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Max Trucking v. Liberty Mut. Ins. Corp. – Employees or Independent Contractors?

The question of whether a worker is an independent contractor or an employee is a critical one in many Atlanta workers’ compensation cases. truckdriver1

While employees are entitled to the protection of workers’ compensation benefits in case of a job-related injury, independent contractors are not. Unfortunately, many unscrupulous employers wrongly classify employees as independent contractors in order to avoid paying for the insurance. This can leave injured employees in an extremely tough spot, and it could result in severe fines and penalties for the employer. Still, some continue to do it because they are hoping to get away with it.

In the case of Max Trucking LLC v. Liberty Mut. Ins. Corp., a dispute arose between an employer and an insurance company regarding the classification of nearly two dozen truck drivers based in Michigan. The insurance company insisted the workers were employees and increased the company’s premium.

Although this was a Michigan-based case before the U.S. Court of Appeals for the Sixth Circuit, the issue of employee-versus-independent contractor is one that often arises in Georgia.

Some of the factors that may play into the determination are:

  • Instructions (who controls the time, place, manner?)
  • Training (who provides it?)
  • Hiring, Supervising, Paying Assistants
  • Hours of Work (who sets it?)
  • Premises (who maintains?)
  • Businesses and Travel Expenses
  • Furnishing of Tools/ Materials
  • Working for More Than One Firm at a Time
  • Right to Discharge/ Terminate
  • Significant Investment?C

Courts will look at these circumstances in their totality. Our Atlanta workers’ compensation lawyers know that no one factor is likely going to be deciding, and that was what the Max Trucking case revealed.

According to court records, the trucking company employs a staff of six dispatchers at its Michigan headquarters. Those dispatchers then act to find transportation jobs on various websites and contact a pool of more than 75 truck drivers to offer the jobs. Approximately 20 of those drivers are Michigan-based.

The company had an insurance policy to cover its six dispatchers, which it first purchased in 2006.

Five years later, the insurance company audited the trucking company, and determined that 16 to 18 of drivers in the “lease-to-buy” program (drivers leased company trucks with intention of eventual purchase) were in fact employees, not independent contractors, in the eyes of Michigan workers’ compensation law. On this basis, the insurer upped the premium.

The trucking company fought back, filing a lawsuit seeking declaratory judgment that its workers were in fact independent contractors – not employees. Insurer counterclaimed for $102,000 in unpaid premiums.

The case went to a bench trial in early 2014. The company’s general manager indicated there were three types of drivers: Those who owned their trucks outright, those who were leasing/ purchasing truck from a third party and those who were in the lease-to-by program offered by Max Trucking.

Under the lease-to-buy program, company bought the trucks and then leased them to drivers with the understanding that at the end of the lease term, drivers could buy those trucks for $1. Drivers paid a $4,000 down payment and a monthly payment. Officially on paper, the company owned the trucks, and held all the titles and loans.

The district court noted these drivers were essentially economically dependent on the company to operate as truckers, as they would not have otherwise had the credit to purchase such an expensive vehicle.

District court ruled the drivers were in fact employees, even though they:

  • Could decline work
  • Could incur individual financial loss
  • Made a significant financial investment in vehicle purchase
  • Receive all tax deductions and depreciation of vehicles on their personal tax returns

Although these things would all go toward indicating an independent contractor status, the court looked at the relationship in its totality. Here, the court ruled the drivers were employees because they performed a service in the course of business, and they did not maintain a separate business, hold themselves out to render services to the public and were not employers themselves.

For information on Atlanta work injury compensation, contact J. Franklin Burns, P.C., at 1-404-303-7770.

Additional Resources:

Max Trucking, LLC v. Liberty Mut. Iss. Corp., Sept. 21, 2015, U.S. Court of Appeals for the Sixth District

More Blog Entries:

Work Injuries Not Properly Reported by Poultry Processing Plant, OSHA Says, Sept. 29, 2015, Georgia Work Injury Lawyer Blog