April 21, 2010
Truck Driver’s Employment Status for Payment of No-Fault Benefits Held to be Jury Question
In a dispute between two insurers regarding priority for the payment of no-fault benefits, the Court found that there was a question of fact for the jury regarding whether the injured truck driver claimant was an employee or an independent contractor.
In Bristol West Ins. Co. v Amerisure Mutual Ins. Co., Unpublished Opinion per curiam of the Court of Appeals, decided Sept. 24, 2009 (Docket No. 286332), Bilail Hassan was injured in an accident while driving a truck for TJ Truck Company. Bristol West was the personal insurer for Mr. Hassan, and Amerisure insured TJ Truck. The issue was regarding the priority of payment of Hassan’s Michigan automobile no-fault insurance benefits. If Hassan had been an independent contractor, then the payment of his no-fault benefits would have been the responsibility of Bristol
West, pursuant to MCLA 500.3114(1). If Hassan was instead an employee of TJ Truck, then his no-fault benefits would have been the responsibility of Amerisure, pursuant to MCLA 500.3114(3).
The Court first recognized that an independent contractor is one who carries on an independent business by contracting to do work without being subject to a right of control by the employer as to the manner in which the work is performed. Instead, the employer’s control is limited to the requirements concerning the results which are accomplished.
The Court then discussed and applied the “economic reality” test to evaluate whether Hassan had been under the control of TJ Truck, and was thus their employee, or if he had instead worked as an independent contractor. The “economic reality” test examines the following factors: (1) control over the worker’s duties, (2) payment of wages, (3) right to hire, fire, and discipline, and (4) performance of the duties as an integral part of the employer’s business toward the accomplishment of a common goal. This list is not exhaustive, and no single factor is itself controlling. The Court is required to consider the totality of the circumstances surrounding the work performed.
In Mr. Hassan’s case, the Court listed factors which favored a finding that he had been a subcontractor. These included testimony that he had been free to reject assignments from TJ Truck, and had in fact rejected assignments on three occasions. There was also testimony that TJ Truck did not have a right to hire, fire, or discipline Mr. Hassan. Finally, the Court noted that no social security or other taxes were withheld from his pay, and his income taxes were reported using an IRS 1099 form.
However, there was also testimony supporting an argument that Hassan had been an employee of TJ Truck. Hassan had testified that he believed he could be fired if he rejected loads, and that he was required to use delivery routes as directed by the company. TJ Truck had leased the truck which was used by Hassan, and also provided him with tools. It was also reported that Hassan was reimbursed for expenses by TJ Truck, and that he did not drive for any other trucking companies.
Furthermore, Hassan had completed an employment application before working for TJ Truck. After the accident TJ Truck had completed a Michigan Wage, Salary and Benefits Verification form which referred to Hassan as an employee, and identified the company as his employer. The Court also noted that the delivery of cargo by Hassan had been an integral part of TJ Truck’s business.
In reversing the trial court’s decision that Hassan had been a subcontractor, the Court of Appeals noted that the trial court had failed to give weight to numerous factors supporting the argument that Hassan had been an employee. The Court also discussed the policy behind placing the burden of providing no-fault benefits on the insurers of commercial vehicles, citing State Farm Mut. Ins. Co. v Sentry Ins., 91 Mich App 109, 114-115 (1979).
In the face of evidence which supported a finding that Hassan was an employee, and contrasting evidence supporting that he was an independent contractor, the Court of Appeals determined that there was a factual dispute requiring that the case be remanded back to the trial court to allow a jury to make a determination regarding Mr. Hassan’s employment status.
One issue the Court did not discuss was whether a Contractor Lease Agreement had existed between TJ Truck and Mr. Hassan. The lack of mention of any such agreement most likely indicates that a formal written agreement between them did not exist. However, in similar trucking-related cases, the existence of such an agreement can significantly impact the determination of whether the truck driver is an employee or an independent contractor.
In National Union Fire Ins. Co. of Pittsburgh, Pennsylvania v Auto Owners, Unpublished Opinion per curiam of the Court of Appeals, decided Sept. 6, 1996 (Docket No. 177355), the Court reviewed a written lease agreement between owner/operator truck-driver claimants and the company they leased their truck to, and drove for, to determine whether they had been employees or independent contractors for purposes of the Michigan No-Fault Act. After first examining the “economic reality” test, the Court identified numerous provisions of the agreement which demonstrated that the claimants had in fact been independent contractors rather than employees:
A. The agreement consistently referred to the claimants as independent contractors, not employees;
B. The agreement explicitly provided that it did not create an employer/employee relationship;
C. The claimants were responsible for all costs associated with the equipment, including motor fuel, oil, tires, repairs, taxes and assessments on the equipment, base plates, and fuel permits, etc.;
D. The claimants were not required to transport tendered freight and could accept or reject any freight;
E. The claimants independently determined the manner in which the tendered freight was delivered;
F. The claimants were permitted to hire their own employees and were solely responsible for their employees’ compensation, direction and discharge;
G. The agreement provided that the company would compensate the claimants on a load-by-load basis;
H. The company did not withhold any state or federal taxes from its compensation to the claimants;
I. The agreement was terminable at will by either party; and
J. The company did not carry Workers Compensation insurance on the claimants.
These provisions from the contractor lease agreement demonstrated a lack of control by the company concerning how the claimants performed their duties, and established that the claimants’ dealings with the trucking company were conducted at arms length. As a result, the
Court held that they had in fact worked as independent contractors to the company, rather than as employees.
When faced with a need to determine whether a driver was an employee or a subcontractor, the existence and substance of such an agreement between the driver and the trucking company can provide valuable evidence to resolve that dispute.