Owner-operator concerns grow over labor classifications and hours of service

What’s on owner-operators' minds in today’s ever-changing regulatory landscape within the trucking industry? While each owner-operator is different, a few topics consistently rank among the top. With the spike in insurance rates over the years, the changes in labor laws, and the upcoming Environmental Protection Agency emissions requirements for truck OEMs, trucking owner-operators have much to consider as they look ahead.

A lot of their concerns boil down to operational ramifications and how much these regulations and requirements will cost to implement, said Wendy Greenland, CEO of Openforce, a management platform for independent contractors.

“If their margins are razor thin—which they typically are—they're trying to make ends meet,” Greenland told FleetOwner. “Then all of a sudden, [owner-operators] hear about new regulations that are coming out that may affect them. Now, there’s uncertainty ... There’s also a lot of legal uncertainty. Is that going to change their operations?”

What is the California Assembly Bill 5?

The California AB5 regulation was set forth to provide benefits for independent workers, specifically those known as “gig workers.” The rule put in a place an “ABC” test to help classify independent contractors versus employees. To be considered an independent contractor, all three points must be satisfied.

A. The person is free from the control and direction of the hiring entity, both in contract and in fact.

B. The person performs work that is outside the usual course of the hiring entity’s business.

C. The person is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

Labor laws

Two labor laws currently affect the transportation industry: the California Assembly Bill 5 and the Department of Labor’s new independent contractor classification ruling. The DOL’s classification ruling echoes California’s AB5, “which codified the ABC test,” Greenland said. In a nutshell, these are classification tests that determine whether a worker should be classified as an employee, receiving full benefits and a W-2 form, or whether they should be classified as an independent contractor and receive a 1099 form.

What is the DOL Employee or Independent Contractor Classification under the FLSA?

The Employee or Independent Contractor Classification Under the Fair Labor Standards Act replaces the 2021 Independent Contractor Rule. “The Department believes that this final rule will reduce the risk that employees are misclassified as independent contractors while at the same time providing greater consistency for businesses that engage (or wish to engage) with individuals who are in business for themselves,” the Department of Labor states.

While the rule doesn’t adopt an “ABC” test, it does use an “economic reality” test to determine if an independent contractor is “economically dependent on an employer for work.” The final rule uses six factors to determine employee versus independent contractor status:

opportunity for profit or loss depending on managerial skill;

investments by the worker and the potential employer;

degree of permanence of the work relationship;

nature and degree of control;

extent to which the work performed is an integral part of the potential employer’s business; and

skill and initiative.

“The final rule provides detailed guidance regarding the application of each of these six factors. No factor or set of factors among this list of six has a predetermined weight,” the DOL states.

“What we're hearing amongst the drivers is, ‘What does that mean for me? Is there something I should be concerned about? Is there something that will raise the cost of doing business?’” Greenland said. “They're trying to understand a little bit more about what these new Department of Labor rules actually mean for them in terms of the criteria.

“But at the end of the day, they have to operate and manage their small business as an individual entrepreneurial business, and they need to understand all of the compliance and insurance requirements to do that successfully,” Greenland told FleetOwner. “Often, they're still trying to figure all of that out. Then, they have these regulations by state, so there's some confusion there for sure.”

In what would be considered more “patriarchal states, where they feel like it’s their responsibility to regulate more”—such as California, New York, Massachusetts, and Illinois—Greenland said Openforce sees “a greater concern around ambiguity on the long-term viability” of the owner-operators’ business model. In California, for example, some of the owner-operators with concerns over these labor regulations are deciding to retire or leave the industry altogether, Greenland told FleetOwner.

“We actually like being independent, and we're not looking to be classified as employees,” said Carl Smith, an owner-operator contracted with Pillar Logistics.

See also: 2024 Regulations Roadmap: Part 2

Smith hauls liquid chemicals regionally from Ohio to Wisconsin. He owns his own tractor but said he depends on Pillar for billing and arranging his loads. He worries that if federal regulations adopted California’s AB5 rule, he would lose the flexibility of being his own boss.

“I think that would have some real negative impacts on our industry, and specifically, small business truckers—people like me,” Smith told FleetOwner. “That kind of takes away a lot of the things that we actually went into business for ourselves for.”

Financial impacts of labor laws

What are Hours of Service regulations?

The Federal Motor Carrier Safety Administration outlines Hours of Service as a “60-hour/7-day limit and 70-hour/8-day limit” that are based on hours worked over a period of days. The rules include a 14-hour driving window and an 11-hour driving limit. After 11 hours of driving have been completed within the 14-hour driving window, drivers must take a break of 10 consecutive hours.

Yet on-duty time doesn’t include just driving. On-duty time includes:

All time at a plant, terminal, facility, or other property of a motor carrier or shipper, or on any public property, waiting to be dispatched, unless you have been relieved from duty by the motor carrier;
All time inspecting, servicing, or conditioning any truck, including fueling it and washing it at any time;
All driving time, meaning all time spent at the driving controls of a CMV in operation;
All other time in or on a CMV other than:
- Time spent resting in or on a parked vehicle;
- Time spent resting in a sleeper berth;
- Up to 3 hours riding in the passenger seat of a property-carrying vehicle moving on the highway immediately before or after a period of at least 7 consecutive hours in the sleeper berth;
All time loading, unloading, supervising, or attending your truck; or handling paperwork for shipments;
All time taking care of your truck when it is broken down;
All time spent providing a breath, saliva, or urine sample for drug/alcohol testing, including travel to and from the collection site;
All time spent doing any other work for a motor carrier, including giving or receiving training and driving a company car; and
All time spent doing paid work for anyone who is not a motor carrier, such as a part-time job at a local restaurant.

To simplify, FMCSA suggests learning what is considered off-duty time, which the administration outlines as being “relieved of all duty and responsibility for performing work. You must be free to pursue activities of your own choosing and be able to leave the place where your vehicle is parked.”

Owner-operators worry not only about having their independence and work flexibility stripped away but also about the possible financial impact of these labor laws. In the “patriarchal states” Greenland mentioned, she’s hearing a lot of concern from owner-operators about the costs these regulations inflict on their business.

“In those states, we're hearing more complaints about the cost of doing business,” Greenland told FleetOwner. “The cost of insurance is a huge factor we're hearing right now—not just health insurance and auto, but auto liability is just getting exponentially higher ... There are fairly large judgments out there by juries around the country that are affecting the auto liability rates of owner-operators that have been doing this every day for years and haven't had a problem, but they're being affected by the increase in rates.”

Smith said that aside from the enactment of California’s AB5 and the DOL’s independent contractor ruling, he just wants to be paid what he’s owed—specifically when he’s on duty and without racking up miles.

“The service hours we’re held to by the Department of Transportation can be loosened up a bit, and I think it should be done maybe according to a driver’s experience and his driving record,” Smith told FleetOwner.

Smith offered the example of being on duty and experiencing a flat tire. While the tire repair could take one hour, it might take the technician six hours to reach Smith. According to Hours of Service rules, even though Smith isn’t driving for those six hours while he’s waiting for a tire repair, he’s still required to be on duty.

"When I finally get my truck fixed, I'm six hours short, and I still have nine hours to get home. Well, why not just let me go on home?” Smith said. “It's just one example of where [HOS rules] can be a little more loosened up to accommodate a driver for their time on duty. Incidentally, those six hours that I'd be waiting for a tire to be fixed, I don't get compensated for it. I’m out six hours."