Iowa acts to protect owner-operator status
June 24, 2020
The state of Iowa soon will have a new rule that is intended to protect the trucking industry’s independent contractor classification for individuals who own their own truck.
On June 18, Gov. Kim Reynolds signed into law a bill to define vehicle owners. Specifically, the new law automatically classifies owner-operators as independent contractors.
The new rule covers owner-operators performing services while operating the vehicle.
The Iowa Department of Workforce Development reports that under current state law there are 894 individuals identified as owner-operators who are classified as employees and not independent contractors.
Supporters said the drive to change Iowa law was spurred by California’s passage of a work classification overhaul.
California’s AB5 codifies the state Supreme Court’s establishment of the ABC test, which makes it more difficult for a worker to be considered an independent contractor. In effect since Jan. 1, the law was intended to apply to a variety of industries, including trucking.
The California Trucking Association is challenging the rule in court as unconstitutional and as being preempted by the Federal Aviation Administration Authorization Act of 1994, which prevents states from enforcing a law or regulation related to a price, route, or service of motor carriers.
On May 13, the Owner-Operator Independent Drivers Association filed an amicus brief with the U.S. Court of Appeals for the Ninth Circuit in support of the California Trucking Association’s case.
Iowa state Rep. Gary Worthan, R-Storm Lake, has a family trucking business. He served as the House sponsor of the owner-operator bill that is now law.
During House floor discussion on the bill, Worthan described who the bill would cover.
“It will include anyone who owns their own truck, truck tractor, or truck-tractor combination. It will also include those who are in a purchase agreement, or a lease-to-purchase agreement, of a truck tractor,” Worthan said.
He added that certain exceptions would apply.
Critics said the rule change is too broad in its protections.
Rep. Bruce Hunter, D-Des Moines, said there are trucking operations that willfully misclassify employees as independent contractors to avoid responsibility for worker’s compensation and unemployment coverage.
During House floor discussion on SF2296, Hunter said that willful misclassification costs the state of Iowa about $600 million annually. He added that during the current pandemic there should not be another unneeded blow to the state’s workers.
“In today’s environment of COVID-19, and the economic damage it has done to the state, to put another burden on those employees of being willfully misclassified as independent contractors is something the state should not stand for,” Hunter said.
Worthan said characterization of the legislation as exploiting workers shows a complete lack of understanding of the free enterprise system.
“All it does is clear up the definition of an owner-operator in the transportation industry.”
House lawmakers approved the bill on a 51-46 vote. Passage cleared the way for the bill to move to the governor’s desk for her signature. The Senate previously approved it on a 32-18 vote.
The new law takes effect on July 1.
More Land Line coverage of news from Iowa is available.
Land Line Senior Editor Mark Schremmer contributed to this report.