Owner-Operators: Exit Strategy Needed?

Government pressures continue to grow and threaten the owner-operator model used by many trucking companies.  IRS court victories over FedEx Ground coupled with the Attorney General of California’s recent efforts to sue trucking companies over their alleged misclassification of owner-operators are making a lot of trucking companies nervous.

Threats against the non-employee status of owner-operators will continue to grow as ballooning federal and state budget deficits force treasuries to look for more revenue; in this case the perceived tax money not paid by employers for FICA and unemployment insurance.

Additionally, individual owner-operator law suit filings will most likely escalate as successful court decisions supporting governmental efforts increase and the lure of obtaining employee status complete with paid taxes and benefits becomes more and more attractive.

Most likely, we’re years and millions (and millions) of dollars in legal fees away from a definitive decision in the courts.  That doesn’t mean however that we shouldn’t consider our alternatives now.  If your company utilizes owner-operators, you may at least want to consider what your exit strategy might be. Possible strategies include:

·         Attrition – quit hiring owner-operators.  Going forward you only add company drivers to your fleet.

·         Buy-Outs – compile a lease expiration and residual value schedule from your owner-operators to determine buy out options. When a lease expires, convert the owner-operator to a company driver and make a purchase decision on his equipment based on residual value and your current fleet profile.

·         Employee Owner-Operators – used by the courier industry, these are employees (company pays taxes, provides benefits) that get paid wages and truck pay. posted 9/19/2008

Comments

[Eulalia]

Good post.

[Aaron Huff]

I heard about an organization that got started a couple of months ago to spread the word about the importance of keeping the contractor status. It is called the Coalition for Independent Contractor Freedom at www.cficf.org.