The Reality of PEO'S (Professional Employment Organizations)
Robert Reed 3/8/03
During the years since deregulation in 1980,trucking has seen many changes. One major change that started in private carriers and is making strides into for hire over the road carriers,is driver leasing. Known as "PEO'S" (Professional Employment Organizations), "driver leasing", or "employee leasing", these entities are changing the structure of trucking companies and the industry. They operate on the premise that they can hire and manage drivers and provide services better and at lower costs than the trucking company. Trucking companies traditionally operate with in-house staff for operations, maintenance and safety functions.
Third-party logistics firms are also big players in changing the transportation industry as these firms take over complete transportation departments and supply trucks, drivers and personnel to run the trucking operation. These companies are best suited for this operation as they are motor carriers with authority under "DOT" control. They attract better drivers and have a stake in maintaining superior and safe operations that comply with DOT standards. Some of these companies control over 15,000 drivers nationwide.
PEO'S are relatively new services that take over all company drivers and lease them back to the trucking company. PEO'S operate under co-employer contracts and typically assume responsibility for other departments as well, such as payroll, safety, maintenance and dispatch operations. What's more, these services advertise that they can lower workers compensation rates and deal with Federal and State employment laws, provide more benefits for drivers, provide for safety and compliance to DOT regulations. The effect of these arrangments are that large PEO'S can essentially control thousands of drivers and trucking personnel. Hundreds of smaller leasing companies also control thousands of truck drivers. These service providers are not under any oversight from the DOT and Federal Motor Carrier Safety Regulations.
In theory, these services can be beneficial to smaller trucking companies and private fleets that run local routes under controlled situations, for example local companies that deliver its product to customers and return the drivers to home each day.Also leased drivers filling in for vacations, seasonal business or temporary help can be of great assistance for these smaller carriers. However, when driver leasing is utilized to fill empty trucks for "over the road" for-hire carriers because of the so-called "driver shortage" potencial problems can ensue. In practice, these drivers tend to become commodities by both the trucking company client and the leasing company. The trucking company may assume it is not the employer under any circumstances, thus creating the incentive to produce revenue by running drivers in violation of DOT regulations. Furthermore, since the leasing company is not regulated by the DOT, it may create an incentive to "look the other way" regarding driver management practices. Those drivers who become disqualified or have accidents can easily be taken from one client trucking company to another by the leasing company.
The potential downside to these leasing arrangements is confusion with oversite over safety for the motoring public and truck drivers when a catastrophic crash occurs. The leasing company, the trucking company, and their respective insurers may have after the fact conflicting opinions of the true"employer" is. The IRS, NLRB, and USDOL through section 405 of the STAA and Federal Appellate Courts have held that lease drivers are jointly employed by both the leasing company and client trucking company. The Federal DOT regulations consider lease drivers employees of the motor carrier.
Motor carriers in trucking are registered and must comply with levels of insurance and all Federal Motor Carrier Safety regulations to protect the public and operate safely. The time has come to put any PEO, employee or driver leasing company that leases truck drivers under DOT authority and control. The growth of this industry, which controls thousands of drivers, should ideally be brought under the same regulatory umbrella as motor carriers, to insure highway safety. Making these leasing companies comply to the same regulations as motor carriers will reduce highway mishaps by closing loopholes in which unsafe drivers can operate or safety standards can be violated without regulatory penalty.