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Excerpt taken from:
Market Segment Specialization Program (MSSP)
Trucking Industry
Department of the Treasury
Training 3149-110
TPDS No. 83252C
Rev. Rul. 87-41, 1987-1, C.B. 296, details the 20 common law factors and provides guidelines for determining employee or independent contractor status relating to technical service personnel under IRC section 1706. At this time, there is no revenue ruling that addresses the 20 common law factors as they relate to rulings in Exhibit 5-1. The 20 common law factors can be adapted to the independent truck drivers as follows:
1. Is there a significant investment in equipment? If the drivers own their transportation equipment, then they are free to render services to others.
2. Who determines the route? How much control is exerted over the manner in which the independent contractor handles the deliveries?
3. How is the independent contractor able to realize a profit or incur a loss? Who has liability for loss or damage to goods?
4. Are services rendered to different firms? If yes, this would indicate they are an independent contractor.
5. Does the employer have the right to terminate or discharge the driver without liability? An independent cannot be fired if the terms of the contract are met.
6. Can the driver terminate without liability? If yes, this would indicate an employer/employee relationship. An independent contractor can be held liable to complete a specific job.
7. Are the services provided by the independent contractor integrated in the business? (For example, the distribution of goods and services of the business).
8. Does the independent contractor pay for operating expenses by reimbursing the company or paying them directly? If no, then this may indicate that they are an employee.
9. Is the worker provided with tools and materials? If the driver/helper operates the employer’s equipment such as tractors, forklifts, etc., this would be an indication that they are an employee.
10. Does the driver have the basic training to drive a truck and a license to operate a tractor and trailer? Most drivers will have the basic training. However, if the driver has to be trained to operate additional equipment other than the equipment owned, then he or she may be an employee.
11. Must the driver personally render service? The driver not having the ability to hire someone else to drive the truck indicates that he or she may be an employee.
12. Must the driver comply with written instruction and attend meetings? If yes, then this indicates the amount of control exerted over the drivers.
13. Are there preset work hours?
14. Must the driver devote full time to business? If yes, this indicates a restriction placed on the earning potential of the independent.
15. Is the work performed on employer’s premises? If yes, they may be employees. However, by the nature of the work, drivers do not usually work on the employer’s premises.
16. How is payment for services handled? Is the driver paid at the end of a specific job or on a regular basis such as a set rate per hour or week? Hourly rates and fixed salaries tend to indicate the driver is an employee.
17. Does the driver have to submit oral or written reports/ Most drivers are required to complete a manifest sheet showing daily deliveries and provide proof of delivery.
18. Can the driver hire or fire assistants? If no, this indicates that they are not in control of their operations but are directed by an employer.
19. Does the driver offer services to the public? Does the driver have the proper operating authority?
20.
Is the working relationship continuous? If yes, this may indicate that they are an employee
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