For decades, the owner-operator has been a fixture of the American trucking industry. The independent contractor (IC) model gives carriers flexibility and lets entrepreneurs run their own businesses under a carrier’s authority. But the model carries a corresponding risk: the possibility that a regulator, a plaintiff’s lawyer, or a class of drivers will argue that those “independent” drivers were employees all along.

This risk, combined with highway accidents, serve as two significant threats that many motor carriers face. The IC misclassification risk has grown sharply. A patchwork of state tests now governs who counts as an employee, and several states have adopted versions of the “ABC Test,” a standard that is notoriously difficult for trucking companies to satisfy. The hardest element, often called the “B Prong,” asks whether the worker performs work outside the usual course of the hiring company’s business. Add aggressive plaintiff’s firms, a federal standard that swings with each administration, and the leverage of class and collective actions, and the exposure is significant: reclassification can trigger claims for back wages and overtime, unpaid employment taxes, workers’ compensation and unemployment contributions, benefits, and penalties—often multiplied across an entire driver population and stretched back over multi-year limitations periods.

The good news is that misclassification risk can be mitigated structurally. Thoughtful choices about which ICs you recruit, which entities they contract with, and how you separate fundamentally different kinds of work can meaningfully reduce both the likelihood of a successful challenge and the size of any resulting exposure. The considerations below describe a layered, defense-in-depth approach. None is a silver bullet; together they can harden a carrier’s IC operations to challenges.

1. Get the fundamentals right, on paper and in practice.

Every structural strategy rests on a foundation of getting the basic IC relationship right. That means the documentation and your day-to-day operational practices both have to support genuine independence on the part of the ICs. On the documentation side, you should have clear, written operating agreements with disclosures of how compensation will be calculated, and properly authorized deductions and chargebacks. Compliance with the Federal Leasing Regulations is essential.

But paperwork matters little if the carrier behaves like an employer. The way the relationship is actually conducted is what primarily drives outcomes. That means following through in practice: no forced dispatch, no forced purchases of equipment or services, and restraint when it comes to controlling how the IC performs services: scheduling, routing, and driving habits. The IC should be able to accept or decline loads, run their own business, and exercise control over the means of performance.

Notably, the control a carrier must exercise to comply with the Federal Motor Carrier Safety Regulations, the Federal Leasing Regulations, and other government requirements is not the same as the control that signals an employment relationship. The same can be true of customer-dictated requirements applicable to the ICs. Some courts recognize these distinctions (the former more so than the latter), so the cleaner you keep the line between regulatory/customer control and control that originates with the carrier in the first place, the stronger your position becomes.

All that said, best practices are merely the price of admission. The structural levers that follow are what separate a defensible operation from a more vulnerable one.

2. Curate your IC population by domicile.

One underused lever is the type of ICs you recruit, and where they are domiciled.

Carriers should consider recruiting those ICs who “look” the most like independently established business. This means recruiting ICs who have their own trucks obtained from third-party dealers or lessors, have formed their own business entities with no help from the carrier, source goods and services separate from carrier-sponsored facilitated programs (e.g., insurance, fuel, etc.), and operate multiple trucks or delivery vehicles and source the driving labor to operate them.

Another consideration is what states you target for IC recruitment. For the most part, misclassification risk is state-specific, and the states are not equal. Some apply a flexible, multi-factor test that weighs the totality of the relationship, a standard the IC model more easily satisfies. Others apply the more rigid ABC Test or other IC-hostile rules that are difficult for carriers to meet. States that have proven especially challenging for the IC model include California, Colorado, Illinois, Massachusetts, North Carolina, New Jersey, Nevada, New York, Oregon, and Washington. (That list is illustrative, not exhaustive, and the landscape shifts as legislatures and courts act.)

An IC’s state of domicile doesn’t automatically determine which state’s law governs a misclassification challenge—choice-of-law provisions in your operating agreements matter, and so does where the IC’s work is localized—but domicile is a reasonably good proxy for the law a court is likely to apply, and, critically, it maps directly onto something you control: recruiting. You can design your recruiting efforts to steer toward favorable states and away from the worst ones. For carriers that have a genuine choice about what type of ICs to recruit, and from where, this can become a meaningful risk-management decision that helps cabin misclassification risk.

3. Build a single-state “firewall” when you must recruit in a bad state.

Sometimes business needs require ICs domiciled in an unfavorable state. When that’s the case, the goal shifts from avoiding exposure altogether to containing it.

One option is to house those ICs exclusively within a motor carrier whose operations are limited to that state, and to route the relevant work to that carrier alone. This works best when the customer-facing entity is a property broker, and the customer has consented to the broker directing freight, in its discretion, to its affiliated motor carriers. Work that requires ICs domiciled in the problem state flows only to the single-state carrier.

The containment logic is straightforward: if an IC brings a class or collective action, the putative class should, in theory, be limited to the ICs who actually contracted with that single-state carrier during the relevant limitations period—rather than sweeping in your IC populations in other states. You’ve drawn a perimeter around the exposure.

That perimeter becomes more effective when paired with two further tools: standalone class-action waivers and bilateral (one-on-one) arbitration agreements, though caution is warranted with respect to arbitration given the exemption from the Federal Arbitration Act for arbitration agreements with interstate transportation workers.

Together, these structures can function as a “firewall” around operations in a given state, isolating the risk to a single-state entity and channeling any disputes into individual proceedings rather than aggregate litigation. The combination of entity segregation, class waivers, and arbitration can help turn a single bad-state IC into a manageable risk rather than the seed of an fleetwide class.

4. Match the model to the work, and segregate when it doesn’t fit

Not every line of business suits the IC model, and forcing a poor fit creates exactly the kind of control that undermines IC status.

Generally speaking, some work is simply more suggestive of carrier’s “employer”-like control—e.g., high-touch service, tight and regular routing requirements, specialized handling or load requirements. The more closely you have to direct an IC’s performance to meet the customer’s needs, the harder it is to maintain a credible arms-length IC relationship.

For that kind of work, it may be that employees are the right model. If so, the key is to keep the employee drivers structurally separate from the ICs. The ideal structure is a separate entity with its own motor carrier authority that houses the employee drivers exclusively—a clean division between the two populations.

If it is not commercially feasible to have two separate motor carrier entities to engage owner-operators (on one hand) and employ drivers (on the other hand), an alternative approach is a “fleet operator” or “unregulated trucking company” arrangement. Under this model, the fleet operator is a distinct entity that employs the drivers—issuing regular paychecks and annual W-2s—that is leased to and operates under the motor carrier’s authority.

That being said, having ICs and employee drivers running under the same carrier authority is not ideal. It can raise complications under the Section 530 “safe harbor,” which generally rewards consistent treatment of similarly situated workers. But the argument can be preserved if the work performed by the employee group is genuinely distinct from the work performed by the ICs and the fleet operator is the only entity paying wages to the employee drivers. (A full discussion of Section 530 and the steps necessary to gain its application are beyond the scope of this article.) Distinct work and a clean payment structure can help keep the two models from contaminating each other.

Misclassification risk can’t be eliminated from the IC model, but with thoughtful structuring, it can be mitigated. The best carriers treat structure as a discipline—recruiting by jurisdiction, walling off exposure in single-state entities, and matching each line of work to the optimal work-relationship model—rather than scrambling once a claim lands. It is best to build the firewall before you need it, not after.