After a decade long court battle, and covering almost twenty years of claims (1999-2017), Knight-Swift Transportation Holdings Inc. (Swift) has agreed to pay a $100 million settlement to around 20,000 owner-operator truck drivers who alleged in a federal class-action lawsuit that they were misclassified as independent contractors and not paid the legally required minimum hourly wage, as reported by Transport Topics.
In addition to alleged violations of federal labor statues, the drivers also claimed violations of state wage and contract laws, according to the settlement. Swift has denied the allegations and argues that the owner-operators were properly classified as independent contractors. The owner-operators alleged in that Swift controlled their work and by law employed them to transport goods by truck for the carrier’s customers. As the complaint laid out “Defendants control when, where and how plaintiffs deliver freight. They control the route truckers use. They control virtually every aspect of the way truckers perform their work. They control the equipment the truckers are to use, its maintenance and condition.”
Many states, such as New York (where the Swift lawsuit was first filed before being moved to Arizona), are working on establishing clear boundaries of who is an employee and who is a contractor. For trucking firms, the “NYS Commercial Goods Transportation Industry Fair Play Act” has been on the books for five years now. This law presumes that such workers are employees unless payments for their services are reported on a federal income tax form 1099 (if required by law).
In addition, they must be a separate business entity, or they must be:
- Free from control and direction in performing the job, both under contract and in fact;
- Performing services outside of the usual course of business for the employer; and
- Engaged in an independently-established trade, occupation or business that is like the service they perform.
The IRS uses the “Common Law Test” to determine the difference. These factors include:
- Is the worker subject to the control and supervision of the employer in performing the job?
- Is the work performed part of the usual work of the employer’s business?
- Does the worker have an independently established business offering similar services to the public?
New York State takes the “Common law Test” and expands it to seventeen questions. Employers must apply these questions to determine if they have a contractor or an employee on their hands:
- Provided a copy of any contracts, or substance of oral agreement
- Describe the services performed
- Are these individuals in an independently established business?
- Can similar services be performed for others in a competitive business?
- Can work assignments be refused?
- Is there a requirement to devote a specific amount of time to the services performed?
- Are they covered under your insurances?
- Are deductions made?
- Who provides tools or supplies, materials or equipment?
- When services are not performed (illness), who furnishes a replacement?
- Who sets the rate of pay and what is the basis of compensation?
- How are services obtained?
- Where are services performed?
- Is there a requirement to report at established times?
- Do you supervise or review their work?
- Do you provide reimbursement of expenses? Fringe benefits?
- Do you provide training or require attendance at training sessions?
Companies blurring the lines of who is an employee and who is a contractor is nothing new and this goes beyond trucking but with massive settlements and tighter regulations in play, management needs to be more vigilant on this issue.