Question: What determines the difference between an independent contractor and an agent in a broker/shipper relationship?
Answer: The distinction between an independent contractor and an employee is very murky and the subject of MANY lawsuits, most often by the government seeking to reclassify independent contractors as employees. There is no bright line test.
Generally stated, an independent contractor is a separate and distinct business. An independent contractor must provide service under his own “direction and control” and determine the “details, manner and means” of doing the job. How much “direction and control” a shipper or broker exerts over a trucking company is critical in determining if the trucker is an employee of the shipper or broker or an independent contractor. Each state and the federal government has its own test(s) and policy(ies) for application and, in many instances, states have different tests for different agencies. The IRS has its own test and, in this regard, publishes a list of 20 factors to be considered in making the determination. The IRS publication on current worker classification law can be found here.
An agent is a person or entity that can be an employee or independent contractor providing service for the principal on an ongoing basis. However, a totally independent third party can be an agent and nothing else. For example, I am the BOC-3 process agent in Oregon for several companies that provide blanket designations. That makes me the designated BOC-3 process agent for thousands of trucking companies and brokers that use those companies to make blanket filings. Thus, I am the agent for all of those companies even though I have not had any contact with most of them.
An agent is one who is authorized to do some act for or on behalf of the principal. For example, you can have an employee that you have authorized to make major purchases on behalf of the company – this employee would be an authorized agent for that purpose even though no other employee is authorized to do that. You also can authorize an independent contractor to act as a limited agent, however, the more authority the independent contractor is given the more likely someone will claim that the independent contractor is really an employee.
In the Broker/Carrier situation, if the carrier designates the broker as its “special, limited agent” solely for purposes of accepting payment of freight charges, the carrier should remain an independent contractor as long as the carrier controls the details, manner and means of providing service. This means that the carrier should have the right to accept or reject any shipment, to determine the routes, to be solely responsible for equipment maintenance, fuel, etc. In the Shipper/Carrier situation, the same analysis applies — the shipper cannot exercise or have the right to exercise control over the carrier’s manner and means of providing service.