Imagine you can predict the future. How would you answer the following:

Where is the transportation industry headed?

What will drive the change?

What opportunities will benefit the trucking and logistics industries most?

Answering these questions created thoughtful conversations among fleet executives at the 2019 Truckload Carriers Association annual conference in March. The consensus among those discussions – the industry is evolving quickly with technology paving the way.

According to the Commercial Carrier Journal, four major themes predicting the next directions for the industry emerged at the conference: enhancing transportation apps, growing logistics, embracing technology, and meeting customer needs.

FreightRover started considering industry shifts two years ago at its 2017 launch. The challenge in starting a transportation technology company wasn’t just to predict the future of the industry, but to help create it. While we didn’t have a crystal ball, our instincts were correct with our CarrierHQ platform aligning to each of the four key areas fleet executives predict the industry is heading next.

Enhancing Transportation Apps

Driver apps aren’t new. Many large fleets have created home-grown driver apps or purchased out-of-the-box options for years. However, many apps available to small fleets remain limited in scope. CarrierHQ’s app takes a more comprehensive approach:

  • Mobile marketplace – drivers can access fuel, medical, and equipment savings within the same place.
  • Driver settlements – CarrierHQ offers full pay visibility including establishing deductions, electing pay frequency, and viewing net earnings.
  • Factoring portal – fleets factoring with FreightRover’s affiliate partner Rover180 can access receivables information and upload invoice paperwork using their camera phone.
  • Private load board – asset-based carriers and 3PLs can post freight to drivers through CarrierHQ’s load board. Drivers can self-select freight and provide load updates through the app.

Growing Logistics

With more than $700M awarded in independent contractor misclassification lawsuits in the past 10 years, asset-based fleets are understandably concerned about leveraging the capacity of owner-operators. However, in a catch22, they also don’t want to introduce a third-party into their customer relationship to access additional capacity. CarrierHQ serves as an important tool for any fleet’s employment classification risk mitigation strategy. FreightRover partnered with Legalinc to offer business formation services inside CarrierHQ. Independent contractors follow a step-by-step process to obtain their DOT authority and establish a Limited Liability Corporation (LLC). In doing this, asset-based fleets can expand their brokerage operations to leverage independent contractor capacity and maintain the direct relationship with their customer, without assuming driver misclassification risks.

Embracing Technology

In the trucking industry, 97% of for-hire fleets comprise 20 trucks or less. With such fragmentation, widespread use of new transportation technologies historically has a long adoption curve. No shortage exists of new company entrants working to solve transportation’s biggest challenges. At the Transportation Carriers Association conference, Greg Hirsch, senior vice president of Daseke, described these companies as providing new voices to help the industry evolve and attract the next generation of drivers.

Many of the new technologies in transportation specialize in creating efficiencies and controlling costs. FreightRover developed CarrierHQ with the same goals in mind. Fleets can purchase four insurance policy types through the platform. FreightRover has reduced the antiquated multi-week process of obtaining insurance quotes and binding to less than 48 hours through a mobile device. Fleet owners or individual drivers answer a series of questions to generate a real-time quote among multiple insurance companies. A policy is chosen and the insurance certificate delivered digitally. With CarrierHQ’s insurance offering, fleets and independent contractors don’t owe any money up front, instead paying through weekly or monthly settlement deductions. The no up-front investment in insurance and pay-as-you-go model also removes a barrier historically preventing many independent contractors from obtaining their own authorities.

Meeting Customer Needs

As customers demand faster deliveries, shipper service requirements keep increasing. Carrier on-time pick-up and delivery is more important than ever. CarrierHQ’s private load board feature meets these increasing demands by connecting to truck telematic devices and driver cell phones to capture freight tracking data. Fleets grant shippers data access to create streamlined cargo visibility.

CarrierHQ also allows the technology to be custom branded. Fleets and 3PLs benefit by white labeling the platform to create and attract capacity using the service offerings of the mobile marketplace. White labeling existing technology expedites deployment, preserves IT resources, and provides a marketing boost.

Capacity remains one of the biggest challenges facing the industry. Trucking currently sits short 50,000 drivers, a number projected to triple by 2025. Sign-on bonuses and increased marketing spend typically only create turnover among fleets and the existing driver pool. These tactics generally fail to attract new drivers to the industry. Outside of significant legislation changes or economic factors like work conditions and compensation, technology provides one of the best opportunities to stem the driver shortage. CarrierHQ tackles this issue three ways: 1) low-cost business formation services; 2) reducing the need for up-front insurance capital, which averages $3,000-plus per truck for small fleets; and 3) providing mobile access to fleet service discounts for the top cost areas of fuel, equipment, and medical. By reducing these barriers to entry and growth, CarrierHQ opens the doors for more new drivers to join the industry.

To learn more about FreightRover’s CarrierHQ and how it could benefit your business, request a quick demo at https://www.freightrover.com/demo-request/

In the last five years, nearly $600 million has been awarded in independent contractor misclassification lawsuits in trucking. Adding insult to injury, the April 2018 decision in Dynamex Operations West Inc. v. California Supreme Court ruled that the ABC Test must be applied in analyzing whether workers are employees or independent contractors. The ruling applies rigid guidelines for classification and presumes workers are employees unless proven otherwise. This volatile legal environment has many wondering if independent contractors can be utilized by transportation providers at all.

Worker misclassification is a costly issue. However, by understanding the law and addressing risks, independent contractors can provide tremendous business benefits. Plus, eliminating the use of owner-operators would increase the current driver shortage by seven times overnight. The industry needs independent contractors to meet shipper demand, but companies must know how to work with them.

Employee vs Independent Contractor

Let’s start with the basics. The level of control a business has over a worker defines classification.

Employees are hired for a regular, continuous period. They work for an employer who maintains control over the work performance and product.

Independent contractors typically work under contract for a defined period. They perform a service for a company while maintaining their own financial independence. The contractor controls how the service is delivered and the final product.

Understanding the ABC Test

ABC is one of the most common tests used to classify workers. The test generally applies to compensation considerations. Under the ABC Test, independent contractors must meet three criteria:

  1. The hiring business does not control or direct the worker’s service performance (A test);
  2. Work performed is outside the usual course of business for the hirer (B test);
  3. The worker operates an independent enterprise from the hiring entity (C test).

The B test draws the most concern and elicits the question, can independent contractor drivers work for trucking companies that also have drivers as employees?

There are a few things to consider that leave California’s verdict under debate. First, while about two-thirds of states use the ABC Test, the Dynamex case was specific to drivers in California. Second, California applied the ABC Test in its ruling regarding minimum wages, overtime, meal and rest breaks, and wage statement violations. This application of the test omits other variables commonly used to establish independent contractor autonomy. Third, the Court left it open that other types of businesses involving product delivery may be viewed as outside of the usual course of the hiring company’s work even if they provide a similar service. Fourth, California’s application of the B test could conflict with economic regulation prohibited under the Federal Aviation Administration Authorization Act, which provides a broader definition of the B test. The FAAAA already struck down applications of the ABC Test in Massachusetts that limited the rights of independent business owners. Overall, California’s ABC Test raises as many questions as it answers.

Assessing Worker Status

In addition to the ABC Test, government agencies also frequently use the Common Law Test and the Economic Reality Test. The ABC Test may be the most stringent, but also the most ambiguous. Businesses seeking to classify workers as independent contractors would be wise to assess that decision using the Common Law and Economic Reality tests as well, which provide additional clarity.

The Common Law Test is primarily used by the Internal Revenue Service. It looks at who has control of the work – the business or the contractor. It assesses 20 factors, not all of which must be present to assign classification. Factors include:

  • Instructions and sequence – who determines how the work is performed?
  • Training – is ongoing training required from the hirer to ensure work is performed in a certain way?
  • Services rendered – must the work be performed personally, or can it be subcontracted/given to the contractor’s employees?
  • Hours of work – who sets the hours when services are performed?
  • Profit and loss – is time and labor pay provided regardless of who gains or loses economically based on the work provided?
  • Location – who chooses where services are performed?
  • Relationship duration – at service completion, can the worker move on to other projects outside of the hirer?
  • Integration of services – do provided services significantly impact overall daily business success?
  • Payment method – are workers paid by project or by regular intervals (hour, week or month)?
  • Business expenses – who is responsible for paying the worker’s business expenses?
  • Investments – who provides the tools, equipment, materials, and facilities to execute the project?
  • Service availability – is the worker free to provide services to the general public while partnering with the hiring entity?
  • Right to terminate and quit – does the employer have discretion to discharge the worker or can the worker quit without a breach of contract?

The Economic Reality Test establishes an employer-employee relationship when a worker economically depends on a business as services are provided. The test uses five factors collectively and examines the strength of each factor to determine a worker’s status. Factors include:

  • Degree of control – who controls the worker and the work product?
  • Opportunities for profit or loss – who profits from the success or failure of the business?
  • Investment in facilities – who pays for the facilities, tools and equipment?
  • Relationship permanency – is the relationship duration indefinite or periodic?
  • Skills and initiative – are the worker’s skills benefiting one business or being leveraged in the open market to support multiple businesses?

The three tests help the government protect workers. However, the government aims to avoid overly regulating the business of employers or independent contractors. Therefore, government entities typically assess the entire working relationship to make classifications. Factors indicating employee status may be balanced by other factors indicating independent contractor status. The major takeaway – failing to meet a factor among the tests may not necessarily change employment classification. However, better safe than sorry, and transportation providers should consult with their legal counsel to act on the criteria for risk mitigation.

What’s the Solution?

Should trucking just do away with independent contractors? No company wants to pay several million dollars in misclassification lawsuits. Companies also don’t want to miss out on millions in freight revenues and adding employee drivers is difficult, expensive, and time consuming. One possible solution? Modify business practices to shift more entrepreneurial control to independent contractors. For help with that, there’s FreightRover’s CarrierHQ.

CarrierHQ provides an online marketplace of fleet services designed for one-truck operations all the way to the largest carriers in the US. The technology was created specifically to address the industry’s increasing struggle to maintain the independent contractor model. When assessing who has control of the worker, CarrierHQ offers flexibility to fleets working to establish contractors as truly independent. Here’s how:

  • Autonomous enterprise operations – contractors have access to business formation services to create and manage their own business entity (LLC) and may apply for their DOT authority through CarrierHQ (requires Auto Liability insurance). By managing their own business under their DOT authority, they are capable of offering their services in the open market and aren’t affiliated with the hiring fleet’s DOT number the same as employee drivers.
  • Payment method – CarrierHQ offers driver settlement services. The benefits are twofold. First, contractors have the option to select how they want to be paid – weekly or by trip (addressing the pay by project consideration). Second, hiring fleets leverage a third party to provide differentiation between how contractor and employee pay is processed. Contractors with their DOT authority also can access FreightRover Factoring to further control the speed of their settlements.
  • Investments – CarrierHQ provides access to affiliate leasing entities for equipment needs. This allows contractors to acquire trucks and trailers for lease or purchase independent of the hiring fleet.
  • Business expenses – contractors can sign up for Comdata fuel cards with limits established by their credit score rather than using a card with financial attachments to the hiring fleet. This addresses classification concerns stemming from fuel advances or price-based access to fuel stations and per-gallon costs. Physical Damage, Occupational Accident, and Non-Trucking Liability insurance are available for purchase in the contractor’s name as well. Using a series of questions and answers, contractors receive quotes from multiple insurance providers to self-select their plan based on coverage and cost. The system delivers insurance certificates electronically to the driver and the hiring fleet. Online access to Auto-liability insurance is coming soon.
  • Control of the work – hiring fleets can launch a private load board inside CarrierHQ. Through a mobile app, contractors self-select freight eliminating the error of forced dispatch and supporting contractor control over the profits and losses of their business. Contractors determine what work they perform and how they perform it while still providing capacity to the hiring fleet.

CarrierHQ provides the blend of control and choice the industry has desperately needed. Fleets take back control of their business and have new means of addressing the potential dangers of worker misclassification. Contractors have an online marketplace providing choice around their work and flexibility on how they manage their enterprise. Independent drivers remain entrepreneurs, not employees. These contractors present more rewards, with more manageable risk, and the industry keeps moving forward.

Interested in learning more? Let’s connect to discuss how CarrierHQ can benefit your overall classification risk strategy.

Schedule a demo | Email sales@freightrover.com | Call 866-621-4145

 

To end FreightRover’s week focusing on women in logistics, we talked with all-star Misty Darnell of Paschall Truck Lines about her thoughts on trucking and the unique female perspective.

Misty Darnell Image

How did you get into logistics?

I received an offer to work fulltime while I was getting my master’s degree in finance. I got my first taste of logistics and instantly loved it. I love that there’s a new challenge every day. Nothing’s ever perfect within logistics – there’s always something that can be better, that can be improved upon. I did that and then got offered a job to come back 5 years after I graduated and to work at Paschall Truck Lines. I knew I loved trucking and it was a good opportunity to get back into it and do something I knew I liked. From there I’ve progressed into the roll I’m in now, which is Vice President of Corporate Development.

What are the biggest problems in the industry?

I think for any carrier the driver market and driver turnover are big issues within our industry. We must make trucking more attractive to more people and get them involved because we have a driver shortage. I think our biggest challenge currently is deciding what we need to do as an industry to get more people involved and wanting to become truck drivers.

Do you think being a woman in the logistics industry gives you a different perspective? Do you think you’ve brought anything new to the table being a woman in a traditionally male-dominated field?

My mind races at 100 miles an hour and is constantly thinking about a bunch of things at once. When you think about logistics and trucking, that’s exactly how trucking is. There are so many things going on at once. It’s not just one process, you’re working through the whole system. You’ve got your trucks to worry about, you have your equipment, your customers, and your drivers.

I’m not sure why there hasn’t been as many women in trucking – I guess because from a driving perspective everyone just thought it was more of a male job. But from the carrier and driver side of things, it’s a huge opportunity for women to come into this industry to give a completely different perspective and thought patterns. Women tend to look at things very openly and question things at times. I know for myself, I always question why I’m doing something and what potential opportunities might be there. I think logistics for women can be a huge opportunity for them to be successful if they can come in and handle the driver aspect of it as well as the back office.

What can other women learn from your success?

Within my organization, I’m the only woman vice president and I’m also the youngest. I sit on two vendor customer advisory boards where I’m often the only woman in the room. It’s easy to worry about stereotypes like, “Oh you’re a woman. Do you know as much as everyone else?” However, when you’re able to open your mouth and speak very intelligently, you instantly gain respect. As a woman, you must prove yourself. Be confident in what you’re speaking about and be knowledgeable. That comes with any industry and any job, but especially here where there traditionally haven’t been very many women at higher levels.

How is technology helping to bring more people into the industry?

The technology advances help enables automation and back-end procedures, which free up time to work more hands-on with the drivers. Technology allows us to reallocate resources. There’s a driver shortage and there’s also a shortage on the experience side. We’re a training fleet, so we hire drivers from CDL school and put them through our training program. We’re able to expedite processes and reallocate those resources to training novice drivers to become better long-term drivers.

What is Paschall Truck Lines doing to get people into the transportation and logistics industries?

On the driver side of things, we have taken a hard focus at hiring additional women drivers. Our percentage right now is about 8% of our total driver pool. I know that doesn’t sound like a lot, but within the industry it’s actually really good. We see hiring more female drivers as a big opportunity and we are trying to increase that percentage monthly.