An independent contractor clause specifies that the relationship between the parties involved is that of independent contracting rather than employment, meaning the contractor is responsible for their own taxes, benefits, and liability. It also typically delineates the expectations, responsibilities, and limitations of both parties to avoid any misclassification or legal issues.
BCO Independent Contractors. Management believes the Company has the largest fleet of truckload BCO Independent Contractors in the United States. BCO Independent Contractors provide truck capacity to the Company under exclusive lease arrangements. Each BCO Independent Contractor operates under the motor carrier operating authority issued by the U.S. Department of Transportation (“DOT”) to Landstar’s Operating Subsidiary to which such BCO Independent Contractor provides services and has leased his or her equipment. The Company’s network of BCO Independent Contractors provides marketing, operating, safety, recruiting and retention advantages to the Company.
The Company relies exclusively on independent third parties for its hauling capacity other than for trailing equipment owned or leased by the Company and utilized primarily by the BCO Independent Contractors. These third party transportation capacity providers consist of BCO Independent Contractors, Truck Brokerage Carriers, air and ocean cargo carriers and railroads. Landstar’s use of capacity provided by third parties allows it to maintain a lower level of capital investment, resulting in lower fixed costs. During fiscal year 2022, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 35%, 54% and 2%, respectively, of the Company’s consolidated revenue. Collectively, revenue generated by air and ocean cargo carriers represented approximately 8% of the Company’s consolidated revenue during fiscal year 2022. Historically, variable contribution margin (defined as variable contribution, which is defined as revenue less variable costs of revenue, divided by revenue) generated from freight hauled by BCO Independent Contractors has been greater than that from freight hauled by other third party capacity providers. However, the Company’s insurance and claims costs, depreciation costs and other operating costs are incurred primarily in support of BCO Independent Contractor capacity. In addition, as further described in the “Corporate Services” section that follows, the Company incurs significantly higher selling, general and administrative costs in support of BCO Independent Contractor capacity as compared to the other modes of transportation. Purchased transportation costs are recognized over the freight transit period as the performance obligation to the customer is completed.
The Company’s BCO Independent Contractors are compensated primarily based on a contractually agreed-upon percentage of revenue generated by loads they haul. This percentage generally ranges from 62% to 70% where the BCO Independent Contractor provides only a tractor and 73% to 76% where the BCO Independent Contractor provides both a tractor and trailing equipment. The BCO Independent Contractor must pay substantially all of the expenses of operating his/her equipment, including driver wages and benefits, fuel, physical damage insurance, maintenance, highway use taxes and debt service, if applicable. The Company passes 100% of fuel surcharges billed to customers for freight hauled by BCO Independent Contractors to its BCO Independent Contractors. During fiscal year 2022, the Company billed customers $445 million in fuel surcharges and passed 100% of such fuel surcharges to the BCO Independent Contractors. These fuel surcharges are excluded from revenue and the cost of purchased transportation.
All employees, officers, directors and independent contractors should protect the Company’s assets and ensure their efficient use. All Company assets should be used only for legitimate business purposes. Theft, carelessness and waste have a direct impact on our profit.
Employees, officers, directors and independent contractors are prohibited from taking (or directing to a third party) a business opportunity that is discovered through the use of corporate property, information or position, unless the Company has already been offered the opportunity and turned it down. More generally, employees, officers, directors and independent contractors are prohibited from using corporate property, information or position for personal gain and from competing with the Company.
Sometimes, the line between personal and Company benefits is difficult to draw, and sometimes there are both personal and Company benefits in certain activities. Employees, officers, directors and independent contractors who intend to make use of Company property or services in a manner not solely for the benefit of the Company should consult beforehand with your manager, the Chief Executive Officer or Chief Financial Officer, or their equivalents.
In carrying out the Company’s business, employees, officers, directors and independent contractors often learn confidential or proprietary information about the Company, its customers, suppliers, or joint venture parties. Employees, officers, directors and independent contractors must maintain the confidentiality of all information so entrusted to them, except when disclosure is authorized or legally mandated. Confidential or proprietary information of our Company, and of other companies, includes any non-public information that would be harmful to the relevant company or useful or helpful to competitors if disclosed.
At December 28, 2019, 12,733 of the trailers available to the BCO Independent Contractors were owned by the Company and 290 were leased. In addition, at December 28, 2019, 4,044 trailers were provided by the BCO Independent Contractors. Approximately 31% of Landstar’s truck transportation revenue was generated on Landstar provided trailing equipment during fiscal year 2019.
BCO Independent Contractors are independent contractors who provide truck capacity to the Company under exclusive lease arrangements.
An Independent Contractor is an individual or entity contracted to perform work for—or provide services to—another entity as a non-employee. They retain control over how the task is completed, usually supplying their tools and methods. Independent contractors are often referred to as freelancers, consultants, or service providers. Unlike employees, they don’t receive benefits like health insurance or retirement plans from the entity engaging their services, and they are responsible for their taxes.
You should consider using an independent contractor in situations where:
Specific expertise is needed: When the project requires skills or knowledge not available within your organization.
Short-term projects: When you have tasks that do not justify hiring a permanent employee.
Cost-effectiveness: When managing project costs, as hiring a contractor can sometimes be more cost-effective than a full-time employee.
Flexibility: When you require flexibility in scheduling and project scope.
Uncertainty in workload: During fluctuating periods of demand, allowing your organization to scale operations up or down quickly.
Writing a contract for an independent contractor involves several key elements to ensure clarity and fairness. Here’s how you should approach the drafting process:
Introduction: Clearly define the parties involved, including both the hiring entity and the independent contractor.
Services Provided: Specify the services or work the contractor will perform.
Payment Terms: Detail how and when payments will be made, including any invoicing or payment schedules.
Project Timeline: Include deadlines for completion of the work or important milestones.
Confidentiality and Ownership: Address issues of confidentiality, non-disclosure, and who retains ownership of the work product.
Indemnification and Liability: Define responsibility for any claims or damages arising from the employment relationship.
Termination Clause: State conditions under which either party may terminate the contract.
Signatures: Ensure that both parties sign and date the contract to make it legally binding.
Contracts that typically involve independent contractors include:
Consulting Agreements: Used when hiring someone to provide expert advice on a specific issue.
Freelance Contracts: Often employed by writers, graphic designers, and creatives who offer services for a particular project.
Vendor Agreements: When businesses engage with vendors to supply goods or services without hiring them directly as employees.
Project-Based Contracts: Engaged for singular projects like software development or event planning.
Service Agreements: Used when hiring for a specific service like cleaning, repair, or maintenance tasks.
By ensuring these areas are clearly addressed, you can create a robust contract that outlines expectations and minimizes potential disputes.
Try our AI contract analysis and extract important clauses and information from existing contracts.
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