Preparing Your Independent Contractor Program for New Administrations
President-elect Joe Biden has not hidden his thoughts on the use of independent contractors and other labor and employment issues. His campaign website describes his labor and employment positions at length, and those positions mirror his efforts as one of President Obama’s chief jobs and economic advisors. Fortune magazine recently echoed what you can expect from the Biden administration, and whomever he picks for Labor Secretary will say a lot about his vision.
How far Biden pushes some of these ideas remains to be seen, but it is fair to assume the Biden administration will pursue pro-labor rules and likely attack the use of independent contractors across many industries.
With that in mind, now is a good time to revisit your independent contractor program to make sure it can withstand scrutiny. A strong independent contractor program has reasonable, easy-to-understand contracts and business terms, and more importantly, it permeates every part of your interactions with your independent contractors. A good independent contractor program talks the talk and walks the walk.
Talk the Talk – Easy to Understand Contracts
- Good contracts do not need to be weighed down by dense fine print. Good contracts should be clear, and easy to understand for your team members, for your contractors, and for any judges or arbitrators that have to read them down the road.
- Contracts should have options for independent contractors to choose the pay, operations, programs, services, and other terms of their choice. These can be in the form of choosing operating areas or load types, choosing payment methods, even choosing dispute resolution methods.
- Contracts need to cover the Truth-In-Leasing regulations and other state requirements. For example, the Truth-In-Leasing regulations require certain provisions about insurance, exclusive possession and control of equipment, settlement deduction authorizations, and so on. State independent contractor definitions like those in New York and Georgia require certain language in your contract, or certain ways to obtain permits. Make sure your contract complies with federal law and your states of operation.
- Good contracts are entered into easily. Give your contractors reasonable time to review and discuss their contract. Make it easy for your contractors to reference their contract.
Plaintiff attorneys claim businesses force contracts on independent contractors. They claim contracts are not negotiable, are entered into in a rush, and are too complicated. Take those arguments away from the attorneys by simplifying your contracts, giving your contractors options, and giving your contractors time to review contracts at their own pace.
Walk the Walk – Respect Independence in all Facets
A good contract is nice, but most claims from contractors are won or lost because of actions, not contracts.
- Every aspect of your contractor relationship needs to keep independence in mind. All independent contractor definitions look at least in part at the level of control businesses have, or that they exercise, and most definitions will look at the economic relationship as well. Sometimes you will need to exercise control for regulatory reasons, safety reasons, or customer reasons. The key is to be mindful of when you choose to exercise control. You need to find balance between independent freedom and your business need for control.
- Do your recruiting efforts support independent contractor status? What does your website say? What about your advertisements? Do your recruiters understand the difference, and sell it appropriately?
- Does your onboarding and orientation process differentiate between drivers and independent contractors? Look at the paperwork, policies, and materials you are using during the orientation and onboarding process. They should reinforce the difference between your independent contractors and employee drivers.
- Does your safety program respect the difference? Most likely you are going to toe the line between independence and control the most when it comes to safety. The FMCSA does not differentiate and it expects carriers to not differentiate either. Plus, we all want to help drivers be safe, and hold them accountable when they are not safe, regardless of status. But there are ways to do it while respecting independent contractor status. For example, from a purely independent contractor status perspective motor carriers should not require or put cameras in independent contractor trucks. But from a safety perspective it is nearly universally accepted that cameras lead to safer driver behavior. There are incentive programs, coaching steps, lease purchase provisions, insurance requirements, and other methods to get cameras in independent contractor trucks while respecting independence. My personal philosophy is if you are going to blur the line on independent contractor status blur it in the safety arena, not elsewhere. Plaintiff attorneys do not like going against carriers with good safety practices.
- Does your Operations team know what is in your contract, and do they live up to it? Do your contractors have the right to turn down freight? What are their freight options? Do they have fuel and maintenance vendor options? Does your Operations team treat your contractors differently than your employee drivers when it comes to dispatch, discipline, incentives, dispute resolution, routing, pay administration, and so on?
- Does your lease purchase program stand alone, separate from your carrier operation? Often the biggest mistake carriers make when it comes to independent contractor programs is the intertwining of their lease purchase program with their carrier operations. Lease purchase programs, including lease purchase rights, must be separated from carrier operations. If the contractor’s contract with the carrier ends, that should not automatically end the lease purchase contract, and vice versa.
Whether or not your contractors are independent is a product of easy-to-understand contracts, and respect for the contractor’s independence throughout all aspects of your relationship. With any new federal or state administration, but especially new administrations in your primary operating states, comes an opportunity to review and reinforce the independence in your independent contractor programs.