How America Built a 1099 System Designed to Exploit Drivers

The industry has spent four decades building a system that extracts maximum value from drivers while shifting maximum risk onto them.

The federal government recommended banning lease-purchase agreements in the trucking industry. Unanimously. Every member of the FMCSA Truck Leasing Task Force agreed: these programs are “irredeemable tools of fraud and driver oppression.”

That’s from an advocacy group. That’s language from a January 2025 federal report to Congress.

It barely made the news.

The industry has spent four decades building a system that extracts maximum value from drivers while shifting maximum risk onto them. The 1099 classification is the cornerstone of that system. And it’s destroying the profession from the inside out.

Let’s start with what we actually know about the numbers.

According to FMCSA data from November 2023, there are approximately 922,854 independent owner-operators working in interstate commerce. That’s 11.1% of all interstate CDL drivers. But that number is misleading because it doesn’t capture the real scope of the problem.

The real issue isn’t true owner-operators who own their equipment outright and operate under their own authority. The problem is the massive gray zone between W-2 employees and legitimate independent contractors, where carriers have created classification schemes designed to evade employment law while maintaining complete control over drivers.

The Economic Policy Institute found that 10 to 20 percent of employers misclassify at least one worker as an independent contractor. In trucking and construction, that number is significantly higher. Court cases and DOL investigations have repeatedly surfaced trucking as an industry where misclassification is systematic and intentional.

Over 200,000 drivers have been documented in court records as affected by predatory lease-purchase programs alone. That’s 5.7% of all interstate CDL drivers, and FMCSA Task Force members believe the actual number is much larger. Most drivers who fail these programs leave the industry quietly, believing they failed rather than understanding they were set up to fail.

Here’s how the scam works.

A carrier recruits a new driver, often someone still in CDL training. They offer the driver a truck through a “lease-purchase” agreement, promising that making weekly payments will lead to ownership. They simultaneously sign the driver to an “independent contractor operating agreement” that requires the driver to perform exclusive work for that carrier.

The carrier controls everything: rates, routes, dispatching, fuel surcharges, insurance, maintenance vendors, and escrow accounts. The driver has no negotiating power. These are take-it-or-leave-it contracts, and drivers typically aren’t even permitted to take them home for review before signing.

Then the carrier deducts all obligations from the driver’s paycheck before the driver receives any pay. Truck payment. Insurance. Fuel. Equipment charges. Communications fees. Maintenance escrow.

What’s left? Sometimes nothing. Sometimes less than nothing.

In Cervantes v. CRST, a driver manager testified that negative paychecks were so common that “paydays were our most stressful days.” Tuesdays and Thursdays brought calls from drivers who owed the company money after working all week.

The industry term for this is “going in the hole.”

The Task Force reviewed compensation data from Roberts v. TransAm that reveals the economics of these programs.

TransAm’s lease-purchase drivers earned total compensation equal to just 11.3% of the revenue they generated for the carrier. The industry average for W-2 driver compensation is 42% of operating costs.

TransAm’s lease-purchase drivers were earning $0.227 per mile while the industry average, including wages and benefits, was $0.709 per mile. These drivers earned less than one-third of the average trucking employee’s pay.

The most successful driver in the case study was Nassir Truitt. He completed five consecutive leases with TransAm. He was extraordinarily productive, generating $254,339 in revenue in 2019, roughly 34% more than the average truck in TransAm’s fleet.

His take-home pay after expenses: $33,126. Before self-employment taxes.

The median employee in refrigerated trucking that year made $67,600. Truitt, despite his exceptional productivity and rare success at actually completing leases, earned 23% less than TransAm’s own student drivers. At points he worked for months surviving on $150 to $500 per week in advances from the carrier, never digging himself out of the hole.

He was one of the successful ones.

How many drivers actually complete these programs and own a truck at the end?

The Task Force found evidence suggesting success rates of less than 1 in 100 drivers. Some data suggests it may be closer to 1 in 1,000.

Celadon’s Vice President of Operations estimated 5 to 10 percent success when pressed in a deposition. Internal management reports showed Celadon’s contractor turnover running between 245% and 328% annually. As many as 3,000 drivers may have cycled through Celadon’s program in a single year.

Roberts v. TransAm showed even more extreme churn. TransAm had a fleet of about 560 trucks, with 140 to 160 in their lease-purchase program. Between February 2018 and September 2021, 4,481 drivers cycled through their contractor fleet.

These aren’t success stories. This is a revolving door designed to extract value from each driver before they fail out and the next victim takes their place.

Remarkably, TransAm leased the same trucks repeatedly to successive drivers at the same weekly payment. Even as trucks depreciated, accumulated mileage, and required more maintenance, new drivers paid the same rate as the first. No underwriting. No disclosure of truck history. No disclosure of the program’s actual success rate.

This didn’t happen by accident. It’s the predictable result of 45 years of deregulation.

Before the Motor Carrier Act of 1980, the Interstate Commerce Commission controlled market entry, rates, and routes. About 60% of trucking employees were unionized. Drivers earned roughly 50% more than workers in comparable industries. Operating rights had real value, sometimes worth hundreds of thousands of dollars.

Then Jimmy Carter signed the Motor Carrier Act.

The number of carriers doubled between 1980 and 1990. Freight rates dropped 22 to 25 percent in real terms within five years. That sounds like efficiency. What it actually meant was a race to the bottom.

Union membership collapsed from 60% to 28% by 1985. Real weekly driver earnings fell 30% between 1978 and 1996. Owner-operators as a percentage of the workforce doubled. Operating rights that once held significant value became nearly worthless.

Deregulation created a market where the only competitive advantage was finding ways to pay drivers less. And the industry found plenty of ways.

A driver in the late 1970s earned the equivalent of a six-figure income today. The median truck driver now earns $48,310. That’s not inflation. That’s systematic wage suppression enabled by regulatory changes and classification games.

The per-mile pay structure that dominates trucking is part of the problem.

Drivers get paid only for miles driven. Not for pre-trip inspections. Not for loading and unloading. Not for detention time waiting at the docks. Not for traffic delays. Not for breakdowns. Not for weather holds.

The Truck Safety Coalition found that when you account for all the unpaid time truckers work, their average hourly wage drops to $11.15. That’s less than half what manufacturing and construction workers earn.

This pay structure creates pressure at every level. Drivers who need money have incentive to skip safety inspections, exceed hours of service, drive in dangerous conditions, and push through fatigue. The financial pressure is baked into the compensation model.

FMCSA studies found 65% of drivers report feeling drowsy while driving. Nearly 50% admitted to falling asleep behind the wheel in the previous year. Approximately 13% of commercial truck crashes involve fatigued drivers.

Lease-purchase drivers are under even more pressure because they’re servicing debt in addition to trying to earn a living. When carriers control their work volume and can reduce their loads at will, drivers who need to make payments have no choice but to take whatever work is offered at whatever rate.

The Task Force found that carriers structure these programs specifically to ensure drivers have no meaningful ability to control costs or revenue. The only way to earn more is to work more hours or take fewer days off. This directly affects hours-of-service compliance and safe driving.

The Social Security implications compound over a lifetime.

W-2 employees split payroll taxes with their employer. Each pays 7.65% toward Social Security and Medicare. Independent contractors pay both halves: 15.3% of their net self-employment income.

Misclassified drivers lose the employer match entirely. Their employers don’t pay Social Security taxes on their behalf. The driver’s reported earnings are lower due to deductions for truck payments, fuel, insurance, and fees. Lower reported earnings mean lower future Social Security benefits.

A driver who works 30 years under these arrangements will retire with substantially less than a driver who worked as a properly classified W-2 employee. The wage theft isn’t just happening now. It follows them into old age.

There’s no workers’ compensation if they’re hurt. No unemployment insurance if they’re terminated. No employer contributions to health insurance or retirement.

The carriers secure lower labor costs and shift all risk to the driver. Society picks up the tab when these drivers retire poor.

Eastern European trucking networks operating out of Chicago have built entire business models around recruiting drivers from Serbia, Bosnia, Croatia, and Turkey through H-1B and other visa programs. These drivers receive limited training, often have limited English proficiency, and are told that practices which violate American labor law are normal and legal.

Some of these operations classify drivers as W-2 employees on paper while paying them like 1099 contractors, dodging Affordable Care Act health insurance requirements while violating DOL classification rules. Drivers are promised $30,000 to $40,000 annually, trapped by a visa status that ties them to their employer.

Reports of ELD manipulation, falsified logbooks, and systematic pressure to exceed hours-of-service limits are widespread across these operations. Industry sources estimate that firms with ties to Serbian networks now control 10 to 15 percent of the American trucking market. This isn’t just a labor issue. It’s a national security concern.

The Super Ego Holdings lawsuit exposes one model of this fraud. Allegations include misclassifying drivers as independent contractors, secretly altering broker rate confirmation sheets to skim from load prices, making illegal deductions, and paying below minimum wage in some periods. The class potentially includes thousands of drivers.

California tried to fix this with AB5.

The law created the ABC test for independent contractor classification. To classify a worker as an independent contractor, the hiring entity must prove the worker is free from the company’s control, performs work outside the usual course of the hiring entity’s business, and is customarily engaged in an independently established trade of the same nature.

For trucking, Prong B is fatal. A truck driver hauling loads for a trucking company is clearly performing work within the usual course of the trucking company’s business. Under AB5, these drivers are employees.

The California Trucking Association fought AB5 for four and a half years before dropping their legal challenge in August 2024. The law is now in effect for approximately 70,000 independent truck drivers in California.

The first enforcement action came in November 2024. The California Labor Commissioner cited Mega Nice Trucking, Ryder Last Mile, and Costco, totaling $868,000 in misclassification and labor law violations. More enforcement is expected.

But AB5 only applies to California. The rest of the country continues to operate under the old rules, and carriers continue to find ways around classification requirements.

The FMCSA Task Force’s recommendations are comprehensive, but Congress must act.

The unanimous recommendation: ban lease-purchase agreements entirely as “irredeemable tools of fraud and driver oppression that threaten a safe national transportation system and diminish the number of truck drivers attracted to and who stay in the trucking industry.”

If Congress won’t ban them outright, the Task Force recommends mandatory W-2 classification for lease-purchase drivers, required disclosures including success rates and average take-home pay, two-check payment systems separating wages from truck costs, third-party escrow holders, a prohibition on carriers holding driver debt, minimum experience requirements before entering programs, and CFPB enforcement of consumer protection laws.

They also recommend ending the FLSA motor carrier exemption that currently allows carriers to work drivers 60 to 70 hours per week without overtime pay. The GOT Truckers Act, a bipartisan bill, would accomplish this.

Should we fundamentally restructure trucker compensation?

The per-mile and per-load pay models create financial incentives that conflict with safety. Drivers are paid to maximize distance in the shortest time, not to perform thorough inspections or wait out dangerous weather.

Hourly pay, including overtime, would cover all working time: inspections, loading, waiting, maintenance, and more. It would align driver incentives with safety priorities. It would eliminate the financial pressure that drives HOS violations.

Local and regional drivers already work on an hourly basis. The sky hasn’t fallen. They complete their routes, make deliveries, and go home.

Long-haul trucking could work the same way. It would cost more. Freight rates would increase. But the current system is subsidized by drivers working unpaid hours, by future Social Security benefits that won’t be paid, and by accident costs externalized onto the public.

The real cost of cheap freight is borne by drivers and crash victims. We just don’t see it because the accounting is spread across decades and millions of individual tragedies.

The driver shortage everyone complains about isn’t a shortage of CDL holders. There are more licensed commercial drivers than ever. The shortage is a shortage of people willing to accept the conditions the industry offers, the real shortage is skilled, qualified truckers willing to work for basically free.

Pay has stagnated for four decades. Benefits have eroded. Working conditions have deteriorated. Financial arrangements that would be illegal in most industries have been normalized in trucking.

When drivers fail, when they go in the hole, when they lose their truck and leave the industry broke and broken, they believe they failed. They don’t understand that the game was rigged from the start.

The FMCSA Task Force just told Congress these programs should be banned. Whether Congress listens depends on whether anyone is paying attention

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