Tuesday, April 16, 2013 by
President Obama released his FY 2014 budget (available here), which includes a request that Congress continue funding the federal government’s intensifying efforts to combat employee “misclassification” nationwide. This program is described as follows (from p. 126):
When employees are misclassified as independent contractors, they are deprived of benefits and protections to which they are legally entitled, such as minimum wage, overtime, unemployment insurance, and anti-discrimination protections. Misclassification, together with the underreporting of cash income for those paid as independent contractors, also costs taxpayers money in lost funds for the Treasury and in Social Security, Medicare, the Unemployment Trust Fund, and State programs. The Budget includes approximately $14 million to combat misclassification, including $10 million for grants to States to identify misclassification and recover unpaid taxes and $4 million for personnel at WHD to investigate misclassification.
These funding levels are the same as seen in the President’s FY 2013 budget. Of particular interest is the $10 million in state grants, which are doled out by the U.S. Department of Labor as an incentive for states to reclassify independent contractors as employees. The Department of Labor’s FY 2014 budget (summary available here) goes into more detail regarding this program (from p. 25):
The FY 2014 UI State Administration request includes $10,000,000 for states to improve worker misclassification efforts. Modeled on a successful (SNAP) Supplemental Nutrition Assistance Program, this initiative will provide a “high performance bonus” to the States most successful at detecting and prosecuting employers that fail to pay their proper share of UI taxes due to worker misclassification and other illegal tax schemes that deny the Federal and State UI Trust Funds hundreds of millions of dollars annually. States will be able to use these incentive funds to upgrade their misclassification detection and enforcement programs. As part of this initiative, States would be required to capture and report outcomes and cost/benefit information to enable the evaluation of new strategies.
While it remains to be seen what Congress will ultimately enact, the President’s budget demonstrates that the executive branch of the federal government remains focused on combating “misclassification” – and in directly funding state agencies that do so as well. Any company retaining the services of independent contractors (including owner-operators) should be sure to adopt and adhere to contractual and operating procedures which best protect independent-contractor status.
For additional information on the federal government’s attack on so-called “misclassification” or questions regarding the protection of independent-contractor status, contact Greg Feary, or Braden Core in the Firm’s Indianapolis office at (317) 637-1777
Friday, September 14, 2012 by
Northern District of California Judge Ronald M. Whyte denied a motion for class certification on September 7, 2012 with regard to a class of truck drivers from CEVA Freight, LLC seeking to be classified as employees instead of independent contractors. Judge Whyte found that the circumstances for the owner-operators were too individualized to allow for them to proceed with their misclassification action as a class. Some of the owner-operators hired their own teams to operate trucks while others operated their own trucks--these types of differences in circumstances were enough for the Judge to deny the motion. The owner-operator plaintiffs claimed that, as a result of the misclassification, they were owed overtime, as well as meal breaks and other benefits. With this ruling, the owner-operator plaintiffs would have to pursue their claims of misclassification individually, pending any appeal to the 9th Circuit Court of Appeals. The case has been ongoing in federal court since 2005.
Wednesday, August 29, 2012 by
On remand from the Ninth Circuit, the United States District Court for the Southern District of California issued its decision on August 27, 2012, holding Affinity Logistics Corporation (“Affinity”), a motor carrier, carried its burden of establishing it properly classified as independent contractors a certified class of former owner-operator delivery drivers (the “contractors”) under California law. Ruiz v. Affinity Logistics Corp., No. 05CV2125, slip op. at 21 (S.D. Cal. Aug. 27, 2012).
The Southern District previously reached this same conclusion under Georgia law, which applies a presumption of independent contractor status, to the facts adduced at a three-day bench trial. On appeal, the Ninth Circuit concluded California, not Georgia, law should apply to the contractors’ relationship with Affinity and remanded the case. California law applies a presumption of employment status that a putative employer may overcome if the weight of the evidence supports a finding of independent contractor status when the court applies a multi-factor, common law right of control test.
When it revisited the issue under California law, the Southern District applied the right of control test with “with deference for the remedial purposes of California’s protective legislation.” Id. at 6. This notwithstanding, the court found evidence that the contractors could “hire others to complete the deliveries Affinity hired them to do is strong evidence suggesting that Affinity did not have the requisite level of control over the manner and means of [the contractors’] work.” Id. at 7. The court further found the majority of the “secondary factors” considered by California courts, including, e.g., investment in equipment and opportunity for profit or loss, among others, favored independent contractor status. Id. at 20-21.
While the court further found Affinity exercised “some control” over the contractors, the court deemed this evidence irrelevant to the ultimate question because “this control was either unrelated to the manner and means by which [the contractors] accomplished their work, or it was a result of other factors—such as federal regulatory requirements or [customer] preferences—rather than direct control by Affinity.” Id. at 21.
The court therefore found in favor of Affinity. Judgment has been entered against the plaintiff and class of contractors. Plaintiff filed a Notice of Appeal on August 29, 2012.
Tuesday, May 8, 2012 by
On April 25, 2012, the Equal Employment Opportunity Commission (“EEOC”) issued important new guidance impacting the way employers use criminal arrest and conviction records of prospective employees to make hiring decisions. Motor carriers (including last-mile carriers, household goods carriers, and couriers) dealing directly with homeowners, residents, and retail consumers are quite often required by their retailer customers to perform criminal background checks. Although the EEOC’s guidance applies to “employers” as opposed to contractors of owner/operators, caution and attention are warranted. Employers seeking to avoid liability for claims of discrimination under the disparate impact and disparate treatment prohibitions contained in Title VII are advised to evaluate their application and hiring policies to ensure compliance with the EEOC’s new guidance.
Under the EEOC’s new guidance, an employer’s (e.g. motor carrier) blanket policy or practice of excluding applicants with criminal records from employment may violate Title VII to the extent the policy strays far from Federal Motor Carrier Safety Regulations and the commercial motor vehicle driver disqualifications listed at 49 U.S.C. § 31310. Instead, the EEOC now requires narrowly-tailored individualized assessments, or “targeted screens,” of applicants that consider the nature of the crime, the time elapsed since the arrest or conviction, and the specific responsibilities of the job for which the applicant is applying.
With the new guidance in place, employers should expect the EEOC to step up its investigative and enforcement efforts, particularly to the extent blanket criminal background policies raise the “pattern or practice” flags most noticeable to the EEOC. Motor carriers that “employ” drivers and helpers to conduct in-home deliveries should therefore evaluate their application and hiring policies related to the use of criminal arrest and conviction records to ensure narrow tailoring and individualized assessments in light of the new EEOC guidance. Even contractor-model motor carriers should use reasonable efforts to avoid overly-broad screening of owner/operators. For additional information on the new EEOC guidance, or to discuss implementing a policy that minimizes your company’s exposure on a claim of discrimination in its hiring practices, contact Greg Feary, Jim Hanson, David Robinson, or Jack Finklea in the Firm’s Indianapolis office at (317) 637-1777.
Friday, February 17, 2012 by
The Oregon Employment Department intends to initiate formal proceedings to repeal an administrative rule prohibiting the application of the Oregon For-Hire Carrier Unemployment Tax Exemption to owner-operators that obtain their equipment through motor carrier- and motor carrier affiliate-sponsored equipment acquisition programs, sometimes referred to in the industry as “leaseback” arrangements. A taskforce comprised of industry players, with the advice and guidance of counsel and represented in large part by the Oregon and American Trucking Associations, advanced a vigorous and proactive effort to secure the repeal of the rule. The repeal of the rule is crucial to protect the long standing utilization of leaseback arrangements by Oregon motor carriers and owner-operators. The Employment Department resisted the efforts of the task force, but the Governor’s office ultimately intervened. The formal repeal of the administrative rule is expected to occur at the end of the next legislative session.
The Oregon For-Hire Carrier Unemployment Tax Exemption provides that the term “employment” excludes “transportation performed by motor vehicle for a for-hire carrier by any person that leases their equipment to a for-hire carrier and that personally operates, furnishes and maintains the equipment and provides services thereto.” ORS 657.047(2) (emphasis supplied). The soon-to-be repealed administrative rule defined the term “their equipment” to include only equipment “independently furnished by the service-provider, neither leased nor purchased from the for-hire carrier or from any entity affiliated with the for-hire carrier.” OAR 471-031-0200 (certified as effective on Dec. 13, 2010).
Monday, January 30, 2012 by
Associations in the logistics industry associations in opposing a bill that would close ports to owner-operators. Sens. Charles Schumer (D-NY) and Kristen Gillibrand (D-NY) introduced The Clean Ports Act of 2011 (S. 2011). The bill would reverse a 9th Circuit's decision and grant local governments the ability to regulate interstate and foreign commerce by trucks within the port jurisdiction. The 9th Circuit ruled only the federal government has the power to regulate truck interstate and foreign commerce.
The Clean Ports Act would give ports the authority to regulate truck prices, routes and service in order to improve pollution, congestion and safety.
This is the companion legislation to a measure introduced in the House last February by Rep. Jerrold Nadler, D-N.Y. That bill was referred to the Transportation and Infrastructure Committee, which is not likely to get through the House.
Monday, December 5, 2011 by
In Michigan state lawmaker, Sen. Hoon-Yung Hopgood, D-Taylor, has introduced a bill that would prohibit vehicles in excess of 8,500 pounds from idling for more than 5 minutes per hour. While loading or unloading, idling would be allowed for up to 30 minutes in a 60-minute period.
Exemptions would include situations when vehicles are stuck in traffic or “operating a defroster, heater, or air conditioner, or during installation of equipment, solely to prevent a safety or health emergency and not part of the operator’s rest or sleep period.” Idling would also be permitted to power a medical device, such as a continuous positive airway pressure machine, or CPAP. The exclusion would not apply for vehicles equipped with an auxiliary power unit.
The bill does not include an exemption for extreme temperatures. It does, however, specify that auxiliary power units, gen sets or other idle-reduction technology are allowed.
Violators of the five-minute rule would face fines of up to $500. Owners or operators of locations where a truck is loading or unloading for longer than 30 minutes would face up to $150 fines.
The bill – SB819 – could be considered as early as this week in the Senate Transportation Committee.
Tuesday, October 25, 2011 by
On August 1, 2011, the deadline for “large” motor carriers and other trailer fleet owners (those with 21 or more trailers) to seek delayed compliance with the Greenhouse Gas Emission Regulation (“GHG Regulation”) of the California Air Resource Board (“CARB”) passed. For any large motor carrier that did not seek to file a delayed compliance plan, the GHG Regulation requires, with very few exceptions, that each 2010 model year or older 53 feet or longer trailer operating in California must either be SmartWay Certified or must be retrofitted with fuel saving technologies by January 1, 2013. The effect of filing a delayed compliance plan was to allow carriers to stagger compliance (e.g., bring 20% of the California fleet into compliance per year until 100% compliance is reached on January 1, 2016), thereby avoiding a 100% compliance obligation on January 1, 2013.
It has come to our attention that a significant number of motor carriers may not have received notice of the passing of the deadline to file delayed compliance plans, or even that the filing of such plans was an option. The firm is investigating the potential for late-submittal of plans that would provide carriers that did not file with a staggered compliance option so as to avoid a 100% compliance requirement by January 1, 2013. If your company would be interested in investigating whether such relief is available, please do not hesitate to contact us. If your company maintains a trailer fleet of 20 or fewer trailers, the deadline for filing a delayed compliance plan is July 1, 2012. We have conferred with the American Trucking Associations, Inc and it has advised the firm it is sending out alerts and working through this issue with its experts to possibly obtain relief on the deadline problem. It concurs with the firm that preparing and submitting a proper filing immediately is a prudent step despite the passage of the deadline.
Friday, September 16, 2011 by
The Federal Motor Carrier Safety Administration's anticipated pilot program for long-distance trucking across the Mexican border remains on hold. The Inspector General of the Department of Transportation indicates that the program is close to being ready, but that the FMCSA must first explain how it will conduct certain safety audits of Mexican carriers in Mexico before getting the green light to move forward. Ultimately, the goal of the program is to test the system devised by the FMCSA to ensure that Mexican trucks are safe and in compliance with U.S. cabotage regulations. Of course, even once it is green-lighted, the program faces additional opposition - i.e., the Owner-Operator Independent Drivers Association has sued to halt the program, and several congressmen have introduced legislation to limit the program.
Friday, September 16, 2011 by
After eight years of legal proceedings, the Arizona Supreme Court has ruled that Swift truckers who claim that the company routinely shorts drivers for mileage may take their case to trial. The drivers claim that Swift uses an artificial calculation that results in drivers being paid for significantly fewer miles than they actually drive. The suit claims that by basing per-mile pay on mileages calculated by software rather than actual miles driven, Swift underpaid drivers by seven to ten percent. The class action case encompasses all drivers and owner-operators who worked for Swift since January 30, 1998.
Friday, May 20, 2011 by
The July 1, 2011 deadline for certain motor carriers and equipment leasing companies (including motor carriers that offer equipment purchase programs to owner-operators) to qualify for relaxed enforcement of the California Air Resources Board (“CARB”) greenhouse gas emission rule is fast approaching. Under the rule, subject to certain limited exceptions, 53’ trailers operated in California (regardless of where the trailer is registered or based) must meet certain minimum requirements aimed at achieving increased fuel mileage. The rule is already in effect for 2011 and newer model year trailers. Compliance for 2010 and older trailers is not required until January 1, 2013. However, CARB is providing trailer owners with the option of staggering implementation of the rule so that 100% compliance for trailers operated in California is not required until January 1, 2016. In order to qualify for this staggered implementation, a detailed fleet compliance plan must be submitted to CARB by July 1, 2011.
The July 1, 2011 deadline is only for owners with fleets of 21 or more trailers (regardless of the number of trailers that will operate in California). For smaller fleets of 20 or fewer trailers, the plan does not need to be submitted until July 1, 2012. Also, while the rule speaks in terms of “owners,” a lessee may be considered the owner under the rule depending on whether the lessor has issued notifications regarding compliance (in which case, the lessee will be deemed to be the owner of the trailer). As such, motor carriers that lease equipment may have the obligation to comply notwithstanding the fact they do not hold title to their trailers.
Tuesday, March 8, 2011 by
The National Conference of Insurance Legislators ("NCOIL"), a national association of state legislators involved in insurance-related issues, approved model language setting forth the circumstances under which an owner-operator will be considered an independent contractor for purposes of workers' compensation insurance. The model legislation, drafted over a period of time and subject to motor carrier and other industry comment, establishes a six-factor test to determine independent contractor status. The model legislation must be introduced and enacted in a state pursuant to that state's legislative process before it carries the force of law.
As drafted, the model legislation requires an individual to meet each of the following factors in order to be deemed an independent contractor for purposes of workers' compensation. (1) The individual must own the equipment or hold it under a bona fide lease arrangement (related-entity leases are prohibited except in temporary situations); (2) the individual must be responsible for substantially all of the principal operating costs; (3) the individual must supply the necessary services to operate the equipment; (4) the individual's compensation must be based on factors related to the work performed and not solely on the basis of time expended; (5) the individual must substantially control the means and manner of performing services, in conformance with regulatory requirements and shipper specifications; and (6) the parties must sign a certification statement attesting to owner-operator status that meets the terms of the law.
Although there is no immediate effect as a result of this model legislation, its existence may encourage the consideration of such legislation throughout the various states. Motor carriers and owner-operators should stay abreast of such developments, and support any efforts to enact this legislation in states that do not currently have an owner-operator exemption.
Wednesday, February 16, 2011 by
Rep. Jerrold Nadler reintroduced his bill, the Clean Ports Act, to give ports more authority over drayage operations. The New York Democrat initially introduced the measure last year yet Congress did not act on his proposal.
Under current law, states and local authorities such as ports are barred from regulating truck prices, routes or service. Nadler's Clean Ports Act would create an exemption to let these entities set requirements "reasonably related" to improving pollution, congestion, safety operations at ports.
This change could allow the Port of Los Angeles to proceed with its concession plan, which would ban owner-operators from providing drayage service and all drivers would have to be employees of companies.
Currently the LA Port is temporarily barred from implementing the employee driver requirement of the plan pending a ruling by the U.S. Court of Appeals for the Ninth Circuit.
"The Clean Ports Act represents a crucial modernization of federal law that would dramatically improve the quality of air for the estimated 87 million Americans who live and work near major container ports," said Rep. Nadler in a statement.
The bill will be referred to the House Transportation and Infrastructure Committee, where it faces an uncertain future due to the committee's immediate focus on passing legislation to reauthorize the federal aviation and highway programs.
Friday, January 21, 2011 by
On January 20th, the federal court of appeals for the 9th Circuit issued a favorable ruling affirming summary judgment in a case brought by the Owner-Operator Independent Driver Association ("OOIDA") against Swift Transportation for alleged violation of the federal leasing regulations. OOIDA challenged Swift's method of disclosing chargebacks against owner-operator compensation. Neither the lease nor settlement statements issued to the owner-operators disclosed Swift's profit on chargeback items, if any, but the lease did set forth flat fee chargebacks, or information sufficient for the owner-operator to determine the amount that would be charged back.
The court made the same distinction between flat fee and variable fee charge backs as was made by the 11th Circuit in its 2010 decision involving Landstar. The court agreed with the decision in Landstar that, assuming the chargeback is a flat fee, the carrier is under no obligation to disclose any markup that might apply. However, the court departed from Landstar with respect to variable fee chargebacks. The Swift court read Landstar as requiring the carrier to provide a full itemization of the carrier's underlying costs with respect to variable rate chargebacks (from which the owner-operator could then ascertain the carrier's profit by deducting the underlying cost from the amount of the chargeback). The Swift court declined "to make a blanket assertion that all variable-rate charge-backs per se require a disclosure of the amount of the carriers' profits and costs. A full 'recitation as to how the amount of each item is computed' does not necessarily require carriers to disclose their precise profits or costs to third-parties, even for variable rate fees."
The governing rule, according to the Swift court, is that the carrier must provide sufficient information so that the owner-operator can determine in advance whether their final costs will be. Since Swift was not required to disclose chargebacks, the owner-operators failed to prove that they were damaged so the court affirmed judgment in favor of Swift.
Saturday, November 20, 2010 by
Effective as of November 11, 2010, the California Highway Patrol has adopted regulations affecting motor carriers usinig equipment they do not own. The language closely mirrors the federal leasing regulations found at 49 CFR 376 ("Lease and Interchange of Vehicles" to Title 13). Under the new California regulations, all intrastate carriers using owner-operators on a non-temporary basis will have a new regulatory obligation, and CHP may now enforce the provisions of CFR 376 "Lease and Interchange of Vehicles" on interstate carriers. This includes the authority to examine lease agreements in order to determine which entity (overlying motor carrier or underlying independent contractor) is responsible for vehicle safety and maintenance during BIT inspections.
Note that while they are effective now, subsection (g) of the regulations provides for a transition period:
“For those business entities which have engaged in some sort of vehicle leasing relationship enacted prior to the filing of these regulations, the terms of these regulations will be met no later than June 30, 2011.”
Cal. Admin. Code Tit. 13, § 1235.7(g) (Westlaw 2010).
Wednesday, October 27, 2010 by
An order issued late Tuesday afternoon by the U.S. District Court, temporarily halts the Port of Los Angeles’ (“POLA”) plan to exclude owner-operator drivers from performing services at the Port. The order reinstates the previously issued injunction in favor of the ATA against POLA’s employee mandate as set forth in its Concession Agreement for carriers serving the Port. POLA announced in late September that 20% of the gate moves performed by carriers in the final quarter of 2011 would have to be performed by employee drivers, with additional phase-in requirements of 66% of gate moves by employee drivers by the end of 2012 and 100% of gate moves by employee drivers by the end of 2013. In light of the Court’s ruling Tuesday that phase-in schedule is on hold until the appellate process is complete. The remainder of the terms of the Concession Agreement will remain in place while the ATA’s appeal to the Ninth Circuit Court of Appeals is pending.
Wednesday, August 25, 2010 by
On September 11, 2011, the Federal Motor Carrier Safety Administration ("FMCSA") will eliminate the practice of allowing non-motor carrier registrants to obtain registrant-only USDOT numbers. The "registrant-only" USDOT number was developed by the FMCSA as a way to identify registered owners of commercial motor vehicles ("CMVs") that are not motor carriers, but lease their CMVs to entities that are motor carriers.
Ultimately, the FMCSA determined that the registrant-only USDOT numbers were having an adverse affect on its ability to track motor carriers' safety violations. In too many cases, law enforcement personnel were being presented with registrant-only USDOT numbers during inspections and crash investigations. As a result, the data that should have been assigned to the record of the offending motor carrier operating the CMV was being erroneously assigned to the registrant-only USDOT number - a number that should have no safety events assigned to it.
Wednesday, August 11, 2010 by
A motor carrier may adjust compensation to its owner-operators to address its cost of insurance, the Seventh Circuit Court of Appeals confirmed on August 9. The insurance issue emanated from a claim by the Owner-Operator Independent Drivers Association that a motor carrier, Mayflower, made illegal chargebacks from owner operators that amounted to a mandatory purchase of insurance from the motor carrier, which is prohibited by the Federal Leasing Regulations governing motor carrier lease arrangements with owner-operators.
Monday, July 12, 2010 by
California’s Senate Transportation and Housing Committee unanimously approved a bill – SB1156 – that would make available $20 million for drayage trucks that have yet to comply with the California Air Resources Board’s (CARB) drayage truck regulation. The bill is particularly helpful for small fleet owners and trucking operations. SB 1156 is intended to address the economic difficulties truck drivers face complying with CARB standards. The bill was routed to the Senate Appropriations Committee and is on its way to the Senate floor for further consideration.
Thursday, June 10, 2010 by
Starting Friday, June 11, West Virginia's anti-idling rule will take effect. The rule applies to diesel-powered vehicles weighing over 10,000 pounds. Such vehicles will be limited to idling for no more than 15 minutes and violators will face a fine from $150 to $300. Owners and/or operators could be subject to the fines, including those at locations where trucks load or unload.
Exceptions to the anti-idling rule include idling while sleeping or resting, while in traffic, when required by law to stop, or when it is necessary "to operate defrosters, heaters, air conditioners or cargo refrigeration equipment."