Illinois Levies “ABC” Test, with a Catch

Motor carriers who hire owner-operators to haul loads in or through the state of Illinois should be aware that the state says it intends to enforce the “ABC” test, including how O/Os are paid. Of course, ICSA members based in Illinois are subject to Illinois law in this regard.

It should be noted that any trucks who haul freight in the state must also comply with the regulations. Here are three problems you should be aware of:

1. Illinois, like California, applies the “ABC” test to determine whether a worker is an employee. The “B” prong of that test asks whether a worker “performs work that is outside the usual course of the hiring entity’s business” – thus, generally finding that owner-operators in trucking are employees. Trucking, the argument goes, is trucking.
2. A recent U.S. District Court opinion in Chicago held that the Illinois Wage Payment and Collection Act (IWPCA), a state law, applies to truck drivers operating there. Wages are paid to employees – and the “ABC” test in Illinois likely considers O/Os to be employees.
3. That court decision ruled that the IWPCA kicks in no matter how little work an O/O (“employee”) may perform in Illinois.

So, a motor carrier that hires owner-operators to haul loads in or through the state of Illinois, 1) probably has “employees” in that state; 2) compensation under an O/O lease agreement is likely now considered wages; and 3) even if these drivers do very little work in Illinois, they and the motor carrier are now subject to Illinois’ wage law.

The IWPCA prohibits employers from making deductions from employee wages, such as for expenses incurred by the motor carrier on behalf of the truck driver (e.g., refueling an owner-operator’s truck from the carrier’s supply), unless:

1. Written consent is “given freely at the time the deduction is made;”
   or
2. A written agreement specifies the amount and duration of a recurring deduction and provides an option for withdrawal.

The court held that written consent applies to each time a deduction is made. For recurring deductions the court ruled that both (1) clarity on the time period between and amounts of the deductions, and (2) the option for the employee to withdraw consent, are essential.

Does your O/O lease agreement meet these Illinois requirements?

One bright spot: the IWPCA applies only to wages and not to escrow accounts. Particularly if you use owner-operators on a regular basis in Illinois, one solution may be to set up escrow accounts with them.