Unemployment Insurance - Worker Classification

Truckers (Motor Carriers and Contract Operators)

Part 1 - Direction and Control

Cases demonstrating the test for direction and control

Robert K Jeffers v. C R England Inc (LIRC September 19, 2008)

From November 2006 through January 2007, Robert Jeffers was trained by his employer, C. R. England. Effective February 2, 2007, Jeffers entered into a contract to provide driving services for England. This contract was an independent contractor agreement.

Due to accidents in which Jeffers was involved on April 11 and 14, 2007, England terminated this agreement.

Jeffers initiated a claim for benefits on May 7, 2008, after his discharge from a restaurant which had employed him since his separation from England. The issue is whether the amounts Jeffers earned performing services for England during the base period for this claim are required, because he performed these services as an employee rather than as an independent contractor.

Although the record shows that Jeffers satisfied seven of eight requirements stated in Wis. Adm. Code § DWD 105.03, it does not show that he met the requirement that he hold the truck he used to perform driving services for England under a bona fide lease arrangement with an entity other than England.

The director of England's independent contractor division testified that Jeffers did not own the tractor he used to drive for England, but leased this truck from Horizon Truck Sales and Leasing, an entity separate from England. Jeffers testified, however, that he signed the lease at one of England's facilities and believed that the lease was with England. The commission credited Jeffers, given that England stated in response to question #1 on a department "Employment Status Questionnaire" it completed May 23, 2008, that Jeffers did not own the truck or "hold [it] under a bona fide lease arrangement with any person other than" England".

Since one of the factors stated in Wis. Adm. Code § 105.03(1) was not satisfied, the rule requires that the factors stated in Wis. Adm. Code § 105.03(2) be considered.

The record shows, and England concedes in its responses on the department's "Employment Status Questionnaire" form referenced above, that Jeffers was unable to negotiate with England to determine the method, frequency and regularity of payments made to him. In addition, the record shows that England required Jeffers to obey certain of its work rules or policies, including its accident and safety policy.

England failed to sustain its burden to show that Jeffers performed driving services free from England's direction and control, and therefore failed to rebut the presumption that Jeffers performed these services as an employee.

Even if England had shown that Jeffers was free from its direction and control, it did not show that Jeffers performed the subject driving services in an independently established trade, business or profession in which he was customarily engaged.

Although Jeffers was free to hire another driver and to refuse a load, he did not, as discussed above, own the truck he used to drive for England or hold it under a bona fide lease arrangement with an entity other than England.

Moreover, Jeffers did not satisfy any of the factors stated in 105.04(2). When he reported the second accident to England on April 14, 2007, he was directed not to drive the truck but to leave it parked, and someone from England would come to pick it up. Since Jeffers' livelihood as a driver relied upon this truck, which this incident established was not his asset and subject to his control but instead was controlled by England, Jeffers did not have a means of livelihood separate and apart from that gained from services he performed for England; a business which continued once the relationship with England was terminated; or an ownership interest in a business that Jeffers could sell or give away without restriction from England.

The record does not show that Jeffers was free from the direction and control of England, or engaged in an independently established business, and, as a result, by operation of Wis. Adm. Code Chapter DWD 105.03 and 105.04, Jeffers functioned as an employee of England, not an independent contractor, and the amounts he earned performing services for England during the base period should be factored into the computation of his benefit eligibility.

Thomas Parker v. DeBoer Transportation, Inc. (LIRC, February 1, 2007)

Thomas Parker worked as a driver for DeBoer Transportation. From September of 2005 through December 20, 2005, he worked as a company driver. On January 2, 2006, he entered into an agreement with another business to lease a truck and entered into an agreement with DeBoer to work as an independent contractor. Thereafter, Parker hauled the DeBoer's trailers and freight. Parker continued to perform services in accordance with the agreement until April 24, 2006, when DeBoer terminated the agreement.

The issue decided by the Labor and Industrial Review Commission (LIRC) was whether Parker was an "employee" of DeBoer for purposes of determining unemployment insurance benefit eligibility.

Parker leased a truck from a business other than DeBoer. Parker was responsible for the maintenance of the truck and the principal operating costs. He incurred personal expenses while performing the driving services. He performed the driving duties himself, although he could have hired other individuals to do the work under certain conditions.

DeBoer did not dictate the means and method of performing the driving services beyond requiring that Parker comply with all regulatory requirements. After Parker became a contract operator, Parker was free to accept or reject loads offered to him by DeBoer's dispatcher. Parker could determine which route to take for the delivery of the freight. Parker was free to determine the hours of work, and when to start and stop work, within the mandates of federal regulations. DeBoer could terminate the agreement upon five days notice while Parker was required to provide 30 days notice. Parker was paid per mile pursuant to a standard set by DeBoer.

LIRC held that Parker was not acting under DeBoer's direction and control.

Parker leased his truck from an entity other than the DeBoer. Parker was free to refuse any loads offered by DeBoer. The lease indicated that the Parker could use other drivers, although the other drivers had to be properly licensed and had to comply with state and federal requirements. For example, the other drivers were not allowed to exceed the hours of driving and work allowed by law. There is no evidence in the record to suggest that the Parker, after his DUI arrest, attempted to hire a replacement that the appellant rejected.

LIRC held that the evidence in the record supported a conclusion that Parker performed services in an independently established business.

The commission found that Parker performed services for DeBoer as an independent contractor and not an employee.

DWD v. LIRC and Dunham Express Corp. (Wis. Court of Appeals 2010)

Dunham Express provides package delivery services in Wisconsin. In 2000, Dunham began transitioning some of its drivers from "employee"to "contractor" status. Dunham developed a master lease agreement governing the relationship between Dunham and its "contract drivers". Dunham utilizes both "employee drivers" and "contract drivers" in its delivery services.

DWD audited Dunham for 2003 and 2004 and determined that Dunham was liable for unemployment insurance contributions for its contract drivers. An appeal tribunal affirmed the determination. LIRC reversed, deciding that the drivers were "contractors" rather than "employees".

LIRC explained that the drivers determined the details and means of their performance because it interpreted "routes and number of stops" to mean the series of roadways a driver would follow and rest times between pickups and deliveries, which drivers determined. LIRC found these interpretations more reasonable, observing that even though Dunham's bid sheets defined "route" as "the customer service group", not "specific highway or street routes of travel, which are determined by Contractor at Contractor's sole discretion", and the bid sheets appear to refer to "stops" as points of pickup or delivery, its master lease agreement refers to "rest stops" and "street and highway routes", thus supporting LIRC's interpretation.

The court of appeals disagreed, saying that if the rule meant "rest stops" or "street and highway routes", it would have used different wording than the words in the rule "routes and number of stops to be made during the haul". Because Dunham arranged routes and stops in preparing its bid sheets, the only reasonable finding, according to the court, is that the drivers did not determine the routes and number of stops to be made during the haul.

The court of appeals found that, overall, the drivers did not determine the details of their performance. Dunham required its drivers to use white vehicles bearing the Dunham logo. The court also concluded that a plain reading of "type of equipment" encompasses color and logo requirements and that type of equipment was determined by Dunham.

The court addressed the contention that the requirement for white vehicles bearing the Dunham logo was based on legal and customer requirements, and therefore must be disregarded under Chapter DWD 105.02. The court concluded that LIRC had not identified any specific legal or customer requirement that their drivers' vehicles must be white and bear the Dunham logo.

Dunham placed at least some restrictions on the drivers' freedom to assign other drivers to provide delivery services under their contracts and terminate those drivers' services. The control Dunham retained over approving or terminating sub-drivers weighed against a finding that the drivers determined the details of their performance. Applying the criteria listed under Chapter DWD 105.03(1) (e), and construing the provision in favor of employee status, the court concluded that no reasonable view of the evidence supported finding that this element of the test was met in favor of independent contractor status.

Because at least one element under Chapter DWD 105.03(1) was lacking, the court turned to the six factors in Chapter DWD 105.03(2). The court decided that under subparagraphs (c) and (e), Dunham required "decals, lettering, signs, emblems or other markings on the contract operator's motor vehicle for the purpose of advertising the carrier's name or business' and required the contract operator to obey any work rules or policies".

LIRC had found in its decision that Dunham required driver vehicles to bear the Dunham logo primarily for security and customer satisfaction purposes, but also for advertising purposes. DWD 105.03(2)(c) focuses only on whether the logo was required "for the purpose[s] of advertising" not whether advertising was the primary purpose. The court had no basis to reverse LIRC's factual finding that Dunham required drivers to bear its logo at least in part for advertising purposes, and therefore this factor weighed in favor of finding that the drivers were under Dunham's direction and control.

Dunham required the drivers to wear Dunham uniforms, drive white vehicles with Dunham decals, and lock their vehicles between stops. LIRC determined that these requirements were necessary for security concerns and some customer requests. However, Chapter DWD 105.03(2) (e) requires a focus on whether Dunham required drivers "to obey any work rules or policies". Dunham had not established that customer or legal specifications were the basis of these requirements, which would have called for application of Chapter DWD 105.02 in favor of contractor status. The court concluded that, based on this evidence, the only reasonable finding is that Dunham required the drivers to follow at least some work rules and policies, which weighed in favor of employee status under Chapter DWD 105.03(2)(e).

The court acknowledged that Chapter DWD 105.03 does not require that a certain minimum number of factors support a finding that individuals are free from an employer's direction and control, and that DWD had conceded that most of the factors weigh in favor of LIRC's decision. However, the court concluded that the factors that weigh in favor of a finding that the drivers were not free from Dunham's direction and control were significant enough that LIRC's determination that the drivers were free from Dunham's direction and control was unreasonable and contrary to the purpose of the unemployment act. On that basis the court found that the drivers were Dunham's employees under Wis. Stat. § 108.02(12)(c) and liable for unemployment contributions for their services as drivers.