Lawsuit Against Swift Determines Lease Operators Are Employees, Not Independent Contractors

This update from Getman Sweeny, the lawyers representing the drivers in this lawsuit that's been going on for 7 years now.

More info in the Wall Street Journal article

This is not advice or a discussion of leasing (per se') - but more for informational purposes for those who may have leased - or those considering the ramifications of leasing.

I'm gonna ad-lib with some cut-n-paste here...

Contract drivers aren’t eligible for many protections given to employees, including some minimum wage laws, and often are ineligible for employer-provided health insurance and other benefits. Some owner-operators say they prefer their independent status, which allows them to jump from fleet to fleet chasing better pay and consistent work.

But Dan Getman, an attorney representing the Swift drivers, said large, long-haul trucking companies “shift the various risks of truck operation onto drivers” by locking many of these contractors into monthly lease payments, effectively forcing them to drive for one fleet and on that company’s terms.

The complaint claims that the truckers are held in “forced labor” in violation of federal labor. Since truckers can only drive for Swift, and cannot leave their work without the threat of crushing debt burden, Swift and IEL’s arrangement amounts to “forced labor” for Swift for periods extending up to four years.

So essentially - some of the DISADVANTAGES of leasing come to light in this suit. But the fact that COMPANY LEASES force a lease/driver to work for ONLY THAT COMPANY - makes them "employees" and not "independent contractors" (or Owner/Ops) as most of the standard company lease contracts are written the same way.

The "class action" that's going on now - that the court refused to pass back to ARBITRATION (as the lease calls for all disputes to be resolved in arbitration, NOT in court), as it has ruled that the lease drivers are MIS-CLASSIFIED EMPLOYEES - and NOT INDEPENDENT CONTRACTORS.

The Class Action Suit is open to anyone who leased from 4/16/2010 - to present. As with most Class Action Suits - the folks that REALLY COLLECT THE $$ - are going to be THE LAWYERS.

Now - I'm not trying to "stir up feces" against Swift. I have NO AXE TO GRIND - from all testimony here, from PEOPLE I TRUST - they are a decent company to work for (or as decent as any other in an industry where most seem to rage against their employer for one reason or another). This suit may end up APPLYING EQUALLY to every company that does lease-ops INTERNALLY (even tho the leasing company has a different name - Success Leasing, etc. - it's still owned by the same principals as the carrier)

The fact(s) that I'm trying to illuminate here are, that the practice of leasing for a company to "escape the obligations" it would normally have towards an "employee" (versus a contractor) under the guise of "being your own boss" - have been judged (for the moment) by a Federal Judge to be UNTRUE.

The "great deal" of leasing a truck, that we keep saying may not be so great for a number of reasons - just found yet another reason.

The leasing contracts THEMSELVES - may end up being found to be INVALID, because they classify someone who actually IS AN EMPLOYEE (for the reasons illustrated): they can't "take their ball and play elsewhere", they are still bound to semi-forced dispatch, they must use company specified maintenance facilities, etc.

In November, Swift set aside $22 million in estimated payouts to 1,300 drivers for Central Refrigerated, a trucking fleet the company acquired in 2013. A class-action against Swift itself would be much larger, involving up to 15,000 drivers, said Mr. Getman, who also represents the Central Refrigerated drivers.

The point is - that this type of action may well find itself spreading to OTHER COMPANIES in the "Mega Company" world, that do these kind of lease deals.

Should this class grow really large, and WIN IN COURT - this could be a VERY COSTLY SETBACK for Swift. They are the largest publicly held trucking company (which means they have SHAREHOLDERS TO ANSWER TO).

Companies may also be in the process of revising their contracts - in order to avoid litigation like this. But you can BET that unless you are getting a NEW(er) truck, that you will OWN for a specified amount after the term of the lease, that you can TAKE TO ANOTHER CARRIER as long as some form of guarantee from that carrier is made with regards to lease payments, or the lease-op is given the opportunity to REFINANCE the balance of the lease/buyout - then THE COMPANY is still at a MUCH GREATER ADVANTAGE IN ANY OF THESE DEALS, than the DRIVER WILL EVER BE - REGARDLESS OF HOW MUCH MORE $$ you can net as a lease over a company driver.

Discuss CIVILLY PLEASE.

Rick

Sounds a lot like the current dust-up about Uber drivers.

Sounds a lot like the current dust-up about Uber drivers.

This suit has actually been going on for 7 years - longer than Uber has even been an issue.

As the WSJ article mentions - there's a lot of stuff that's going on in California (go figure) especially around the ports and drivers there, regarding status as "independent contractors" - versus employees.

We often advise against leasing here, especially for newcomers to the industry, as "taking on too much responsibility, too soon", while trying to learn the "safety & trucking" side of trucking. While adding that the "risk reward" of taking on all the companies risk/liability for the equipment, versus the "increased income" (in addition to being 1099'd and liable for your own taxes, health insurance and other non-reimbursed expenses) sometimes just isn't worth it - ESPECIALLY FOR PEOPLE JUST OUT OF SCHOOL.

This lawsuit illuminates further, how lease-ops - due to the way the leases are written, and the fact that you are "bound" to a carrier by them - may have "mis-classified" lease guys as CONTRACTORS, instead of as EMPLOYEES.

I (again) have NO AXE TO GRIND WITH SWIFT.

This lawsuit just happens to be the one that ended up in my inbox. I'm reasonably sure (without actually examining the leasing contracts from Prime and others) that a majority of companies that do these type of leases, have them structured similar enough, that they are going to have to radically change their business model (the way the leases are structured), or discontinue the leasing programs altogether until they figure out a way to structure them that lets them off the hook as far as the driver/lease-op actually being an Independant Contractor.

Where this might end up is - lease purchase programs that DO GIVE a little more advantage to the driver, as far as being able to move to a different carrier, or ending up with a viable truck at the end of the lease period to purchase and actually get a few more years of "debt free operation", with a still-manageable maintenance overhead.

While I don't see Swift going belly up if this lawsuit actually finds for the plaintiff - it will set a precedent for the industry that may or may not be of BENEFIT TO US AS DRIVERS overall. Something to keep monitoring though.

Rick

I really didn't look into leasing. Only know what a couple trainers told me. But with Prime they can choose to run under their own authority or under Prime's. It's cheaper to go under prime. Cause the other way you are paying your own liability and collision insurance etc. They cannot partake of our health benefits, but we do have a HR that gives them info on plans.

My trainer had a lease she paid off and kept the truck. There are different types of leases at prime, so its possible some could be affected and some not.

Also I have been told (yeah I know) h That we have a separate logistics side....which I have never seen. Only ever heard people talk if it.

Interesting Success leasing was mentioned cause that's who we use.

To bounce off of Rainy's post. If you truly want to be an OO, you should buy or lease your Truck independently of ANY Company. Get your own authority and roll. Then you can haul freight for ANYONE, I would imagine you would get a better deal anyways. Never looked into it, so I could be "all wet", as my Grandpa used to say. All wet was his way of saying Full of $#!+

I really didn't look into leasing. Only know what a couple trainers told me. But with Prime they can choose to run under their own authority or under Prime's. It's cheaper to go under prime. Cause the other way you are paying your own liability and collision insurance etc. They cannot partake of our health benefits, but we do have a HR that gives them info on plans.

My trainer had a lease she paid off and kept the truck. There are different types of leases at prime, so its possible some could be affected and some not.

Also I have been told (yeah I know) h That we have a separate logistics side....which I have never seen. Only ever heard people talk if it.

Interesting Success leasing was mentioned cause that's who we use.

Swift is a biggie, as is Prime - the two biggest.

I mentioned Success - because I can't see their lease contracts being very different. The industry has a tried and true methodology. So if Swift is being sued for this - I can't see Prime not being at risk for similar suits.

The basis of the suit is that - if you can only take dispatch from the company, you can only use their maintenance facilities - if the rules are basically the same for lease/ops as they are for company - the only difference being, the company treats you as a 1099 Owner Op - then the judge has ruled the suit can go forward as, under those conditions (re-read my original post) - lease-ops are MIS-CLASSIFIED AS CONTRACTORS, when in fact - they are for all intents and purposes EMPLOYEES.

I also mentioned that I have reviewed neither companies lease contracts, so I really couldn't venture an opinion on either - but apparently a federal judge found the case had merit, and was in the correct venue to continue.

As TM says (no matter how wet between the ears he is) - if you ARE going to do something like this - the BEST WAY (after working a year or two as a company driver) would be to get YOUR OWN FINANCING or come in with a butt-load of cash. These leases are attractive, because you can have horrible or non-existent credit, and the company will throw you a truck, because you can't just quit and lease on somewhere else with THEIR TRUCK (remember, you PAY like it's your truck - but it's NOT YOUR TRUCK). If you can get outside financing (and make sure you have at least 3-4 months operating expenses including DEBT SERVICE in reserve), you can lease on ANYWHERE with YOUR TRUCK (even though it belongs to the leasing company).

Rick