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One of the single most important things to remember when thinking about independent contractor issues is that the status of the law is dynamic. Far too many companies view the situation as static and continue to do what they have always done, even in the face of the changing legal landscape. One must consider the context of state and federal litigation, statutory revision, changing guidelines, and changing tests being applied in their jurisdiction.

In the coming issues, I will endeavor to provide specific examples and analysis of changing case law, regulatory guidelines, tests, and statutes that I hope you will find of value. While not every example will apply to your business, and there may be issues from outside of the carrier/courier field, the trends in the application of the law provide real guidance. To that end, the most important piece of advice that I can provide is that you have your independent contractor agreements reviewed by a knowledgeable attorney. When it comes to legal expenses, an ounce of prevention costs so much less than a pound of cure.

One important change of note in recent years is the test used by the Internal Revenue Service. I am certain that you have all heard of the “20 factor test” previously employed by the IRS. It simply provided 20 factors, some of them rather redundant, without much in the way of weight or organization. More troubling was the lack of any advice as to how many factors could or should be found in each direction in order to make a determination.

Now, the IRS has attempted to simplify and refine the test, trimming the twenty factors into eleven, and organizing them into three groups: behavioral control, financial control, and relationship of the parties.

Behavioral Control

This test considers facts which tend to show whether the company has the right to direct and control how the worker does the task it was hired to perform. [emphasis mine]. It is important that this factor is not whether there has been control exercised, but the right to do so.

The considerations here focus on instruction and training. Instruction of the when, where, how, with whom, and order or sequence of events are considered tenets of instructing an employee. Obviously, basic instructions on what the job encompasses – the object of it, are necessary, but when one is explicit as to how that objective is to be accomplished, the appearance is that of employer and employee. In our context, this may include order of events, route selection, etc. In a similar vein, training is something that an employee will ordinarily receive. An independent contractor uses his skill and knowledge to determine his own methods.

Financial Control

This test looks at how the worker is paid, whether the worker can make a profit or suffer a loss by his actions and choices, whether the services can be offered throughout the market, and whether there is any reimbursement for expenses.

These factors are all straightforward, and they are the simplest, in my opinion, to control for. It is essential that one not run afoul of the simple to follow factors such as these, because others are a much tougher balancing act.

Type of Relationship

The first three factors considered under this test are similarly straightforward and must be abided: A written contract showing the intention of the parties in regard to their choice of relationship; benefits like insurance, sick pay, vacation pay, or retirement planning, and permanency of the relationship (fixed or indefinite). This is where I break the rule that lawyers never say “always” or “never”: Always have a good IC Agreement, never give benefits, and always have a fixed period in the contract.

The final factor in this section is the single worst factor used, and the most troubling both in the courier, and long-haul carrier industry: “The extent to which services performed by the worker are a key aspect of the regular business of the company.” While I loathe this factor, it should be noted that its purpose is supposed to go to the issue of control. The idea is that if a worker is performing a key aspect of your regular business you are more likely to actually exercise control over that employee. However, the carrier model demonstrates the inefficacy of this factor.

While the factors have been consolidated and organized in the new test, they still boil down to just one thing: control. How much control over the service provider does your company have? This is why in every client consultation, one of the first questions I ask is whether you are sure that what your company actually wants is an independent contractor relationship with its drivers. There are clearly benefits and burdens to each model.

One Final Parting Tip:

I strongly discourage mixed use of employee drivers and independent contractors under one corporation. It will work against you in state or federal litigation. Moreover, far better than winning a court case, is not getting sued in the first place, and a mixed model sends mixed messages. The grass is always greener, and a disgruntled independent contractor driver might look at the employee driver and think, he’s got so much better of a deal. Having a mixture does not mean that you will get sued or lose that case, but it makes both more likely and makes my job as defense counsel that much more difficult.

For further information on the IRS test, see IRS Publication 15-A.

Roberts & Associates joins the CLDA

Roberts & Associates is proud to join the CLDA as a new member in 2017. Based upon the valuable insights and contacts gained through the Florida Messenger Association, our firm joined the CLDA without hesitation.

With decades of experience representing the shipping and transportation industry, our firm is happy to provide support, guidance, and legal advice to the delivery, courier, last mile, and logistics company members of these great organizations.

Attorney Larry Roberts was excited to attend this year’s annual meeting in Orlando and honored to serve on the expert panel for the “Ask the Experts: Independent Contractors/ Contracting Tips” session.

“It was a wonderful event all around with an informed and involved group of attendees,” commented Attorney Roberts. “I really enjoyed the opportunity to provide some guidance and insight to the CLDA members during the expert panel and the one-on-one interactions with so many throughout the three day event.”

Larry was able to address the questions and concerns from the hundreds of members in attendance for this session.

Roberts & Associates provides a full range of client services to transportation companies throughout the various sectors of the industry, including custom contract preparation, litigation, and regulatory guidance.

Florida Messenger Association’s Annual Conference and Exhibition

In January of 2017, Roberts & Associates was proud to serve as sponsor of the Florida Messenger Association’s Annual Conference and Exhibition in Orlando, Florida. The FMA has been serving the interests of couriers, messengers, last mile delivery companies, warehousemen, and distributors in Florida for nearly thirty years. Its mission is to improve and advance the common business interests of messengers, couriers, and related transportation service providers in the State of Florida for the benefit of the public in need of such services. Larry Roberts attended the conference on behalf of the firm and was glad to have the opportunity to meet with this sector of the industry and to hear their concerns.

In addition to participating in various activities and roundtables, Mr. Roberts was able to meet one-on-one with FMA members at the Roberts & Associates booth to discuss specific concerns in the industry, such as maintaining the independent contractor model for drivers, and generally limiting liability as a small operator beholden to larger forwarders and providers. “For me, the real benefit of attending conferences is the opportunity to hear, directly from industry leaders, what their biggest concerns are,” said Attorney Roberts, “and what keeps them up at night.”

Attendance at conferences such as this helps the firm stay abreast of the developments at all levels of the industry from international shipping, to last mile delivery, and everything in between in order to be well prepared to represent clients in all facets and at all levels of the cargo transportation sector.