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The Morning After

November 10, 2010

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"The reason we've got an unparalleled standard of living in the history of the world is because we've got a free market that is dynamic and entrepreneurial, and that free market has to be nurtured and cultivated."
Owner-operators could become an endangered species if the President gets his way
Owner-operators could become an endangered species if the President gets his way


Those are President Obama's words, spoken from the White House during the post-election press conference on November 3. The President was responding to a reporter's question about the state of the economy. The reporter asked, in part, "Do you think you need to hit the reset button with business?"

I was in the car driving to the airport listening the press conference live on NPR, and when those words floated out of the speakers, I thought immediately of the threat posed by the President and his administration -- with help from legions of liberal apparatchiks in various agencies across the country -- to the fate of owner-operators. Since his days as Senator Obama back in Illinois, our President has worked to undermine the entrepreneurial spirit he now says is responsible for our unparalleled standard of living.

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In case we forget, as a Senator he was strongly involved with independent contractor reform initiatives, and he co-sponsored the Employee Misclassification Prevention Act in the Senate, along with Senators John Kerry and the late Edward Kennedy. When President Obama took office, he indicated that the misclassification of workers would be a priority issue for his administration, and he included $25 million in his FY 2011 budget proposal to target the misclassification of employees as independent contractors.

Obama hadn't been in office very long when he appointed M. Patricia Smith as the Department of Labor's chief solicitor. While Smith was New York State's Commissioner of Labor, she oversaw that state's Misclassified Workers Task Force. Smith has a history of cracking down on recalcitrant employers. She served as New York State's Commissioner of Labor under former Governors Eliot Spitzer and David Paterson, and she created a program called the New York Wage and Hour Watch in which community organizations, immigrant groups, and labor unions served as the department's eyes and ears to report violations.

Perhaps I'm not giving the President a fair shake here, but those actions don't strike me as particularly friendly to business.

Now, I'll be the first to acknowledge that employee misclassification goes on. I'm sure there are workers in the thousands forced to declare themselves independent contractors so employers can minimize their tax burden and other liabilities. I don't think you'd find many owner-operators in those ranks, and that's why I'm deeply concerned with the potential impact of the Obama presidency on the future of owner-operators.

They exemplify the entrepreneurial spirit in trucking. Many start as one-truck operators and go on to build small -- and some very large -- fleets. They are owner-operators because they want to be. But if the president and his Democratic colleagues succeed with their broad-based bills aimed at preventing employee misclassification, they will ruin a good small business opportunity, and make it very difficult for carriers to do business with their time-honored entrepreneurial partners.

Do I honestly think a few words in a morning-after press conference are indicative of a change in policy direction? No, but the words were encouraging. The President wound up his answer to the reporter with the following statement. Again, probably just fence-mending platitudes, but at least he's on the record.

"I think as we move forward, sitting down and talking to businesses, figuring out what exactly would help you make more investments that could create more jobs here in the United States, and listening hard to them -- in a context where maybe Democrats and Republicans are together so we're receiving the same message at the same time -- and then acting on that agenda could make a big difference."

Here's hoping.


Comments

  1. 1. Tim Brady [ November 12, 2010 @ 02:34PM ]

    Jim, Jim, Jim, I amazed at your statement ["Now, I'll be the first to acknowledge that employee misclassification goes on. I'm sure there are workers in the thousands forced to declare themselves independent contractors so employers can minimize their tax burden and other liabilities. I don't think you'd find many owner-operators in those ranks, and that's why I'm deeply concerned with the potential impact of the Obama presidency on the future of owner-operators."]

    When you have the vast majority of carriers paying their lease operators between 85cents to a $1.10 per mile plus FSC so most average less than $1.40 which is far less than what they would make take home if they earned 35 cents a mile as a company driver. According to ATRI in 2009, the average cost per mile (break-even point) for a general freight including driver pay was $1.73 or 33 cents more than what most Lease operators average (or about the pay of a company driver.)

  2. 2. Darrel Engan [ November 24, 2010 @ 10:02PM ]

    Jim, i think your are paranoid. But the companies who do not have "legitimate" owner/ops should be nervous. I am talking about all these lease purchase rumdums who cannot manage their own personal life much yet run a business. I don't care what you say these guys are not o/o/'s, they are closer to indentured servants . Why would a trucking company have to make money hauling freight, when you can make money selling these bozos trucks. Haul cheap freight, hell your making money off these guys buying trucks. If the government steps in and makes these lowlife companies stop this practice, i am all for it. If you cannot save enough for a down payment, have decent credit where you can walk into a dealer and buy a truck,YOU HAVE NO DAMN BUSINESS BEING IN THE TRUCKING BUSINESS!!!

  3. 3. Jim Park [ November 30, 2010 @ 03:37AM ]

    Thanks for the comment, Tim.

    You have the honor of being the first to respond to any of my blog posts. I was beginning to think nobody reads 'em.

    Your assertion that most owner-operators are underpaid is absolutely correct, and I have no argument with your numbers. I do seminars here in Canada for owner-ops, and we include a cost-per-mile component. Canadian numbers are very similar. Our guys are underpaid, too. But, worker misclassification legislation won't help underpaid owner-ops. Rather, it would strip them of the opportunity to operate as small businesses, turning their trucks into expensive lunch boxes.

    Additionally, reversing the onus within the 530 provisions isn't going to force carriers to pay owner-ops more money.

    There's a fundamental difference between a dental assistant who would rather be an employee being forced into servitude by a boss who figures it's cheaper to pay her as a contractor, and a guy who buys a truck and si

  4. 4. Jim Park [ November 30, 2010 @ 04:17AM ]

    Thanks for the comment Darrel

    I'm with you on this one. I'm no fan of some of those lease-to-own programs (sometimes known as the Never Never Plan). There are some legitimate programs out there, but the good ones and the bad ones have one thing in common: nobody puts a gun to the driver's head and makes them sign up for it.

    Having said that, I'm aware of situations where carriers won't hire inexperienced people as company drivers, but they will set them up as -- as you put it -- indentured servants. I think that's despicable, but it happens.

    My fear in all this is that the regulators will fail to make the distinction between a legitimate owner-operator (leased to a carrier or independent), and make it very difficult for anyone who owns a truck to run it as a small business.

    I wish people who enter those Never Never plans would open their eyes and start asking questions and taking steps to protect themselves. We can't (shouldn&#0

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Author Bio

Jim Park

Equipment Editor

Truck journalist 13 years, commercial driver 20 years. Joined us in 2007. Specializes in technical/equipment material (including Tire Report), brings real-world perspective to test drives.

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