AB5. Will it be enforced? What do you think?

They would go with getting their authority and becoming a contract carrier. No different than what it is now. The exception is that they would be IC’s capable of working with more than one carrier.

There are many carriers that work with IC’s who have their own authority. J.B. Hunt 360, Schneider, Prime, C.H. Robinson just to name a few. All which I have mentioned have load boards to work off of. The IC has his/her own authority and still has his/her own equipment to operate. The IC has full control of his/her own company and is fully vested by FMCSA. This is what the government is pushing for.

Currently, IC’s leased unto a carrier are not fully vested by the FMCSA. Their not operating as a motor carrier. Their hired no differently than company drivers. Sure they can have their own trucks and trailers. But they aren’t authorized as motor carriers. Here is where the problem comes into play because you have companies that have abused this loop hole to avoid IRS regulations. They will say that the driver is an IC but in reality they retain complete control over the drivers duties and freedom.

So, AB5 stands to eliminate this by stating specific qualifications an IC must meet. But again, this will hurt carrier’s with massive IC’s by cutting millions of dollars in revenue stream off. Theses carriers will not go down without a fight which is what is happening now.

 

Really? I know for a fact where I got those numbers and it’s simple math. 1+1=2 last time I took accounting and finance classes.

 

Let's see ... With my current carrier, my insurance is $120 a week and $50 for tags and permits. And I don't pay cargo liability. I'd be lucky to match that $120 on my own and the tags cost is pretty much pass through.

Now for a carrier to clear a $300 week profit off of me they would need to charge me $470.

Now you're going to tell me that the megas make more because they're self insured ... 8 years at Swift and the most I ever paid was $86 a week for insurance and Swift covered the tags.

 

Ok, so you’re talking about lease purchase programs then. Because there are many like myself who own our trucks and/or trailers and can take them anywhere we want at any time.

The megas that offer lease purchase programs already own the trucks. They simply figured out a way to increase their profits by talking people in to making their truck payments for them. So let’s play this out.....

You want everyone to have to get their operating authority and become a motor carrier. Many people doing a lease purchase don’t have the money or the means to get a truck on their own, so what makes you think they could come up with the money to get their own insurance as a new motor carrier? The lease purchase trucks would simply go back to being company trucks. There wouldn’t be a rate increase and there wouldn’t suddenly be a bunch of independent contractors getting a fair rate like you say. You’d have the owners like me that would get our authority and keep doing what we’re already doing.

 

When it comes to guys who own their equipment and lease to a motor carrier, what IRS loopholes are there? Last time I checked I still have to pay all my taxes. Any time I see fit I can take my truck and trailer and leave.

More government and more rules is never the answer for anyone running a small business. You need to keep in mind that not all of us drag around a box trailer running broker freight for a mega. Some of us have really good deals worked out that we’d just as soon have not go away because a few people want more rules. Everyone wanted deregulation, so here we are, and now that the playing field isn’t perfectly flat for everyone suddenly more rules are needed.

 

Some people think by incorporating you can get around it. The options other than that would be getting your own authority or going to a two check system where the company you’re leased to gives you one check for your equipment and then pays you as an employee with another check.

 

Ok, I haven’t practiced tax law in 2 years and I surrendered my license so my advice is not legal advice but quoted from IRS documents. But here is what the IRS says, not my opinion and not my wording.

“You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed.”

Now, the key word here is control. If you do not have operating authority, you cannot legally put yourself or your business out there as a for hire contractor., period. Doesn’t matter if you own the truck/trailer, or if the leasing company owns the equipment. Therefore, you will remain under the operating authority of the carrier you lease to. You do not have control to go as you please not to do as you please. You are under the control of that carrier. You are running loads under the authority of that carrier, not your own authority. You can leave with your truck/trailer, yes. But the moment you leave said carrier, you are not authorized to operate as a for hire entity. Therefore, your options are to find another carrier to lease unto or get your operating authority.

Thus, you can only have the control that is defined by the IRS and AB5 if and only if you have your own operating authority issued by the FMCSA. You will then become a true independent contractor accordingly to law.

I get it, it’s a hard pill to swallow. It steps on a lot of shoes and upsets many that feel like they are independent contractors when in fact they aren’t, legally. If enforced, many carriers with massive amounts of IC’s will lose revenue streams. Some IC’s will be forced to return to company driver positions. This is understood, at least by me it is. However, it is the law. I just explained it as clear as I could and provided what is defined by the IRS. We can sit here and try to play on wording all day. But the law is black and white and not up for individual interpretation. This is something you learn in law school. If the wording isn’t right, your only option is to change what is written by going through the proper channels.