Truck Law

A Transportation Law Blog from TransportationAttorneys.NET

Month: September, 2015

Current State of the Law on Independent Contractor Drivers

by G. Spencer Mynko, Esq.

What is the current state of the law on the Independent Contractor Drivers?  This is the first article in a series where I will discuss recent legal developments and new case law that directly impacts trucking companies that use independent contractor drivers.
Any California trucking company who utilizes Independent Contractor drivers needs to understand that they are a target for misclassification accusations and are at risk for audits, lawsuits, and even criminal charges.  Therefore, and now more than ever, trucking companies need to have clear understanding of the legal climate in California regarding independent contractor drivers and what the case law has to say about this critical issue.  2014 has been a very important year and many important cases have been decided by California state and federal courts.  What the courts have said on what is and what isn’t an Independent Contractor Truck Driver is something every trucking company needs to understand.

So you probably want to know, based on the recent legal developments, what do I have do to avoid an accusation of misclassifying employee drivers as independent contractors. The answer unfortunately is not simple.

The problem peculiar to California that makes this analysis so difficult is the law in California tells you what not to do instead of what to do.  There is no clear formula that a trucking company can follow to be certain it is properly classifying its drivers as Independent Contractors.  Historically, California has presumed that anyone who receives compensation for services is an employee.  Therefore, the burden has traditionally fell upon the prinicipal to prove that a worker is an Independent Contractor.  This deeply rooted  and long standing California tradition helps explain why the State (and its agencies like the Employment Development Department (EDD), the Department of Labor Standards Enforcement (DLSE), etc.) and the Courts are naturally suspicious and distrustful of trucking companies who classify their drivers as Independent Contractors.  In other words, when you tell an EDD auditor, Labor Board commissioner,  Administrative Law Judge, or any other state official, that your truck driver is an Independent Contractor, they think you are lying.  While that seems harsh, and cynical on my part, it sadly seems to be the case.

So where do we start?  In California, a person who provides services to another is presumed to be an employee.  EDD states that the basic test for determining whether a worker is an independent contractor or an employee is whether the principal has the right to direct and control the manner and means by which the work is performed. When the principal has the “right of control,” the worker will be an employee even if the principal never actually exercises that control.  See http://www.EDD.ca.gov/PDF_PUB_CTR/DE38.pdf.

Why is it so important to get it right?  The penalties for misclassification are very stiff.  California labor code section 2 to 6.8 imposes penalties on employers who willfully misclassify their employees as independent contractors. Will fullness classification is defined as “voluntarily and knowingly miss classifying that individual as an independent contractor.”  The penalties for violating section 2 to 6.8 include finds between $5000 and $15,000 per violation of the law. If the employer is engaged in a pattern or practice of violating this law, the fines are increased to between $10,000 and $25,000 per violation.  See http://www.leginfo.ca.gov/cgi-bin/displaycode?section=lab&group=00001-01000&file=200-244

How serious is the State of California taking this?  Very seriously, as evidenced by how aggressively its agencies like EDD and the Labor Commission is going after trucking companies. For example, in one specific case involving onetrucking company, the labor commissioner awarded 40 improperly classified drivers $4.3 million in back pay and penalities.  More than 500 complaints alleging misclassification were filed in 2013 and 2014 against trucking companies.  Finally, EDD is systematically, methodically, and very aggressively targeting trucking companies in audits alleging misclassification.

In my next installment, I will elaborate on the Right To Control test utilized by the courts and discuss the recent case law interpreting Right To Control.   And be advised:  The Right To Control test is a complicated legal analysis used by courts and administrative agencies, looking closely at ten separate factors: it is not simply a matter of common sense.  This is why it is so important to get sound legal advice on this critical matter. 

 

I urge any trucking company to contact Transportation Attorneys today so we can assess whether your company’s right to control its drivers puts you at risk for misclassification accusations.

 

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!

The Carmack Amendment – What You Need To Know About Cargo Claims

by G. Spencer Mynko, Esq.

The Carmack Amendment is a law applied to motor carriers by Congress in 1935.  It was adopted to achieve uniformity in rules governing interstate shipment.  The Carmack Amendment spells out rights, duties and liabilities of shippers and carriers when it comes to cargo loss. Rail and motor carriers are governed by the Carmack Amendment. The Carmack Amendment states that claimants have a minimum of 9 months from the date of delivery to file a freight claim and states that motor or rail carriers are liable for the full loss. It applies to shippers and carriers involved with interstate shipments of all commodities.
 
Plaintiff’s lawyers seeking recovery on behalf of their clients for cargo damage or loss incurred as a result of the interstate shipment of goods often file complaints alleging state law claims such as breach of contract, negligence and fraud. What Plaintiff’s counsel does not know is that such state law claims are preempted by a federal law known as the Carmack Amendment. The Carmack Amendment is a uniform national liability system for interstate carriers which provides certainty to both carrier and shipper. It specifically allows a carrier to require that all claims for loss or damage by a shipper be made in writing within nine months from the date of the loss. It also allows a carrier to limit its liability if all prerequisites have been met.
 
The Carmack Amendment Preempts State Law Claims
 
The Carmack Amendment is presently codified at 49 U.S.C. Section 14706 et seq. The courts have uniformly held that the Carmack Amendment preempts all state and common law claims and provides the sole and exclusive remedy to shippers for loss or damage in interstate transit. Hughes Aircraft v. North American Van Lines, 970 F.2d 609, 613 (9th Cir. 1992). The purpose of the Carmack Amendment is to provide

“. . .a uniform system of carrier liability that would provide certainty to both carrier and shipper by enabling the carrier to asses its risk and predict its potential liability for damages.”  The preemptive effect of the Carmack Amendment also applies to claims of damage or loss relating to storage and other services rendered by interstate carriers. Margetson v. United Van Lines, Inc., 785 F.Supp. 917, 919 (D.M. 1991). Causes of action for negligence, breach of insurance contract, breach of contract of carriage, conversion, intentional misrepresentation, negligent misrepresentation, and negligent infliction of emotional distress are all preempted by the Carmack Amendment.
How does Carmack work?
 
The Carmack Amendment holds the carrier liable for damages to the goods it transported, without proof of negligence, unless it can prove it was not negligent and/or one of the exceptions to liability applies.  Under the Carmack Amendment to hold a motor carrier liable for cargo damage, the shipper must prove that:

a)    The goods were in good condition when given to the shipper
b)    The goods were damaged when delivered (or weren’t delivered)
c)    The amount of damages
There are five exceptions outlined in the Carmack Amendment that a motor carrier can claim to deny liability for cargo damage:
1) an Act of God – weather, a tornado, flooding, acute driver illness
2) The public enemy
3) Act or Default of Shipper
4) Public Authority (the government)
5) The inherent vice or nature of the goods transported (my favorite)
 

The Carmack Amendment limits the motor carrier’s liability to the actual loss or injury to the property.  Courts have generally interpreted this to be the difference between the market value of the property in which it should have arrived at the destination, less the market value of the actual condition in which it arrives.Hence their is an implied duty of the customer to mitigate its damages: they cannot simply sit back idly and do nothing. They have to make the most of the damaged cargo. This is an important defense carriers need to be aware of.


A Carrier May Require That Claims Be Made In Writing Within Nine Months.
Given that the Carmack Amendment provides a shipper with the sole remedy for interstate moves, all conditions precedent to bring a civil action under the Carmack Amendment must be satisfied. In particular, a carrier may, by contract, require that a claim be made to it by a shipper within nine (9) months of the shipment and that a civil action be instituted within two (2) years after the denial of such a claim. 49 U.S.C. Section 14706(e). The nine (9) month limitation is a condition precedent to bringing a civil action. Consolidated Rail Corp. v. Primary Industries Corp., 868 F.Supp. 566, 577 (S. D. NY 1994). A cause of action will simply not accrue absent strict compliance with the claims limitation.
The purpose of a claim period is to provide the carrier with knowledge that the shipper will be seeking reimbursement. Taisho Marine & Fire Insurance Co. v. Vessel Gladiolus, 762 F.2d 1364 (9th Cir. 1985). There, the court held that the carrier’s actual knowledge of damage to the property did not negate the requirement that written notice be given within the nine (9) month period. The court granted the carrier’s motion for summary judgment on the ground that the shipper did not comply with the requirement that it file a written claim within 9 months. The main policy behind the nine (9) month claim period is to allow the carrier the chance to investigate the claim so as to protect its interest.
Carriers must incorporate these time frames (or their own more permissive standards) into the bill of lading or contract of carriage.  In a claim to carriers, the Carmack Amendment specifies that shippers must:
1)   Use written or electronic communication
2)   Include sufficient facts to identify the shipment or property involved
3)   Assert liability against the carrier for loss, damage or delay
4)   Demand a specified or determinable amount of money
Motor carriers can limit their liability under the Carmack Amendment.
Under the Carmack Amendment, a carrier can adopt a tariff that is applied to shipping rates based on the weight of goods, mileage required to transport, or the value of the goods.  Shippers may agree to a lower shipping rate if they agree to limit the carrier’s liability for the cargo. The Carmack Amendment provides that a carrier may limit its liability “to a value established by written declaration of the shipper or by a written agreement.” 49 U.S.C. §14706(f).

In order to effectively limit its liability, a carrier must:
  1. Maintain a tariff in compliance with the requirements of the Interstate Commerce Commission;
  2. Give the shipper a reasonable opportunity to choose between two or more levels of liability;
  3. Obtain the shipper’s agreement as to its choice of carrier liability limit; and,
  4. Issue a bill of lading prior to moving the shipment that reflects any such agreement.

Although the filing of a tariff alone will not limit a carrier’s liability, the above requirements are satisfied when a shipper is given a “reasonable opportunity” to accept or deny the carrier’s proposed limitation. Hughes Aircraft, 970 F.2d at 612. A “reasonable opportunity” means that the shipper had both reasonable notice of the liability limitation and the opportunity to obtain information necessary to make a deliberate and informed choice. In Schultz v. Auld, 848 F.Supp. 1497, 1505 (Idaho 1993), the court held that a signature on the contract evidencing an acknowledgment and receipt of the contract and its terms was sufficient evidence of a reasonable opportunity to select among liability limitations. In fact, one court has gone so far as to say that a signature on the bill of lading is not actually required in order to limit the shipper’s liability, but the shipper’s mere acceptance of the contract is sufficient. Johnson v. Bekins Van Lines Company, 808 F.Supp. 545, 548 (E.D. Tex. 1992).

How should motor carriers respond to a cargo claim?
 
Motor carriers essentially have three choices when faced with a claim that they caused damage to cargo.  They can either pay the full value of the cargo claim by the shipper, claim one of the five “outs” listed above , or pay under a proper limitation of liability.
If you want to take advantage of the protections carriers are afforded under the Carmack Amendment, or you find yourself being subjected to a cargo claim, Contact Transportationattorneys.net today so we can help protect you against future claims and minimize consequences in current claims.

IFTA and IRP Audits – Be Prepared!

by G. Spencer Mynko, Esq.

Here at Transportation Attorneys, we strive to stay abreast of recent and important legal decisions that affect the trucking and transportation industry. We recently were retained by a trucking company that ran afoul of the IRP (International Registration Plan) and was hit with a $31,000.00 fine. In this article I discuss both IRP and IFTA (International Fuel Tax Agreement) records requirements, and while being in compliance with one agency, won’t necessarily protect you from the other. 
Comprehensive and complete records you are the key to a painless and penalty-free audit. A system that accurately records miles traveled by unit by state protects you from additional assessments at audit, and avoids potential license revocation for noncompliance.  IFTA deals with fuel taxes, whereas, IRP concerns vehicle registration. Properly kept records can satisfy both agencies, but trucking companies need to be clear on what exactly those records are.
What records do you need?
Individual Vehicle Mileage Record (IVMR): A recommended source document under IFTA and IRP is the “Individual Vehicle Mileage Record” (IVMR) (Also referred to as a Individual Vehicle Distance Record (IVDR) in California. The IVMR is the original record generated in the course of actual vehicle operation and is used as a source document to verify the registrant’s application or fuel report for accuracy.
The IVMR/IVDR must show:
    1. Date of the trip (starting and ending);
    2. Trip origin and destination;
    3. Route of travel and/or beginning and ending odometer or hubometer reading of the trip;
    4. Total trip miles or kilometers;
    5. Miles/kilometers by jurisdiction;
    6. Unit number or vehicle identification number;
At the discretion of the base jurisdiction, the following information may also be required:
    1. Vehicle fleet number;
    2. Registrant’s name;
    3. Trailer number; and
    4. Drivers signature and/or name.
IVMR/IVDRs usually also contain space for drivers to record fuel purchase.
These daily reports should be accurately and legibly prepared. Both IFTA and IRP require reported mileage for the actual routes traveled by each vehicle for each trip.
Monthly, quarterly, and yearly recaps or reports are prepared from the IVMR/IVDR information. Computer summaries are not acceptable at face value and must always be supported by IVMR/IVDRs during an audit.
Distance records: Licensees under IFTA and IRP must keep detailed distance records showing operations on an individual-vehicle basis. For IFTA, these operational records should also contain:
  • Taxable and non-taxable fuel use;
  • Distance traveled for taxable and non-taxable use; and
  • Distance recaps for each vehicle for each jurisdiction in which the vehicle operated.
When recording the mileage of an apportioned vehicle, all movement ─ interstate and intrastate ─ must be included, as well as loaded, empty, dead-head and/or bobtail miles or kilometers. Distance must also be recorded when apportioned units are operated with trip permits.
Fuel Records:  IFTA licensees must maintain complete records of all motor fuel purchased, received, and used while conducting their business. Separate totals must be compiled for each motor fuel type. Also, retail fuel purchases and bulk fuel purchases must be accounted for separately.
Fuel records should include:
  • The date of each receipt for fuel;
  • The name and address of the person from whom the fuel was purchased or received;
  • The number of gallons or liters received;
  • The type of fuel; and
  • The vehicle or equipment into which the fuel was placed.
When an IFTA-qualified vehicle is operated under a trip permit, fuel purchases do not need to be recorded and the fuel purchases do not need to be reported on the quarterly tax return. A copy of the trip permit must be retained.
Tax paid retail fuel purchases: Retail purchases must be supported by a receipt or invoice, credit card receipt, automated vendor generated invoice or transaction listing, or microfilm/microfiche of the receipt or invoice. Any receipts that have been altered or have signs of erasures are not accepted for tax-paid credits unless the licensee can demonstrate the receipt is valid.
Retail fuel purchase receipts must identify the vehicle by the plate or unit number or other licensee identifier because distance traveled and fuel consumed may be reported only for vehicles identified as part of the licensee’s operation.
Acceptable receipts must include:
  • Date of purchase;
  • Seller’s name and address;
  • Number of gallons or liters purchased;
  • Fuel type;
  • Price per gallon or liter or total amount of sale;
  • Unit numbers; and
  • Purchaser’s name.
 
Mistakes to avoid:
 
Missing or gap miles. This may occur if there is no record of where a vehicle was during a specific time frame. If the end-of-day and next-day numbers do not match, you have “gap” miles. A driver may mistakenly think that personal miles do not have to be recorded, or the vehicle may have been leased and the leasing miles were not documented. All movement – loaded, empty, deadhead, and/or bobtail distance – must be recorded.
 
Missing or illegible fuel receipts. Photocopies are allowed, but not always encouraged by states. When you have a fuel receipt that is difficult to read, make a photocopy right away. Enter the city and state on the fuel purchase record.
Missing information on the driver trip report (IVMR). When an auditor finds an incomplete driver trip report, he/she has the authority to ask for secondary documents to substantiate your tax claims. This could expose you to more scrutiny and potential liability than you’d like.
How long records have to kept:
IRP requires the licensee to preserve the records their apportioned registration application is based upon for the current application year, plus the three preceding mileage years.
IFTA requires the records used for the quarterly tax return to be retained for four years from the return due date or filing date, whichever is later, plus any time period included as a result of waivers or jeopardy assessments.
If a licensee fails to provide the required records for audit, the four year retention requirement is extended until the required records are provided. A good recordkeeping system is well worth the time and effort to implement and maintain. The quality of your IRP and IFTA records and how you manage them will directly affect the ease or difficulty of an audit. Well managed records will impact your bottom-line by reducing penalties and assessments
We here at Transportation Attorneys can help you with your IRP and IFTA issues. If you or your trucking company are facing substantial fines and penalties, call or contact us for help so we can discuss you rights and remedies.