Are you considering expanding your fleet this year? Need to bring on new drivers to keep up with demand? Know the only way to grow is to start hiring? You can hire drivers who are employed by you or you can hire 1099 drivers (independent contractors). Deciding which is best for your fleet is a business decision only you can make, but it’s important to know the risks of hiring 1099 drivers.
Is Your Driver an Employee or an Independent Contractor?
California, New Jersey, and other states are currently proposing law changes that impact the “gig” economy. Unfortunately, those same laws could have a huge impact on the trucking industry.
Current laws in place require employers to use specific criteria to determine if someone should be an employee or independent contractor:
- Is the employee free to create their own schedule?
- Can they work for other companies?
- Does the company dictate exactly how the work should be done and do you oversee the driver’s work directly?
New laws are adding further criteria to the mix, most infamously California’s ABC test. It’s this test that could cause the most upheaval in the trucking industry, if it stands as law.
- The worker (driver) is free from control and direction of the hiring company in connection with the performance of the work.
- The worker (driver) performs work outside the usual course of the company (fleet’s) business.
- The worker (driver) has their own established business, trade, or organization that fits the nature of the work they’re doing.
It’s “B” that poses the biggest problem to independent contractors and the fleets who hire them. If the law stands, it changes the hiring practices of every fleet in California.
What are the Risks to Your Fleet?
What potential risks do you face if you hire 1099 contractors? It all depends on a few factors, including if the driver should be classified as a contractor at all and what the law says.
The California trucking industry has taken the state to court over the ABC test as the “B” poses the most problems. If the law stands as written without an exemption for fleets and drivers, companies in California will be forced to hire on drivers as employees which creates a lot of upheaval and added expense. Fleets outside of California may still be impacted if any of their 1099 drivers live in California.
Any fleet that hires independent contractors instead of employees pays less in taxes and workers’ compensation insurance – which sounds great until a driver sues the fleet. With workers’ compensation for employees, not only is the incentive for a lawsuit reduced, your legal costs are covered by your policy.
For small companies, just the scrutiny from regulators in your state may not be worth the risk. One driver incorrectly filing for unemployment (although classified as an independent contractor) or filing a workers’ comp claim can put you in a legal spotlight you don’t want. You’ll have auditors crawling through your business, gumming up the works, and costing you time and money.
Regardless of how the law changes in the future, it may be better and easier (and less risky) to hire drivers on as employees. Assume the costs of hiring employees now and reduce the long-term risk to your business.
Need a way to manage your growing fleet? Gorilla Safety can help! Get started, today.
