By leveraging a non-asset based platform with IC's, Motor Carriers (MC) are able to grow while mitigating the significant costs of employee drivers (EE's) and company owned units by leveraging a non-asset based platform with independent contractors (IC).

However, one should consider that while an IC fleet can be a great operational resource, there are inherit risks associated with their utilization.One of the biggest challenges a Motor Carrier faces is maintaining the IC Status of its fleet and defending an IC-to-EE reclassification challenge - an outcome to be avoided at all costs as the financial risks from the IRS & Workers' Compensation (WC) claims/audits could threaten the very existence of the company.

We always advise that the first step of Motor Carrier protection is to have a very well drafted Independent Contractor Lease Operating Agreement (ICOA) as having one will provide compliance with the Federal Leasing Regulations and serve as a foundation from which to defend an IC reclassification challenge as it defines the rights to "Direct & Control". The ICOA should include a provision that every IC needs to provide proof of Workers' Compensation Insurance (WC) on themselves and any employees they may have.

Alternately, as an acceptable alternative to WC a Motor Carrier may allow ICs to provide proof of Occupational Accident Insurance (OA), subject to some minimum coverage standards. Many MCs setup programs that allow their ICs to purchase coverage via settlement deductions, while others may choose to purchase a WC policy to cover all of their ICs.There are a number of models a MC can utilize, with each having their own nuances and levels of complexity.

To develop a basis for future discussion, we'd love to here from you on steps you've taken to protect your company from IC's seeking employee status? Has your company been subjected to a reclassification challenge? What was the outcome? What type of model are you currently utilizing regarding to Workers Compensation, Occupational Accident...or a combination of the two?

In our next blog we'll discuss the different models a Motor Carrier can utilize involving Workers Compensation and Occupational Accident and the nuances and levels of complexity involved with each.