Truck Law

A Transportation Law Blog from TransportationAttorneys.NET

Category: Trucking

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!

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.

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!

Obstructive Sleep Apnea

by gspencermynko

DON’T RELY ON YOUR DRIVER TO BE HONEST ABOUT HIS OR HER SLEEP APNEA PROBLEM
It’s well established that up to 40% of truck drivers have sleep apnea. A recent study out of Australia established that 41% of 517 drivers tested had obstructive sleep apnea(OSA). Yet only 4.4% reported a diagnosis of OSA. Another study revealed that drivers are more likey to under report daytime sleepiness. http://www.huffingtonpost.com/2012/09/04/sleep-apnea-truck-drivers-symptoms-fatigue-sleepiness_n_1844200.html. Truckers are well aware that reporting symptoms of OSA such as daytime somnolence could result in job loss. Accurate diagnosis of OSA often requires accurate information from the driver. If your drivers are not forthcoming about OSA symptoms, the consequences could be disastrous for your organization. Therefore it is imperative that you protect your company from the widespread and serious liability of untreated OSA. Please call today and take the necessary steps to protect your organization, your drivers and the public from OSA related accidents.
Obstructive Sleep Apnea (OSA) among Truck Drivers is now widely recognized as a major public health and safety issue. Anywhere from 28 to 40% of CDL holders suffer from sleep apnea, with approximately 40% of that group considered to have severeOSA. The common denominator in OSA related truck accidents is drowsy drivers causing death and mayhem on the road.
While the US Congress and State Legislatures are predictably behind the curve on this issue, Plaintiff’s Lawyers are predictably at the cutting edge and making law by filing lawsuits on behalf of victims injured or killed by drivers with OSA. Consider this case: http://www.prweb.com/releases/2011/12/prweb9043195.htm . Here, the trucking company settled a lawsuit for $3.25 million and acknowledged that their driver’s OSA was the cause of John Lindsay’s death. The precedent has been set: Trucking Companies can be held liable for damages caused by driver OSA.
Considering the enormous scope of the problem and the enormous potential damages that occur when big rigs crush whatever is in their way, responsible Trucking Companies have no meaningful choice but to protect themselves against such onerous and devastating liability. Indeed, now is the time for Trucking Companies to get ahead of the curve and protect themselves from financial ruin and the public from dangerous drivers. No longer can companies simply rely on drivers and the doctors who sign off on their well-being as adequate assurance that they do not suffer from OSA.
Most certification examinations of commercial drivers are simple, and relatively few drivers are disqualified. If these examinations are not done properly, however, the public can be exposed to potentially unqualified drivers. Should an accident occur, the physician who examined the driver may be found liable. In performing driver certification examinations, the physician’s primary responsibility is to the public. The Federal Motor Carriers Safety Regulations and supporting documents provide guidelines for the conditions that may be disqualifying and the conditions that may allow only temporary certification until better medical control is achieved. Some medical diagnoses, such as insulin-requiring diabetes mellitus, are automatically disqualifying, no matter how well the disease is controlled. Other conditions may require documented clearance from a specialist before certification is granted
Please act now and contact Transportation Attorneys to make sure your company is protected against driver OSA.


G. Spencer Mynko, Esq.
Attorney at Law
http://www.transportationattorneys.net
8311 Haven Avenue
Suite 220
Rancho Cucamonga, CA 91730
t: 909-480-3127
f: 800-709-7051
gspencermynko@gmail.com
spencer@transportationattorneys.net