Truck Law

A Transportation Law Blog from TransportationAttorneys.NET

Month: June, 2015

California Labor Commission rules Uber driver is an employee, not contractor

by G. Spencer Mynko, Esq.

Here at Transportation Attorneys, we pay close attention to legal developments and major cases that can have a direct impact on the trucking and transportation industry.  Uber is an American international transportation network company headquartered in San Francisco, California. It develops, markets and operates the Uber mobile app, which allows consumers to submit a trip request which is then routed to sharing economy drivers.  Recently, the California Labor Commission ruled that Uber drivers have been misclassified as Independent Contractors: they are really employees. While this business may not seem to have much in common with motor carriers hauling freight, I believe there are important issues regarding misclassification that will be decided by California courts involving this case that will affect the law regarding the distinction between Independent Contractors and Employee drivers.

Recently, a California Labor Commissioner concluded that an Uber driver was misclassified as an independent contractor, and therefore was an employee. San Francisco resident Barbara Berwick filed a Labor board complaint against Uber alleging that the company misclassified her as an independent contractor, therefore making her entitled to Worker’s Compensation benefits, unemployment benefits, over time, and other protections associated with being an employee. The commission awarded Ms. Berwick $4,152.20 in employee expenses, including mileage reimbursements, toll charges and interest. Uber has appealed the ruling in Superior Court
Of course, Uber treats their drivers as independent contractors, and probably for good reason.

Uber drivers choose when to work, when to start working and when to finish working. Their smart phones receive a message from a remote center that someone needs a ride. You can accept or reject as many rides as you wish. Once each ride is completed, uber deposits a pre-negotiated fare rate into your bank account. You are responsible for your car, gas, maintenance, and insurance. Obviously, you get to use your car for personal purposes as you like.

Uber requires their drivers to pass a background check, their car has to be reasonably new, and they have to carry a 1 million dollar insurance policy. If your passengers are dissatisfied with your your service, you run the risk of getting no more assignments.
In Berwick’s case, Uber argued that it is just a “technological platform” for private vehicle drivers to facilitate private transactions, that drivers are independent contractors, that Uber has no control over the hours drivers work, and that the company does not have to reimburse drivers for any “expenses related to operating their personal vehicles.”

But the labor commission disagreed and found that Berwick is in fact an employee of Uber, saying, “Without passengers such as Plaintiff [Berwick], Defendant’s [Uber’s] business would not exist.” Relying on precedent that applied to cabdrivers and pizza delivery employees, the commission ordered Uber to reimburse Berwick for 6,468 miles she drove while working as an Uber driver, at a rate of $0.56 per mile. Berwick was also awarded toll charges of $256.00, and $274.12 in interest.
The hearing officer applied California’s legal test for distinguishing between an employee and an independent contractor, concluding that a Berwick, was an employee. California presumes that workers are employees unless the hiring party can show the workers are independent contractors. The hearing officer concluded that drivers were integral to Uber’s business, notwithstanding the company’s contention that all it did was generate a lead for the driver and facilitate a ride for the passenger. California presumes that workers are employees unless the hiring party can show the workers are independent contractors. According to the hearing officer, Uber is “in business to provide transportation services to passengers.”  The hearing officer said that, by obtaining the clients who needed the driver’s services, Uber “retained all necessary control over the operation as a whole,” making the driver Uber’s employee under California law. In essence, without drivers, Uber would not exist.

The ruling sets up companies like Uber to be responsible for things like Social Security, health care and other benefits. The Los Angeles Times reports that just in California, if Uber drivers were classified as employees, they’d have to be reimbursed for gas, tolls, insurance, unemployment benefits, workers’ compensation and Social Security. Whatever happens with Uber’s appeal of the commission’s ruling, more challenges are on the way. A site for drivers involved in legal challenges against the company says a hearing for a class certification of one lawsuit will come in August.
Count on this ruling to inspire a lot of people, particularly in California, to file copycat claims seeking benefits of employment, such as overtime or workers’ compensation payments.
Why should trucking companies be concerned about this? In my opinion, it represents further successful attacks on the Independent Contractor business model. Consider the Uber Driver – then consider the Owner-Operator truck driver – don’t they seem remarkably similar? As a trucking company, don’t you rely on making the same arguments Uber made to the labor commissioner to prove your drivers are Independent contractors? I find the similarities to be striking.

However their may be a happy ending: Uber is going to appeal this ruling and fight back hard. If Uber is successful at overturning this ruling and others like it, and if they are successful at convincing the courts that their drivers truly are Independent Contractors, then trucking companies will be able to make those same arguments and hopefully reverse the tide that has so damaged the Independent Contractor business model for California trucking companies. 

You can count on us to closely follow this matter as it makes it way through the courts.

We here at Transportation Attorneys can help you with your Independent Contractor business model and your ability to withstand  the toughest scrutinization of anyone alleging your company is misclassifying its drivers.

Contact Transportationattorneys.net today!

Recent Legal Developments regarding Misclassification of truck drivers as Independent Contractors.

by G. Spencer Mynko, Esq.

Here at Transportation Attorneys, we pay close attention to legal developments and major cases that can have a direct impact on your trucking company. Please read this article for recent developments in the ongoing misclassification war being waged against California trucking companies and Owner Operators. 

The Pac Anchor case denied review by the United States Supreme Court.   As most of you who read my articles already know, the Pac Anchor case involved The California Attorney General suing Pac Anchor Transportation, Inc. alleging that the trucking company violated the Unfair Competition Law (UCL) by misclassifying its truck drivers as independent contractors.  People ex. rel Harris v. Pac Anchor Transportation, Inc., 59 cal. Fourth 772 (Cal. 2014). The Attorney General argued that Pac Anchor Transportation gained an unfair advantage over competitors by avoiding Worker’s Compensation insurance, not paying unemployment insurance, and failing to pay drivers minimum wage. Pac Anchor Transportation argued that The California labor laws were preempted by the Federal Aviation Administration Authorization Act (the “FAAAA”). Pac Anchor Transportation prevailed at trial, but the Attorney General appealed and the decision was reversed on appeal. This went all the way to the California Supreme Court which held that there was no federal preemption of California labor law. Pac Anchor Transportation petitioned the United States Supreme Court to review this matter, but the US Supreme Court declined to review it and therefore Pac Anchor is law of the land.

Taylor v. Shippers Transport Express, Inc. is a class-action lawsuit brought by Los Angeles port truckers against Shippers Transport Express, Inc. and SSA Marine, Inc. where the drivers claim they were misclassified as independent contractors. Rather than fight this out, the case has settled for $11 million. A California federal District Judge has approved the settlement, which includes $4.9 million in attorneys fees. This settlement doesn’t surprise me considering how hostile California is to the independent contractor business model in trucking.

Vasquez v. Sterling Express Services, Inc. , Los Angeles County Superior Court.   In another California port class-action case, two Los Angeles and Long Beach drivers filed a class action lawsuit against their former employer, Sterling Express Services, Inc. alleging that they were misclassified as independent contractors, and that Sterling Express Services, Inc. improperly deducted truck lease, fuel, registration, parking and other fees from the drivers pay . Also, The drivers claim they did not receive overtime benefits, timely wage payments, and if they rejected assignments, they suffered retaliation.

Hub Group Trucking. Hub Group Trucking is the drayage  operation of the logistics provider The Hub Group. In September 2014, Hub Group announced it was abandoning its owner operator business model in California port trucking, due to the unfriendly business and legal climate in California regarding the use of Independent Contractors as truck drivers
How will your company survive an EDD audit or misclassification lawsuit?

In California, whether a worker is an employee or an independent contractor depends upon application of factors contained in California case law and the California Unemployment Insurance Code. Courts look to factors such as theright to control the details of the work. Even if the principal does not exercise control, as long as it has the right to direct and control the manner and means by which the work is performed, the worker will be considered an employee.

Courts will also consider whether the worker has a separately established business. When individuals hold themselves out to the general public as available to perform services similar to those performed for you, it is evidence that the individuals are operating separately established businesses and would normally be independent contractors.

Courts consider whether the worker is free to make business decisions which affect his or her ability to profit from the work. If an individual has the ability to enjoy profits or suffer losses, the courts are more likely to consider that person an independent contractor.

Courts consider whether the individual has made a substantial investment that would subject him or her to financial risk of loss. A huge consideration in this test is whether the independent contractor owns their own truck. Generally, independent contractors furnish their own tools, equipment, and supplies.

We here at Transportation Attorneys are experts at the distinctions between independent contractors and employees. I urge you to contact us so we can help you evaluate your risk of being held liable for misclassification of drivers. Now is not the time and California is not the place where you want to take chances regarding this.

We hope that once you utilize Transportation Attorneys to help you get your IC agreements and business model set up, you’ll enjoy many miles of trouble-free trucking. Worker misclassification is a big deal in California.  Trucking companies who use independent contractors should carefully review their contracts and practices in order to comply with the law.  We are one of the few law firms that focuses on trucking, transportation and logistics with the knowledge and experience to competently guide you through these ever present hazards.  We are very experienced in dealing with the distinctions between independent contractors and employees.

We here at Transportation Attorneys can help you with your Independent Contractor business model and your ability to withstand  the toughest scrutinization of anyone alleging your company is misclassifying its drivers.

Contact Transportationattorneys.net today!

Protect your Trucking Company from Piercing of the Corporate Veil

by G. Spencer Mynko, Esq.

Trucking is a risky business. Disaster looms around every corner and the consequences of negative events can destroy companies and the livelihood of their owners. This rings true for large trucking companies and individual owner operators: anyone involved in trucking and transportation needs to take steps to protect themselves from overwhelming liability. The most common way trucking companies, including owner operators, accomplish this is by forming a corporation or limited liability company (LLC). The reason for this is so the owners won’t be held personally liable for business debts the corporation is unable to pay.

However, courts will sometimes hold a corporation’s owners and shareholders personally liable for business debts. This is called “piercing the corporate veil”.  Corporations enjoy a “veil” of limited liability, but this can be lifted if a court decides the owner/shareholders are not entitled to corporate protection. Therefore, you need to be asking yourself if you could be personally liable for your business debts and are you taking all the necessary steps to prevent that from happening?

Corporations are legal entities and are separate from the people who own them.The major advantage of forming a corporation is the owners have limited personal liability for company debts. Usually, Corporation owners/shareholders cannot be held personally responsible for business debts. However, courts can ignore the limited liability status of the corporation and hold its officers, directors and shareholders personally liable for its debts. As stated above, this is called “piercing the corporate veil”. Small corporations are at greatest risk for having their veils pierced. “Closely held corporations” – corporations owned by one or just a few people – are most likely to get their veils pierced.

When a corporate veil is pierced, the owners/shareholders can be held personally liable for corporate debts. When this happens, creditors can go after the owner’s home, bank account, investments, and any other assets to satisfy the corporate debt. Therefore, it is critical to understand when a court will pierce the corporate veil.

So, when do courts pierce the corporate veil?

One: there is no true separation between the company and its owners. If the owners fail to maintain formal legal separation between their business and their personal finances, the corporation is just a sham and the owners are personally operating the business as if the corporation didn’t exist. In this situation, the corporation is the “alter ego” of its owner(s).  Examples of this include an owner paying personal bills from the business checking account, ignoring legal formalities that a corporation must follow (such as recording important corporate decisions in the minutes of a meeting), not holding shareholder meetings (even if there is only one shareholder), and generally not acting like a corporation. In these situations, a court could decide that the owners are not entitled to limited liability protection.

Two: fraudulent or wrongful conduct by the company. If the company’s owners acted recklessly or dishonestly, a court could decide that limited liability protection should not apply.

Three: The companies creditors suffered an unjust cost. In the event a corporation is the “alter ego” of its owner, and the company’s actions were wrongful or fraudulent, a court will try to prevent injustice or unfairness by piercing the corporate veil.

Factors courts consider when piercing the corporate veil include:

One: whether the corporation engaged in fraudulent behavior.

Two: whether the corporation failed to follow corporate formalities.

Three: whether the corporation was adequately capitalized and had enough funds to operate.

Four: whether one person or small group of people were in complete control of the corporation.

Again, small corporations are particularly vulnerable to piercing. Owner operators need to be particularly concerned about this. Even though you are the sole owner and shareholder of the corporation, you still need to follow corporate formalities. Specifically, you need to hold annual meetings of directors and shareholders, keep accurate and detailed records of important decisions, adopt company bylaws, and abide by those bylaws.

Do not commingle assets. The corporation should maintain its own bank account and the owner should never use the company account to pay for personal expenses.

You can protect yourself against a court piercing your corporate veil by:

Following the rules for forming and maintaining a corporation.

Maintaining a separate bank account for the corporation.

Do not use corporate assets for personal use.

Making a reasonable initial investment in the corporation.

Do not personally guarantee corporate debts.

Do not use the corporation for illegal, fraudulent or reckless acts.

Do not commingle personal assets with corporate assets.

Letting the world to know they are dealing with a corporation. Put “inc.” On business cards, letterhead, invoices, email, etc. when signing company documents, make it clear you’re doing so in your representative capacity; e.g.: president, vice president, secretary, etc.

Transportation attorneys regularly helps trucking companies, from large carriers to owner operators, with all corporate matters. We are happy to set your corporation up, and advise you on issues regarding corporate governance and best practices for your corporation. No matter how big or how small your business is, if you are in trucking, you should be incorporated!

Contact Transportationattorneys.net today!

Defending against Workers Compensation Claims: The AOE/COE Defense

by G. Spencer Mynko, Esq.

Here at Transportation Attorneys, we regularly get calls from trucking companies who are being sued in a claim for Worker’s Compensation benefits. The typical scenario is where a current, or more likely, former Driver files a claim at the Worker’s Compensation Appeals Board (WCAB). Of course, we usually deal with situations where the driver was treated as an independent contractor, and therefore no Worker’s Compensation insurance was in place. As is always the case, the Motor Carrier quickly points out that because the driver was an Independent Contractor, they were not obligated to secure Workers’ Compensation insurance. Nonetheless, that didn’t stop the “Independent Contractor” from trying to hold the trucking company liable for his or her work injuries. We regularly advise and defend companies who find themselves in this very situation.

One of the potent weapons we have in our legal arsenal to fight such claims is an AOE/COE hearing. AOE/COE stands for Arising Out of Employment and in the Course Of Employment. Basically, for an injury to trigger benefits in the Worker’s Compensation system it has to ” arise out of employment”, and occur in the “course of employment”.  In other words, the injury must be “proximately caused by employment.”  However, in the case of an independent contractor, there is no employer – employee relationship. So “employment” does not exist between the principal and the independent contractor driver, and therefore if the independent contractor was injured in the course of his work, his or her injuries did not arise out of or occur in the course of employment. Simply put, Since the independent contractor was not employed by the Motor carrier, his or her Worker’s Compensation claim should be dismissed.

The way we handle this is to promptly set a date for an AOE/COE hearing in front of the Worker’s Compensation Judge. At this hearing, we will make arguments and put on evidence as to why the injured worker is actually an independent contractor, and therefore not entitled to Worker’s Compensation benefits. The way we do this is to analyze the specific facts involving the independent contractor and his relationship with the motor carrier. We then apply the Borello factors (the legal test used to determine if someone is an independent contractor or employee) to the facts of the case in front of us, and hopefully convince the judge that the driver is truly an independent contractor and therefore not entitled to benefits. If we win this argument, the case/claim is automatically dismissed. (Of course, the applicant – the injured worker making the claim – could appeal that decision). However, if the applicant is unsuccessful in the appeal or, does nothing further, the case will be dismissed for good. On the other hand, if the judge decides that the driver was misclassified as an independent contractor, then the motor carrier is on the hook for the driver’s injuries. This includes being responsible for all medical treatment (past and future) and any disability (past and future).

Of course, The battle will be fought over whether the driver was properly classified as an independent contractor. The driver’s lawyers will argue vigorously that the driver was a common-law employee who was misclassified as an independent contractor, and therefore entitled to benefits. We will argue vigorously that the driver truly is an independent contractor and therefore has no rightful claim against the motor carrier. Be advised that Worker’s Compensation judges are extremely experienced in making these determinations. It has been our observation that Worker’s Compensation judges abhor uninsured employers and will look to hold the motor carrier responsible for the drivers injuries. Again, this is why it is so important that you are careful in classifying drivers as independent contractors, because at the Worker’s Compensation Appeals Board, it could make the difference between owing  nothing and owing hundreds of thousands of dollars

And just like EDD, the Workers Compensation Appeals Board Judge will scrutinize the relationship you have with your drivers to determine if they have been misclassified.  (Please refer to my prior articles where I discuss that process in-depth).

We hope that once you utilize Transportation Attorneys to help you get your IC agreements and business model set up, you’ll enjoy many miles of trouble-free trucking. Worker misclassification is a big deal in California.  Trucking companies who use independent contractors should carefully review their contracts and practices in order to comply with the law.  We are one of the few law firms that focuses on trucking, transportation and logistics with the knowledge and experience to competently guide you through these ever present hazards.  We are very experienced in dealing with the distinctions between independent contractors and employees.

We here at Transportation Attorneys can help you with your Independent Contractor business model and your ability to withstand  the toughest scrutinization of anyone alleging your company is misclassifying its drivers.

Contact Transportationattorneys.net today!