Trial Magazine

You meet with the family of a person catastrophically injured in a crash involving a tractor-trailer. You examine the photos of the truck, and one image shows an “Alpha Trucking” logo affixed to the tractor.¹ Alpha operates nationwide with significant insurance and assets, as well as motor carrier, broker, and freight forwarding authority. After sending out letters of representation, you discover that Alpha denies being the driver’s employer, claiming that the employer is “Omega Trucking,” one of Alpha’s contractors. Omega has only $1 million in insurance coverage, only motor carrier authority, three tractors, and no assets at all. What do you do? To help this family, you must find out which company was really in control in the transportation cycle at issue and which one is the real motor carrier.

Answering these questions requires looking at the traditional rules regarding employer-employee relationships and the Federal Motor Carrier Safety Regulations (FMCSR).² Issues such as which entity is the motor carrier³ or which company has broker or forwarding authority⁴ or operating authority⁵ can be key in these cases. Those less familiar with these terms should review the FMCSR definitions and the registration requirements for transportation companies.⁶

Under the analysis applied by most courts nationwide, the hallmark of an employer-employee relationship is that the employer controls the result of the work and has the right to direct how the work is accomplished.⁷ Moreover, it is the existence of the right to control that is significant—not whether that control is exercised.⁸

Further considerations include: 

• whether the work is part of the alleged employer’s regular business 
• whether the employer is responsible for the result only 
• the terms of agreement between the parties 
• the nature of the work or occupation
• the skill required to perform the work 
• whether the employer is engaged in a distinct occupation or business 
• which party supplies the tools or equipment 
• whether the alleged employer has the right to terminate employment at any time, and 
• whether payment is by the hour or by the job.  

Variations of the “right to control” test have been widely accepted and incorporated into numerous statutes as either the sole test or as part of the test used in many types of cases to determine employment status, including for truck drivers.⁹

Explore ‘Routing’

In the right to control analysis, the initial focus should be on information related to “routing.” Directing drivers what specific routes to take, as opposed to merely instructing them where to pick up and deliver loads, might create an employer-employee relationship.¹⁰ Conversely, “truck drivers who direct their own routes, come and go as they see fit, and control their transport as owner-operators are often deemed independent contractors.”¹¹

Imagine as part of the earlier scenario that discovery reveals Alpha, like many companies, uses detailed logistics programs for route scheduling to maximize efficiency and profits when moving products. Alpha stages routes so that the last scheduled delivery is loaded on the truck first and the first scheduled delivery is loaded last; this prevents a driver from deviating from the assigned route and order of deliveries. Therefore, thoroughly examining the routing can help you assess the level of control the employer has over the employee.

Conduct a Federal Rule of Civil Procedure 30(b)(6) deposition of the person or people knowledgeable about Alpha’s routing system to explain how it works and, more important, how it is an integral part of the company’s business model. Most likely, the deponent will be a dispatcher or a similarly situated individual intimately familiar with the employer’s routing procedure. You must inquire whether Alpha has total control over the routing of its drivers and whether drivers are permitted to deviate from the routes. Also obtain the user manual for the logistics program to help you understand the terms being used to describe the program.

Trucking company apps. Nearly every large-scale transportation company now uses some type of app that allows drivers to view scheduled routes on their cellphones or tablets. Each qualified driver is assigned a personal ID number, which companies like Alpha use to assign routes. The app also provides critical data that Alpha needs to run its business, such as electronic log books and daily inspection reports.

Ask for all of the data, metadata, and audit trails associated with the app. Data such as onboard recording devices and electronic logs will help show that Alpha is the entity pulling all the levers in this specific transaction. When making discovery requests for such information, it is critical to determine whether the cellphone or tablet app is used for routing and dispatching drivers.

Bills of lading and purchase order invoices. Also dig into the bills of lading or purchase order invoices between Alpha and each shipper. Alpha likely has negotiated rates and contracts with customers that specify that it will be the carrier, transporter, or provider. If none of these documents mention Omega, then you are one step closer to showing that Alpha is the real employer and motor carrier.

Will There Be Evidence That Omega Followed the FMCSR?	Y	N
Application for Employment		X
Driving History		X
Inquiries to Previous Employers		X
Drug Test Results		X
Medical Card		X
Drug Testing		X
Monitoring Hours of Service		X
Inspection, Repair, & Maintenance		X
Annual Inquiry and Review of Driving Record		X

 

Focus on Conduct, Not ‘Agreements’

You can prove that Omega is merely an extension of Alpha by showing that Alpha acts as the driver’s employer despite any agreements to the contrary between the two companies. Courts across the country agree that the conduct of the parties, not the terms of their ­agreement, controls whether an employer-employee relationship exists.¹² In other words, calling a worker an “independent contractor” in an ­agreement does not change the fact that the worker is an employee if the parties’ conduct establishes that. The more the alleged “independent contractor” activity is part of the alleged employer’s regular business, the more likely it is that the worker is its employee.

Equipment. Employers in a typical employer-employee relationship provide the equipment. In trucking cases, the most essential piece of equipment is the truck. Companies like Alpha may claim that the driver was an employee of the contractor because the contractor provided the truck. To counter this argument, look for whether the pay rate has a component designed for Alpha to subsidize maintenance, lease, or ­ownership payments and whether so-called “settlements”—essentially a guaranteed minimum amount per truck (based on a flat rate per day)—are standard weekly or biweekly payments to Omega.

Pay rate information likely will be found in the agreement between the employer and the contractor, making retrieval of this information vital for establishing an employer-employee relationship. These factors help show that the “independent contractor” agreement between the companies was nothing more than a truck leasing agreement in disguise, adding another piece of evidence that Alpha was the driver’s employer.

Compliance with the FMCSR. Review whether Alpha was responsible for—among other tasks—conducting background checks, driver’s license verifications, and drug testing to ensure compliance with the FMCSR.¹³ While these factors alone may not be dispositive, if Alpha was responsible for ensuring compliance with the FMCSR driver qualification requirements, that would be additional evidence of Omega’s extremely limited role.

A simple chart showing exactly what Omega didn’t do can be a very illustrative visual, making it simple and easy for the fact-finder to see how little “control” Omega actually exerted. See the chart above as an example based on a recent trial my firm handled.

Power to terminate drivers. Often, ­companies like Alpha claim that the driver was Omega’s employee because Alpha technically could not terminate the driver. But because Alpha has the power to assign routes to Omega—or to the driver using his or her ID number—it could effectively “fire” drivers by refusing to do so.

Many companies in the transportation industry like Omega work solely for companies like Alpha, which directly contradicts the underlying principles of the independent contractor model. In general, this unrestricted right to terminate a worker is inconsistent with independent contractor status.

Payment terms. Pay careful attention to the payment terms mentioned previously. Companies like Alpha often have weekly settlement payment agreements with their contractors that, in turn, pay the drivers. The following scenario is quite common and illustrates how a weekly settlement is really an employee paycheck.

Say that Alpha establishes and controls a payment system based on paying contractors per stop with a set goal for the number of stops per day. If the number of stops falls short of the goal, then Alpha “subsidizes” the difference. For example, a contractor with a stop rate of $35 and the goal of 10 stops per day would be guaranteed to make a flat rate of no less than $350 per day. If a contractor made only eight stops, he would still earn $350 for the day because Alpha would pay a subsidy for the two missed stops. This way, drivers receive a regular rate of pay on a weekly basis from Alpha—which, of course, weighs heavily in favor of employee status for the driver. Companies like Alpha have an interest in paying these subsidies to try to establish control over the drivers without exposing themselves to liability.

The True Motor Carrier

One of the final steps in overcoming the independent contractor defense is to look at how the FMCSR defines “employee” and “employer” under 49 C.F.R. §390.5.¹⁴

Several courts have held that a transportation company must have been exercising its motor carrier operating authority at the time of a crash to be vicariously liable under §390.5.¹⁵ In other words, vicarious liability does not exist under §390.5 if a transportation company is not using its motor carrier operating authority in that specific transaction at the time of the incident.¹⁶ Similarly, when evaluating the FMCSR’s definition of “private motor carrier,” a federal court has found that the critical inquiry is whether the shipper was exercising its motor carrier operating authority at the time of the incident.¹⁷

Applying this case law, when a transportation company like Alpha has authority to operate as a motor carrier, broker, or freight forwarder, the critical inquiry is its role in the specific transaction at issue. Look at the transportation company’s actions to evaluate whether a motor carrier would have taken these or similar types of actions. One important thing to look for is whether the transportation company had operating authority under the FMCSR. If the answer is yes, then you have a strong argument that under the regulatory framework,¹⁸ Alpha is the true motor carrier and thus vicariously liable for the driver’s actions.

Expect a large transportation company to argue that it was acting as a broker or freight forwarder, not a motor carrier, relieving it of liability for the actions of the negligent or reckless driver. During discovery, combat this argument by going through the right to control analysis to show that the trucking company’s actions are those of a motor carrier in this specific transaction.

Once you show that Alpha had sufficient control, argue that it cannot abdicate its regulatory duties and transfer responsibility for FMCSR compliance to Omega. As the regulatory guidance to §390.5 explains, a motor carrier that “employs owner-operators who have their own operating authority” cannot transfer the responsibility for FMCSR compliance to those owner-operators.¹⁹ The guidance states: “The existence of operating authority has no bearing upon the issue. The motor carrier is, therefore, responsible for compliance with the FMCSRs by its driver employees, including those who are owner-operators.”²⁰

To develop support for using this FMCSR guidance, focus on the nature of the relationship between the two companies during discovery. How the money flows between Alpha and Omega is key. The more systematic and continuous the relationship is, the more likely it is that a court will apply FMCSR ­guidance and cast aside any “independent contractor” agreement or argument.

As more and more “independent contractor” agreements creep into transportation cases, look beyond the words on the page. The real motor carrier and employer is likely hiding in plain sight.

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Edward Ciarimboli is a partner at Fellerman & Ciarimboli in Kingston, Pa., and can be reached at ejc@fclawpc.com.

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Notes

1. The article uses “Alpha” and “Omega” as fictional names and these terms do not refer to any real companies.
2. 49 C.F.R. §§303.1–399.211 (2019).
3. See 49 C.F.R. §390.5 (definition of “motor carrier”).
4. See id. (definition of “transportation intermediary”).
5. In general, having “operating authority” means that a transportation company is authorized to transport passengers or goods in interstate commerce for a fee; these companies will have what are called “MC numbers.” See, e.g., Fed. Motor Carrier Safety Admin., Get Authority to Operate (MC Number) (May 15, 2019), www.fmcsa.dot.gov/registration/get-mc-number-authority-operate.
6. Generally, when an employer obtains operating authority, it has registered with the U.S. Department of Transportation (USDOT) and has received a USDOT number as well as an MC number. Employers abiding by the laws and regulations regarding commercial motor carriers must have registered USDOT numbers.
7. See, e.g., I.H. v. Cty. of Lehigh, 610 F.3d 797, 802 (3d Cir. 2010); see also Shaffer v. Acme Limestone Co., 524 S.E.2d 688, 696 (W. Va. 1999).
8. See, e.g., Universal Am-Can, Ltd. v. Workers’ Comp. Appeal Bd., 762 A.2d 328, 333 (Pa. 2000).
9. See, e.g., Construction Workplace Misclassification Act, 43 Pa. Cons. Stat. Ann. §933.3 (West 2011); Kansas Wage Payment Act, Kan. Stat. Ann. §§44-313–44-327 (2019).
10. See Red Line Express Co., Inc. v. Workmen’s Comp. Appeal Bd., 588 A.2d 90, 96 (Pa. Commw. Ct. 1991).
11. Am. Rd. Lines v. Workers’ Comp. Appeal Bd., 39 A.3d 603, 611 (Pa. Commw. Ct. 2012).
12. Stillman v. Workmen’s Comp. Appeal Bd., 569 A.2d 983, 986 (Pa. Commw. Ct. 1990); Am. Rd. Lines, 39 A.3d at 612 (stating that the agreement between the parties was but one factor and was “not determinative” because “the language in some of the documents was inconsistent with the manner in which the parties actually conducted their affairs”); see also Knecht v. Balanescu, 2017 WL 4573796, at *3 (M.D. Pa. Oct. 13, 2017) (stating that the existence of an agreement “deeming a truck driver either specifically an employee of a particular entity or at least subject to the control of a specific entity is a factor to be considered by the courts in determining employment status but is not by itself dispositive on the issue”) (citing Red Line Express, 588 A.2d at 95); Kidder v. Miller-Davis Co., 564 N.W.2d 872, 880 (Mich. 1997); Genie Trucking Line, Inc. v. Am. Home Assurance Co., 524 A.2d 966, 968 (Pa. Super. Ct. 1987).
13. See 49 C.F.R. §392.1; 49 C.F.R. §392.4.
14. See 49 C.F.R. §390.5.
15. See, e.g., Schramm v. Foster, 341 F. Supp. 2d 536, 550 (D. Md. 2004) (finding that a negligent driver was not a statutory employee of the broker under §390.5 because the plaintiffs failed to establish that the broker acted as a motor carrier in the specific transaction at issue); see also Harris v. FedEx Nat’l LTL, Inc., 760 F.3d 780, 785 (8th Cir. 2014) (citing Schramm, 341 F. Supp. 2d at 548); Caballero v. Archer, 2007 WL 628755, at *4 (W.D. Tex. Feb. 1, 2007).
16. Recognizing that a transportation entity may have authority to operate as a motor carrier, broker, and freight forwarder, the Schramm court explained that the critical inquiry must be the transportation company’s role in the specific transaction, not simply whether the entity had motor carrier operating authority. Schramm, 341 F. Supp. 2d at 550; see also Harris, 760 F.3d at 785 (citing Schramm, 341 F. Supp. 2d at 548).
17. Caballero, 2007 WL 628755, at *4. Private motor carriers transport their own cargo and are required to have USDOT numbers but not MC numbers.
18. See 49 U.S.C. §13901(a)-(c), 49 U.S.C §14102(a), 49 C.F.R. §376.12(c), 49C.F.R. §376.22, 49 C.F.R. §390.5.
19. Fed. Motor Carrier Safety Admin., Part 390 (Question 17), www.fmcsa.dot.gov/regulations/title49/section/390.5 (July 29, 2009).
20. Id.