R. H. Hummer, jr., Inc., : : arbitration

______________________________________________________________________

:

JOHN F. GRIFFITH, :

Claimant, :

:

vs. :

R.H. HUMMER, JR., INC., :

: A R B I T R A T I O N

Employer, :

: D E C I S I O N

and :

ATLANTIC MUTUAL INSURANCE, :

:

Insurance Carrier, :

______________________________________________________________________

STATEMENT OF THE CASE

John Griffith, claimant, has filed a petition in arbitration and seeks workers’ compensation from R.H. Hummer, Jr., Inc., employer and Atlantic Mutual Insurance, insurance carrier, defendants.

This matter came on for hearing before deputy workers’ compensation commissioner, Jon E. Heitland, on July 1, 2003 in Des Moines, Iowa. The record in the case consists of claimant’s exhibits 1 and 2; defense exhibits A through G; as well as the testimony of the claimant, Nancy Zmek, and Ronald H. Hummer, III.

ISSUE

1. 
   Whether there was an employer-employee relationship.
   

The undersigned having considered all of the testimony and evidence in the record finds:

The claimant, John Griffith, age 43, worked as an over the road truck driver. He began working for the predecessor of the defendant-employer in March of 2001.

The terms of the relationship between R.H. Hummer, Jr., Inc., and the claimant is set out in exhibit A, an “Independent Contractor Operating Agreement” signed by the parties. Under that agreement, the claimant could not haul loads for other trucking companies; the employer maintained the truck; the employer set the load prices; and the employer set the pickup and delivery schedule for the loads. The employer would provide a dispatcher, collect the revenue generated by the truck, and handle customer service and complaints. The claimant was not allowed to dispute the need for repairs to the truck.

The employee was also expected to be in contact with the employer twice daily by a cell phone that he was required to provide. (Exhibit 1)

Under the agreement, the employer decided what load the claimant would haul. The claimant stated that he had only turned down a load one time, and the next day, he was assigned the same load.

The agreement called for the employer to pay for collision and cargo insurance for the trailer. If the claimant wanted to take a passenger along on a trip, the employer had to approve it. The employer paid for the fuel-tax license.

The employer would pay the claimant for driving the truck by giving him a percentage of the revenue. The claimant owned the truck tractor. Although he is incorporated as Griffith Trucking, he was not incorporated at the time of his injury. However, he signed the agreement as John F. Griffith Trucking.

The claimant also held himself out to other trucking companies as John F. Griffith Trucking. Exhibit C shows that the claimant owned the truck tractor along with his wife.

Exhibit D is an application to drive truck for the employer that the claimant signed. Where an option to check either “contractor” or “driver” appeared, the claimant checked “contractor.” He stated he did so because he owned his own truck. He acknowledged he worked as an owner-operator because he would make more money.

R.H. Hummer, Jr., Inc. owned the trailer and maintained insurance on it. The claimant owned the tractor and paid all the maintenance costs of the tractor. He also selected and paid all operator costs, such as fuel, repairs to the tractor, supplies, collision insurance on the tractor, and personal expenses such as meals on the road.

The employer’s name appeared on the truck tractor, as required by the agreement. However, this was required by federal trucking regulations.

After the claimant was injured, he had his brother Fred substitute for him as the driver of the truck in order to finish out the contract with R.H. Hummer, Jr., Inc.. The claimant agreed that his brother was his employee, not an employee of R.H. Hummer, Jr., Inc.. However, R.H. Hummer, Jr., Inc. did have to approve him as a driver. He paid his brother out of his percentage payment from R.H. Hummer, Jr., Inc. (Ex. G, pp. 16‑17)

Under exhibit A, the operator agreement, the claimant was to receive a percentage of each load. He was not paid by the mile or by the hour. There were no withholding taxes withheld from his check. The claimant was responsible for paying income taxes, social security taxes and Medicare taxes on his own. He was given a check weekly, but only if the proper bill of lading had been submitted.

The claimant was responsible for securing all loads he hauled himself. R.H. Hummer, Jr., Inc. did not provide any employees to assist with this or supervise this function.

R.H. Hummer, Jr., Inc. located and scheduled all the loads the claimant hauled. The claimant had no contact with the shipping companies.

The claimant was free to decide on his own when to take a restroom break, when to sleep, what route to take, how fast to drive, and if weather conditions compelled him to stop driving. However, the claimant testified that employee drivers of R.H. Hummer, Jr., Inc. also had discretion in these things.

Inspections of the truck were conducted by the employer at the employer’s shop. The employer would inspect the truck quarterly, as required by federal regulations, but the owner-operator was expected to inspect it daily.

On exhibit B, the claimant indicated he was rejecting workers’ compensation insurance from the employer, agreeing he was an owner-operator and not an employee for purposes of workers’ compensation.

The claimant acknowledged he considered himself an owner-operator and not an employee. (Ex. G, p. 22) In other applications to other trucking companies, he has related his employment history, including hauling for R.H. Hummer, Jr., Inc., where he indicated he functioned as an owner-operator.

The employer offered the testimony of Nancy Zmek, safety director. She conducts the employer’s orientation for new company drivers. She stated she instructs owner-operators differently than employee drivers. She testified that for owner-operators like the claimant, she specifically goes over the fact that as an owner-operator, they will have no workers’ compensation insurance. The driver is the one who decides if they will work as an employee, or as a leased owner-operator.

She described exhibit A, the owner-operator lease agreement, and exhibit B, the rejection of workers’ compensation insurance form. She testified that these forms were explained to the owner-operators, and they were told if they wanted workers’ compensation coverage, they would have to arrange it on their own.

She acknowledged that under the lease agreement, the driver cannot drive for other companies; however, she stated this is a requirement of federal regulations. The truck company is required to maintain exclusive control over the truck. She stated that federal regulations also required the name of the company on the tractor, but the driver was free to put his own name on there, also, and that this is commonly done.

Ms. Zmek stated that the employer buys the insurance for the trailer. The claimant is free to purchase “bobtail” insurance for the non-hauling liability for the tractor. The driver can purchase this through the employer or through another company at the driver’s option.

On cross-examination, she acknowledged that the manual for all drivers does give owner-operators specific instructions on what to do in case of an accident, and how to secure loads.

Ronald H. Hummer, III, also testified. He is the director of operations for the employer. He stated that the company has 50 driver employees, and 58 owner-operators. He testified that owner-operators own their own truck, are in business for themselves, and are paid on a commission basis. Employees do not own their own trucks, and are paid by the mile. Employee drivers are given benefits, such as a dental plan and a 401(k) retirement plan. Owner-operators are not given any benefits.

He also stated that owner-operators decide on their own vacations, whereas employees have to earn vacation at the rate of one week after one year of employment, two weeks after five years, etc. and must seek approval before taking vacation. He agreed that if a driver does not call in for a load for three or more days, they assume he is hauling for someone else and his relationship with the company may be terminated.

According to Mr. Hummer, owner-operators must pay all tolls themselves as a business expense, while employees are reimbursed for tolls. Owner-operators pay for maintenance and repairs on the tractor, whereas employees do not. An owner-operator decides when the tractor needs an oil change, or new tires, or needs to be washed; employees do not, the company takes care of those things.

Pickup and drop off times are dictated by the customer, not by the employer, according to Mr. Hummer. All employees and owner-operators are required to maintain a clean and professional appearance, as they do come into contact with customers.

He stated the claimant was an owner-operator, and not an employee. Exhibit A is only used for owner-operators. Exhibit B, the rejection of workers’ compensation coverage, is also only given to owner-operators.

CONCLUSIONS OF LAW

The sole issue in this case is whether, on the day he was injured, the claimant was an employee of the employer, R.H. Hummer, Jr., Inc., (hereinafter “Hummer”).

Iowa Code section 85.61(11) provides in part:

"Worker" or "employee" means a person who has entered into employment of, or works under contract of service, express or implied, or apprenticeship, for an employer . . . .

It is claimant's duty to prove, by a preponderance of the evidence, that claimant or claimant's decedent was an employee within the meaning of the law. Where claimant establishes a prima facie case, defendants then have the burden of going forward with the evidence which rebuts claimant's case. The employer must establish, by a preponderance of the evidence, any pleaded affirmative defense or bar to compensation. Nelson v. Cities Serv. Oil Co., 259 Iowa 1209, 146 N.W.2d 261 (1967).

Factors to be considered in determining whether an employer-employee relationship exists are: (1) the right of selection, or to employ at will; (2) responsibility for payment of wages by the employer; (3) the right to discharge or terminate the relationship; (4) the right to control the work; and (5) identity of the employer as the authority in charge of the work or for whose benefit it is performed. The overriding issue is the intention of the parties. Where both parties by agreement state they intend to form an independent contractor relationship, their stated intent is ignored if the agreement exists to avoid the workers' compensation laws, however. Likewise, the test of control is not the actual exercise of the power of control over the details and methods to be followed in the performance of the work, but the right to exercise such control. Also, the general belief or custom of the community that a particular kind of work is performed by employees can be considered in determining whether an employer-employee relationship exists. Caterpillar Tractor Co. v. Shook, 313 N.W.2d 503 (Iowa 1981); McClure v. Union County, 188 N.W.2d 283 (Iowa 1971); Nelson v. Cities Serv. Oil Co., 259 Iowa 1209, 146 N.W.2d 261 (1966); Lembke v. Fritz, 223 Iowa 261, 272 N.W. 300 (1937); Funk v. Bekins Van Lines Co., I Iowa Industrial Commissioner Report 82 (App. 1980).

Under Iowa Code section 85.61(13)(c), the following persons are not considered workers or employees:

An owner-operator who, as an individual or partner, or shareholder of a corporate owner-operator, owns a vehicle licensed and registered as a truck, road tractor, or truck tractor by a governmental agency, is an independent contractor while performing services in the operation of the owner- operator's vehicle if all of the following conditions are substantially present:

(1) The owner-operator is responsible for the maintenance of the vehicle.

(2) The owner-operator bears the principal burden of the vehicle's operating costs, including fuel, repairs, supplies, collision insurance, and personal expenses for the operator while on the road.

(3) The owner-operator is responsible for supplying the necessary personnel to operate the vehicle, and the personnel are considered the owner-operator's employees.

(4) The owner-operator's compensation is based on factors related to the work performed, including a percentage of any schedule of rates or lawfully published tariff, and not on the basis of the hours or time expended.

(5) The owner-operator determines the details and means of performing the services, in conformance with regulatory requirements, operating procedures of the carrier, and specifications of the shipper.

(6) The owner-operator enters into a contract which specifies the relationship to be that of an independent contractor and not that of an employee.

4. 
   Directors of a corporation who are not at the same time employees of the corporation; or directors, trustees, officers, or other managing officials of a non-profit corporation or association who are not at the same time full-time employees of the nonprofit corporation or association.
   
5. 
   Proprietors, limited liability company members, limited liability partners, and partners who have not elected to be covered by the workers' compensation law of this state pursuant to section 85.1A.
   

The claimant points out that he drove exclusively for Hummer during the period of the agreement. He was required to communicate with Hummer and could be terminated if he did not. He had to maintain his appearance, and submit his tractor for inspections by the employer. Hummer solicited the loads and collected the revenue. Hummer’s regulations on securing loads exceeded the federal requirements.

In order to determine if the claimant was an employee or an independent contractor, the requirements of Iowa Code section 85.61(13)(c) will be applied to this case.

First, the record shows that the claimant is in fact an individual who owns a vehicle licensed and registered as a truck or road tractor. Under that section, the claimant would be an independent contractor while performing services in the operation of the vehicle if all of the criteria set out are substantially met.

The first criteria is whether the owner-operator is responsible for the maintenance of the vehicle. The record shows that the claimant was primarily responsible for the maintenance of the tractor. Although the employer was responsible for the maintenance of the trailer, and although the employer also required the claimant to submit his tractor for inspection periodically in order to comply with federal regulations, it was the claimant who decided when and how the tractor was to be maintained. He owned the vehicle and he paid for the maintenance it received.

The second criteria is whether the owner-operator bears the principal burden of the vehicle’s operating costs, including fuel, repairs, supplies, collision insurance, and personal expenses for the operator. The record shows that these items were borne by the claimant and not Hummer.

The third criteria is whether the owner-operator is required to supply the personnel for the operation of the vehicle, and whether those personnel are considered employees of the owner-operator. The record shows that the claimant was required to furnish a driver under the contract, either himself or another CDL licensed driver. When the claimant was unable to drive due to his injury, he arranged for his brother to substitute for him. Although Hummer had to approve this driver, it was still the claimant’s obligation to find a substitute driver. Hummer did not choose one of its drivers to fill in for the claimant. The claimant considered his brother to be his employee and paid him himself. This criteria is met under these facts.

The fourth criteria is whether the owner-operator’s compensation is based on factors related to the work performed, including a percentage of any rates or tariff, and not on the basis of the hours or time expended. Again, the record clearly shows the claimant was compensated by being paid a percentage of the truck’s revenue. He was not paid by the hour or by the mile.

The fifth criteria is whether the owner-operator determines the details and means of performing the services, in conformance with regulatory requirements, operating procedures of the carrier, and specifications of the shipper. In this case, the claimant was the one that chose the route to be taken, how fast to drive, when to take breaks for the restroom or lunch, and if weather conditions would affect the trip. The time and place of pickup and delivery was of course determined by the customer, and various federal regulations and regulations of Hummer also controlled the manner in which he carried out his services, but this is contemplated by this subsection. The claimant otherwise determined the details and means of performing his services as an owner-operator.

The final criteria is whether the owner-operator has entered into a contract which specifies the relationship to be that of an independent contractor and not that of an employee. Clearly under exhibits A and B, he has done so. Hummer has both employee drivers and owner-operator drivers and provided workers’ compensation insurance for its employee drivers. The contract establishing the claimant as an owner-operator genuinely reflected his status and was not an attempt to avoid liability for work injuries. The claimant was clearly told, and agreed, that he would not be an employee and would not have workers’ compensation coverage.

Thus, all six of the criteria in Iowa Code section 85.61(13)(c) are met. The claimant was clearly an independent contractor owner-operator. He chose that status when he signed the contract with Hummer, and he chose not to purchase workers’ compensation insurance for himself even after he was warned about the desirability of doing so in his orientation. It is unfortunate that the claimant was injured, but it is found that he was an independent contractor at the time and as such, he was not an employee and he is not entitled to workers’ compensation benefits.

ORDER

That claimant takes nothing from this file.

Costs are taxed to defendants.

Signed and filed this ___13th____ day of October, 2003.

Copies to:

Attorney at Law

425 2nd Street SE, Ste. 1140

Cedar Rapids, IA 52401

Mr. Joseph S. Cortese

Mr. William H. Grell

Attorneys at Law

317 6th Avenue Ste. 200