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| Independent Contractor, Employee or Agent?
By John Anderson
 | | John Anderson |
Question: What determines the difference between an independent contractor and an agent in a broker/shipper relationship?
Answer: The distinction between an independent contractor and an employee is very murky and the subject of MANY lawsuits, most often by the government seeking to reclassify independent contractors as employees. There is no bright line test.
Generally stated, an independent contractor is a separate and distinct business. An independent contractor must provide service under his own "direction and control" and determine the "details, manner and means" of doing the job. How much "direction and control" a shipper or broker exerts over a trucking company is critical in determining if the trucker is an employee of the shipper or broker or an independent contractor. Each state and the federal government has its own test(s) and policy(ies) for application and, in many instances, states have different tests for different agencies. The IRS has its own test and, in this regard, publishes a list of 20 factors to be considered in making the determination. The IRS publication on current worker classification law can be found here.
An agent is a person or entity that can be an employee or independent contractor providing service for the principal on an ongoing basis. However, a totally independent third party can be an agent and nothing else. For example, I am the BOC-3 process agent in Oregon for several companies that provide blanket designations. That makes me the designated BOC-3 process agent for thousands of trucking companies and brokers that use those companies to make blanket filings. Thus, I am the agent for all of those companies even though I have not had any contact with most of them.
An agent is one who is authorized to do some act for or on behalf of the principal. For example, you can have an employee that you have authorized to make major purchases on behalf of the company - this employee would be an authorized agent for that purpose even though no other employee is authorized to do that. You also can authorize an independent contractor to act as a limited agent, however, the more authority the independent contractor is given the more likely someone will claim that the independent contractor is really an employee. In the Broker/Carrier situation, if the carrier designates the broker as its "special, limited agent" solely for purposes of accepting payment of freight charges, the carrier should remain an independent contractor as long as the carrier controls the details, manner and means of providing service. This means that the carrier should have the right to accept or reject any shipment, to determine the routes, to be solely responsible for equipment maintenance, fuel, etc. In the Shipper/Carrier situation, the same analysis applies -- the shipper cannot exercise or have the right to exercise control over the carrier's manner and means of providing service.
John Anderson - Email John
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Cargo Security Should Not be Scary
By Kevin Anderson
 | | Kevin Anderson |
As Halloween approaches, a truly scary pattern has emerged in the news: the new found boldness/audacity/stupidity of thieves. For instance, two brothers in Pennsylvania recently stole an entire bridge (50 feet by 20 feet) and tried to sell it for scrap. The trucking industry has also been hit hard. FreightWatch reported that cargo thefts in the third quarter of 2011 rose markedly. It is important that carriers take steps to prevent cargo thefts, and to limit their liability if they become targets of cargo thieves.
When it comes to preventing cargo theft, nothing is a replacement for a little common sense.
- Whenever possible, drivers should park in well lit and secure locations. FreightWatch reported that 79% of thefts in the third quarter were from unsecured parking lots, while only 6% occurred at secured parking lots.
- Make it a company policy that drivers must shut off the engine, lock the doors and take the key with them when they park. A thief will not think twice about breaking a window to jump in the cab of a truck that is left running.
- No one should talk about the cargo with anyone outside of your company. According to FreightWatch, food/drinks, electronics and building/industrial materials were the most targeted product types accounting for 54% of all cargo thefts. Don't advertise the fact that you are hauling a high value or desirable load.
Technology can also be a great way to prevent cargo thefts. From GPS, to RFID, Air Cuff Locks, Glad Hand Locks, and King Pin Locks etc., today there is an abundance of products available to help ensure the security of your cargo. There is even a new product that can immobilize a truck remotely if it is stolen. However, if your drivers fail to use or do not know how to use the security technology available to them, it becomes worthless. Make sure that you have the training, policies, and procedures in place to ensure your drivers use all of the technology available to them to keep your cargo secure.
Regardless of the precautions you take, you may find yourself the victim of a cargo theft. In these cases it is important to ensure that you have taken the proper precautionary steps to limit your liability. Prudent carriers will limit their liability through a tariff, shipper-carrier or broker-carrier contract. Without a valid limitation of liability through one of these documents, the carrier may be held liable for the full actual loss by virtue of the Carmack Amendment. It should be noted that cargo insurance limitations or exemptions do not limit a carrier's liability under the Carmack Amendment. If a carrier only has $100,000 in cargo insurance, but the cargo stolen is valued at $500,000, the carrier will be held liable for the excess $400,000, unless the carrier's liability is limited through a valid tariff, shipper-carrier or broker-carrier contract. The most effective precaution a carrier can take is to validly limit is liability contractually prior to hauling any load.
Shippers must also take proper precautions. First and foremost, shippers need to know what carrier is going to be hauling a load and only tender the load to that carrier. Too often shippers load carriers without confirming their credentials. This can often lead to a shipment being driven off by a thief pretending to be a legitimate carrier.
Shippers also must know the value of their cargo and ensure that the shipment is properly insured. If a carrier has contractually limited its liability, the shipper should declare the value of the shipment and ensure the carrier has the wherewithal to cover the maximum possible loss or obtains appropriate insurance to cover the full value of the specific shipment. Most often the shipper will need to pay additional freight charges in order to compensate the carrier for the additional liability assumed by the carrier. For its own financial well being, a shipper should not tender a shipment to a carrier that has limited its liability below the full actual value of the load. If the shipper does and the shipment is stolen, the shipper will be the one taking the financial hit.
While thieves are getting bolder, there are easy common sense steps that carriers and shippers can take to ensure the security of their cargo and limit their liability if they are the target of a cargo thief.
Kevin Anderson - Email Kevin
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| Avoiding Shipper Double Payment of Freight Charges
By John Anderson
| | John Anderson |
Question: As a company who uses brokers to set up their truckload freight, how can we protect ourselves from liability of paying for a load twice, should the broker not pay the actual carrier?
Answer: Shippers can protect themselves from having to pay twice. Shippers generally prepare the Bill of Lading (BOL), which the motor carrier "issues" when it picks up the load and the driver signs the BOL. In these situations the shipper can sign what is referred to as "Section 7," which is the non-recourse provision. However, the BOL needs to contain the correct language. I have seen BOLs that refer to Section 7, but Section 7 is no where to be found - indeed, very few BOLs these days contain Section 7 or the other "standard" BOL terms and conditions. However, you can use alternative language rather than the standard Section 7 language. In addition, shippers should have a written Shipper-Broker Contract that (1) provides that the Broker is designated as the special limited agent for purposes of collection of freight charges so that payment to the Broker constitutes payment to the motor carrier's agent and therefore the motor carrier, and (2) requires the Broker to enter into a written Broker-Carrier Contract that provides in part that the Carrier agrees to look solely to the Broker for payment of freight charges and to no other party.
John Anderson - Email John
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The information presented in this communication should not be construed to
be formal legal advice
nor the formation of a lawyer/client relationship.
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