Your Auto and Transportation Operations Are at Risk Because of This Supreme Court Decision

By: | February 21, 2019

Steve Bojan is the vice president of Fleet Risk Services for Hub International. He has nearly 20 years of operations and risk management experience in the transportation industry. Steve serves as a resource for the brokerage operations with transportation related risks, providing risk control, safety, property, environmental, and workers compensation reduction guidance to HUB’s clients. His specialties include transportation risk management, driver and supervisor training, truckload operations, DOT compliance, safety program development, and specialty fleet operations, including moving and non-emergency medical transportation.

On January 14, 2019, the U.S. Supreme Court ruled that owner/operators involved in interstate commerce have the right to have their employment claims heard by a court, as the drivers in question are viewed as transportation employees and therefore exempt from the Federal Arbitration Act.

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The decision is based on the 1925 description of a transportation worker so that even if there is an arbitration clause in the owner/operator agreement, the correct initial venue for multi/interstate claims would be federal court.

Implications of the unanimous 8-0 New 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 greatly increased. In the same way that class action attorneys now target groups of potentially injured (physically or financially) parties that could have a claim against a product manufacturer or service provider, employment attorneys now have an attractive audience in owner operators who feel that they have been misclassified.

While this decision did not rule directly on the employment status of the owner/operator, it will increase the number of employment cases brought before the courts. These could include misclassification claims for minimum wage payments and workers’ compensation coverage.

While there is still an opportunity to petition for claims to be heard in state courts, where in some cases the laws may be favorable to the owner operator model, there are a number like California that have already had very expensive rulings against transportation organizations.

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

Additionally, there are significant differences 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.

Arbitration is a more controlled environment with a greater amount of predictability surrounding the final outcome.  All trials have some amount of unpredictability related to damages and how case law will be interpreted.

Additionally, while there are significant costs for arbitrators, costs associated with trials escalate rapidly as they tend to drag out and include many motions and meetings before a claim even comes to court.

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

  1. Have an experienced transportation law attorney craft your owner operator agreement. Remember this is a contract between business parties and should be treated as such. It is important to ensure that your agreement is in compliance with applicable state and federal laws/regulations. Your local counsel is knowledgeable about favorable state regulations and how to craft an agreement that is not easily challenged.
  2.  Purchase employment practices liability insurance (EPLI). Talk to your insurance broker about EPLI, which provides fleet operators with protections against the potentially huge costs associated with independent contractor employment issues. In many cases, the policies will include a panel of suggested transportation labor attorneys who offer preferred rates and have a known track record.
  3. Instruct your operations staff appropriately. Teach your staff the difference between working with employees and owner/operators. Practices such as forced dispatch, dictating routes and exerting other unnecessary protocols can have an adverse effect. Make sure your operations staff isn’t acting in a fashion that’s going to put your independent contractors’ status in question. It’s often about how much control your staff is exhibiting. Think of it as a plumber coming to your house to fix a sink and requiring the technician to use your tools and fix the problem according to your recommendations.
  4. Build an attractive owner/operator program. Keep independent contractors happy so they do not want to be reclassified as company drivers. Make sure owner/operators are well compensated, have a healthy lifestyle and can become successful business people.
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    Provide them with options that assist in protecting their livelihood such as occupational accident insurance that protects them if an injury occurs, physical damage insurance to repair their vehicle if it is involved in a crash and vehicle breakdown coverages to protect against major system breakdowns. Creating a voluntary benefits program that allows the owner operators to plan for their future and protect their family is a great opportunity to show how your organization is looking out for them as people, not just as a subcontractor.

New Prime vs. Oliveira will determine the course of the relationship between fleet carriers and their owner/operators moving forward. Fleet operators who examine their policies and procedures and transfer their risk to employment practices liability insurance today will be primed to face what’s down the road. &

Risk Matrix: Presented by Liberty Mutual Insurance

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The R&I Editorial Team can be reached at [email protected]