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New Fronts Open in the War against Independent Contractors

Jan. 11, 2016
Labor unions are setting their sights on organizing independent delivery drivers, following the mantra that "most workers are employees."

The nationwide movement to wipe out independent contractors by establishing that they are really misclassified employees is continuing to pick up steam, although it has suffered some recent setbacks. At the same time fleet operators and legal experts are working on ways to continue this vital business model while negotiating an ever-changing legal minefield.

A few months ago we noted that U.S. Department of Labor's Wage and Hour enforcement personnel now assume that "most workers are employees," Hilary Clinton attacked what she termed "the gig economy" and sympathetic Democrat senators re-introduced legislation to outlaw independent contractors in most industries (see "Labor Department Escalates the War against Independent Contractors").

The origin of this movement is not hard to trace: Antitrust laws don't allow unions to organize independent contractors. Unions and like-minded supporters believe all such relationships are inherently exploitative, and if they had their way everyone would be an employee and a member of a union.

Think that is too strong? Look at California where a new Teamsters-written law deploys state power to coerce drayage carriers into coming to heel—offering them amnesty from legal penalties only if they conduct a voluntary self-audit and reclassify their drivers as employees.

To add pressure, the new law took effect on Jan. 1 and expires on Jan. 1, 2017. This gives companies little time to obtain permission from the California Labor Commissioner, perform an audit, and negotiate a settlement agreement with the commissioner that includes payment of wages, benefits and taxes owed, workers' compensation, and the commissioner's negotiation and execution costs.

A week after the law was enacted in October the Teamsters drove the point home by striking southern California port facilities used by several drayage carriers it has targeted. Elsewhere, however, even after court rulings that FedEx Ground drivers are employees and not owner-operators, the Teamsters have had only sporadic luck in organizing that company's terminals.

Countering the Uber Effect

In California drivers in Orange County sued Amazon and companies providing it with same-day delivery services, asserting they are employees instead of independent contractors. They claim Amazon micromanages their work and they are not allowed to select or reject assignments.

This follows the California Labor Commissioner's ruling that Uber drivers are employees, which led to litigation being closely watched all over the world. On the other hand, on Dec. 3 the Florida Labor Secretary held that Uber drivers are independent contractors.

If you wonder where this is heading, on Dec. 14 the Seattle City Council passed a bill allowing drivers for Uber and Lyft to unionize, along with permitting the city to appoint an exclusive driver representative and compel rideshare companies to bargain with that person.

In happier news, a Kansas judge ruled that a delivery driver for CEVA Logistics was an independent contractor, dismissing a workers' compensation claim he had brought. A New York State court ruled that five CEVA drivers suing for overtime pay were contractors under both federal labor law and a stricter state statute.

A big problem is that courts and regulators are constantly changing standards for how little control a company needs to exert over drivers for them to be considered employees.

Logistics companies are reviewing and changing contract language to match these shifting standards. For example, some tell drivers it's the customer—not the carrier—who expects them to wear uniforms and follow certain practices. Several entrepreneurs are testing other work-arounds and alternatives, such as driver pools which allow drivers to serve more than one carrier.

At this point it is anyone's guess how all of this will shake out. But you can be sure we will continue to keep you informed about the changes taking place, and share with you the best advice on how to handle them.

David Sparkman is founding editor of ACWI Advance (www.acwi.org), the newsletter of the American Chain of Warehouses Inc., as well as a member of the MH&L Editorial Advisory Board.
About the Author

David Sparkman | founding editor

David Sparkman is founding editor of ACWI Advance (www.acwi.org), the newsletter of the American Chain of Warehouses Inc. He also heads David Sparkman Consulting, a Washington D.C. area public relations and communications firm. Prior to these he was director of industry relations for the International Warehouse Logistics Association.  Sparkman has also been a freelance writer, specializing in logistics and freight transportation. He has served as vice president of communications for the American Moving and Storage Association, director of communications for the National Private Truck Council, and for two decades with American Trucking Associations on its weekly newspaper, Transport Topics.

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