On January 14, 2019, the U.S. Supreme Court ruled that owner/operators involved in interstate commerce have the right to have their employment conflicts heard by a court as has been the situation to date under the Federal Arbitration Act even if there is an arbitration requirement in their lease agreement.

Implications of the unanimous 8-0 Prime vs. Oliveira decision are far reaching for fleet operators and independent owner/operators alike.

For one, the potential for litigation - specifically class action suits – to be brought against fleet operators has skyrocketed. In the same way that personal injury attorneys aggressively target injured workers, labor law attorneys may continue to pursue owner/operators and assemble class action suits against trucking companies. The plaintiff's lawyer is on a contingency arrangement so the plaintiff has minimal costs.

While this decision did not rule directly on the employment status of the owner/operator, it will increase the number of minimum wage and other employment issues brought to the courts. Those that are found to be in violation as in California could be subject to back pay and benefits for current and past independent contractors.

Additionally, there’s a vast difference between going to arbitration and taking an employment practices liability case to court. Going to arbitration is confidential, whereas court cases are a matter of public record and create a road map of case law for others to follow suit. Arbitration is more beneficial for the fleet carrier, as higher settlements are usually awarded in court than in arbitration. Going to court or arbitration claims cost about the same overall; however, arbitrator fees are very costly and arbitration forces the employee to pay more cash immediately to start the process, which is good for the employer, but may cost the employer more in the long run.

Fleet owners with independent contractors will want to institute the following immediately in light of the new Supreme Court ruling:

  1. Have your owner/operator contract reviewed by a transportation labor attorney. Using boilerplate agreements is a bad practice – now more than ever. Make sure your independent contractor agreement is worded according to the rules and regulations of your state. Engage a local attorney specializing in transportation labor to review and draft your contracts
  2. Get employment practices liability insurance (EPLI). Talk to your insurance broker about EPLI, which can provide some protection for independent contractor employment issues, and will offer preferred rates for specialized transportation labor attorneys.
  3. Educate your operations staff. Teach your staff how to work with owner/operators vs. employees, and the differences between the two. Practices such as forced dispatch, dictating equipment choices and trucking routes, and the ability of an independent contractor to refuse a load are what separates an owner/operator from an employee. Make sure your operations staff isn’t acting in a fashion that’s going to put your independent contractors’ status in question. Most telling is control. Think of it as a plumber coming to your house to fix a sink and asking to use your tools, or you telling the plumber he has to work until 5.
  4. Build a program that’s attractive to owner/operators. Keep independent contractors happy so they have no reason to go to court claiming they’re misclassified. Make sure owner/operators are well compensated, provide them with an option to purchase occupational accident insurance and leasing a truck and/or trailer with a buyout at the end based on an amortization table and the actual cash value of the equipment 3 or 4 years down the road. consider setting up a voluntary benefits program for owner/operators. Occupational accident insurance is critical to providing independent contractors with the protection they need should they get injured on the job.

Contact your HUB Transportation Specialist for more information on instituting these best practices and insurance solutions to transfer your risk.