April 3, 2020

COVID-19: Five Things to Look for in Your Independent Contractor Agreements

By Kristen M.J. Johnson, Partner, Taylor & Associates

Kristen M.J. Johnson of the transportation-focused law firm Taylor & Associates provides guidance on key considerations in light of COVID-19.

Motor carriers may be concerned about how their directives and safety protocols regarding diseases like COVID-19 impact their independent contractors. We all know that when it comes to distinguishing independent contractors from employees, control is a big part of the test. So how can a carrier impose restrictions, ask owner-operators to stay home when sick or exposed to COVID-19, and generally keep the workplace—including trucks and customer sites—safe and healthy for all?

Fortunately, most legal jurisdictions allow companies to issue directives across the board or specific to vendors and contractors that govern health and safety. As a national transportation-focused law firm, the attorneys at my firm, Taylor & Associates, provided some recent guidance in the Commercial Carrier Journal on how COVID-19 impacts the business structure between carriers and independent contractors and associated risks of misclassification of employees. The legal landscape is shifting rapidly with emergency declarations, regulatory suspensions, and shelter-in-place orders. However, the federal, state and local rules that govern classification of workers—those who are employees and those who are independent contractors, including owner-operators—have not shifted. This creates potential for legal trouble down the road for carriers issuing urgent directives to workers or instituting new health and safety policies. The manner and nature of these directives from a carrier to contracted drivers and other workers and vendors can expose legal liability.

What are the top five key features to look for in independent contractor agreements (ICAs) when it comes to protecting against misclassification and keeping the workplace safe and healthy in the fight against COVID-19? Lawyers will always tell you, “It depends.” Well, that’s true, but we can still dig in a bit and look at these key provisions. I suggest that when carriers communicate with their independent contractors regarding COVID-19, whenever possible refer to the ICA to avoid legal conflict in the future. Allow contractors to ask questions and understand that this is unchartered territory for a lot of folks and that questions are natural and not necessarily designed to fight over contract terms. Honestly, many contracts won’t be so expansive as to capture this potentiality, so there may be gray areas that need discussion and possible addendums or waivers. Remember to get any significant agreements or changes in writing.

The top five ICA features to look for in taking health and safety measures include:

  1. Statement of independence and roles. Your agreement should specify the nature of the business and roles of each party. Typically, the carrier is specifically stated to be in the business of interstate or intrastate transportation of property with motor carrier authority by the U.S. Department of Transportation and engages a contractor to perform transportation services, and the contractor owns motor vehicle equipment suitable to perform those services. This is essential for a number of reasons, but importantly, if a carrier wishes to issue COVID-19 related notices, policies and standards, it should do so in the voice of the role that is stated under its ICAs. This means a carrier may issue directives or notices relating to its business of transportation, including how to interact with customers, safety precautions to keep the transportation of goods safe and uncontaminated, and when to avoid interacting with others. Appropriate notices and policies can be issued as addendums to the contract, as company-wide notices, or as directives aimed at all independent contractors. Those can be done within the scope of the carrier’s contractual role, in meeting its objectives and in carrying out its business.
  2. Term and termination provisions. Does your ICA have an initial or extended term provision? If so, you should consider how suspensions of business impact that term. Typically, the term of the contract is intended to prevent agreements from being in existence for years after work has ended. But you may also want to look at whether the term includes any minimum work obligations. More likely than not, the term of your contract will not be impacted by COVID-19 restrictions, delays or cancellations. You should also, however, look at your termination clause, which may be triggered from COVID-19 restrictions. Typically, these clauses provide that a contract is terminated if it is breached. If there’s a question of whether a breach has occurred, it’s best to discuss the question early and often, and when possible in writing.
  3. Contractor duties and obligations. Does your ICA have any way for a contractor to decline work? A frequent phrase in these agreements is that contractors are to provide transportation “as a carrier may require.” If a contractor declines to operate equipment or provide capacity as needed due to illness, exposure to COVID-19, or states of emergency and quarantines, does that create a potential breach of contract? Carriers may wish to reach out to their contractors to clarify their expectations.
  4. Maintenance of equipment provisions. ICAs should have provisions for fit and serviceable equipment, which could reasonably be interpreted to include clean and sanitized equipment. It may be worthwhile providing guidance to ICs that carriers expect certain sanitizing standards to be put into place, specifically referencing this clause in the ICA. Pay attention to any newly released federal, state or local regulations concerning workplace safety and possible COVID-19 contamination.
  5. Compliance with laws and regulations. There seems to be a tidal wave of regulatory guidance, ordinances, executive and administrative orders, and myriad sources of often conflicting information on what is required, who can work, what is considered critical infrastructure, and what safety guidelines should be followed. ICAs usually have some requirement that a contractor must comply with local, state and federal laws and regulations. Take some time to review this provision and provide guidance to contractors who may be looking to carriers on how to respond and comply appropriately. It’s wholly appropriate to provide legal and regulatory updates to contractors in your team and communicate expectations for compliance.
  6. Bonus point: Where do you keep your ICAs? Are they separated from your employee workforce documents? Keeping ICs and their documents in a separate system, just as an outside vendor would be handled, significantly helps preserve the separateness needed to avoid having your ICs mistakenly considered employees in a host of contexts.

For more information, read Taylor & Associates’ guidance on avoiding the misclassification traps of COVID-19.

Kristen M.J. Johnson

About Kristen M.J. Johnson

Kristen M.J. Johnson is a partner at the transportation law firm of Taylor & Associates and leader of the firm’s litigation group. In 2020, Kristen was the only private practice attorney selected as a Top Woman to Watch in Transportation by the Women in Trucking Association. She practices a full range of business litigation and arbitration, including freight claims, contract and tort disputes, appeals and government investigations. She advises clients on risk management, case and witness preparation, regulatory response and compliance programs, and critical strategy. Kristen is a former Fulbright Scholar and a thought leader, active in her industry and community. She is a member of Women in Trucking, the Transportation Lawyers Association, and the Conference of Freight Counsel. When she is not practicing law, she advocates for children and those in need.