After reading this article we may all have to change the way we business:
Broker are you a Statutory Employer of you Contractor's Driver ?
Recently, the South Carolina Supreme Court addressed a workers' compensation claim by an expedited delivery service driver against a broker who was fatally injured while returning from a brokered load.
Collins v. Seko Charlotte (Op. No. 27519, Apr. 29, 2015). "Driver", a direct employee of the carrier, was dispatched by the carrier to take an "express hot delivery" from South Carolina and deliver it on an expedited basis to Wisconsin. The delivery was under an unwritten contract between carrier and broker, even though the broker also had its own operating authority and employed drivers for local loads. The broker paid the carrier for mileage one way; however, the carrier included the cost of the return trip in the mileage rate it charged broker.
After the load was delivered in Wisconsin, Driver was returning to South Carolina when he was involved in an accident and killed. Driver's estate made a claim under the South Carolina Worker's Compensation Act ("Act") against both the motor carrier and the broker. The motor carrier did not carry workers' compensation insurance, causing Driver's estate to make a "statutory employee" argument as to the liability of the broker.
Noting that the concept of statutory employment provides an exception to the general rule that coverage under the Act requires the existence of an employer-employee relationship, the parties admitted that Driver was not a direct employee of the broker. The statutory employee argument is made mostly in the construction industry where an employee of an uninsured subcontractor makes a statutory employee claim against the general contractor. The Court applied the South Carolina test for statutory employees:
- The activity of the subcontractor is an important part of the owner's trade or business;
- The activity performed by the subcontractor is a necessary, essential, and integral part of the owner's business; or
- The identical activity performed by the subcontractor has been performed by employees of the owner.
Voss v. Ramco, Inc., 325 S.C. 560, 482 S.E.2d 582 (Ct. App. 1997)(emphasis supplied). Only one part of the test needs to be satisfied to find statutory employment and the courts have rather liberally applied the test in order to broadly find inclusion under the Act.
Surprisingly, the broker admitted that Driver was a statutory employee on the trip to Wisconsin. Thus, the primary issue addressed by the court was whether Driver's status ever changed. The broker argued that the contract terminated once the delivery was made in Wisconsin, which would certainly seem to be a meritorious position. However, the Court pointed out that "the contract only provides the necessary foundation for the creation of the statutory employee relationship" and "once the statutory employee status attaches, the extent of the status is determined by the nature of the work contracted to be performed."
The Court examined the nature of the load and noted that it was reasonable to conclude there would be no freight on the return trip. Additionally, the broker conceded each of the three possible
Voss factors:
- It is in the cargo delivery business;
- Interstate deliveries are a necessary and integral part of its business; and
- Its drivers make similar deliveries as Driver did (although limited to trips within 100 miles of dispatch).
The broker's attempt to draw distinction between short haul deliveries and longer trips was unavailing and the Court found that the work "fits squarely within the requirements of
Voss." The Court goes on to say that the broker covers its drivers on their return trips and therefore Driver would be entitled to the same treatment as the broker's direct employees. The Court did not distinguish between the broker's role as a broker versus its role as a carrier.
This is a disturbing case for entities hiring motor carriers. The case raises a few issues:
- This case emphasizes the importance of making sure that any hired carrier has worker's compensation insurance. In this case, it appears that the carrier did not have enough employees to be required to have worker's compensation, or perhaps the carrier utilized independent contractors.
- This case creates more problems for the "fleet driver." A fleet driver is an individual who drives a truck owned by an independent contractor that leases one or more vehicles to a motor carrier. This fleet driver will normally be an employee of someone, and if the fleet owner does not have worker's compensation, that could create additional difficulties for the entity hiring the motor carrier.
- A company hiring a motor carrier (broker or shipper) should not pay compensation for the return trip. Even if it pays a premium for the delivery, the carrier should be free to, and encouraged to, find a backhaul.
- If the broker were established as a stand-alone entity performing only brokerage services, then it would not have met at least one part of the Voss test in that it would not have employees performing similar functions to those of Driver.
