers have long had “safe harbor” from some of the right-of-control rules based on Section 530 of the Internal Revenue Service code. The section spells out requirements for companies utilizing independent contractors. The safe harbor provision makes the prevalence of the IC classification in a particular industry a reasonable basis for classifying workers as ICs.
Without the provision, which would have been gutted by recent attempts at federal legislation addressing IC classification, companies utilizing leased owner-operators wouldn’t be able to do so without significant contract changes.
Bills to change classification rules to the detriment of carriers utilizing independents were introduced in each Congress after the Democrats took both houses in 2006. Mired in a battle over the federal debt and how to revive the economy, the current split-party Congress appears unlikely to take action on IC status. Plewacki characterizes the lull as a time to think about ways to enhance owner-operator freedom in current leases and examine new models.
States continue to wrestle with IC issues, says Greg Feary, an expert on IC classification law with the Indianapolis-based Scopelitis law firm. “In the last year and a half there have been many [decisions] that support independent contractor status for owner-operators,” he says.
The big question, he says, is when efforts to erode Section 530 relief at the federal level will return. “It just depends on the makeup of the Congress, generally. If the federal legislators are more Republican than Democratic, you might not see as many efforts in that area.”
• Independent entity that contracts with carrier and agrees to provide independent contractors
• Contracts with owner-operator and provides settlement and/or other services with all deductions spelled out in the contract
• Is paid by the carrier either on a flat weekly rate per contractor or in an incentivizing mileage or percentage basis to encourage workforce stability
• Contracts with transportation agent, agreeing to lease equipment under the motor carrier’s authority
• Agrees to carrier’s operational requirements and to supply driver
• Contracts with the transportation agent, specifying requirements of owner-operators.
• Typically leaves to the transportation agent the right to provide most service, except for freight/dispatch capability and motor carrier authority