Ceva Freight, LLC v. Emp't Dep't

279 Or.App. 570

379 P.3d 776

Ceva Freight, LLC, Petitioner,

v.Employment Department, Respondent.

A157773

Court of Appeals of Oregon.

Argued and submitted March 3, 2016.

July 20, 2016

Braden K. Core argued the cause for petitioner. With him on the briefs were Steven A. Pletcher, Brandon K. Wiseman, and Scopelitis, Garvin, Light, Hanson & Feary, P.C., Indiana, and Jennifer N. Warberg and Littler Mendelson, P.C.

Judy C. Lucas, Assistant Attorney General, argued the cause for respondent. With her on the brief were Ellen F. Rosenblum, Attorney General, and Anna M. Joyce, Solicitor General.

James D. Nelson and Betts, Patterson & Mines, P.S., Washington, filed the brief amicus curiae for American Trucking Association, Inc., and Truck Renting and Leasing Association.

Seann C. Colgan, Emily Harris, and Corr Cronin Michelson Baumgardner Fogg & Moore, LLP, Washington, filed the brief amicus curiae for Oregon Trucking Association.

Before Ortega, Presiding Judge, and Lagesen, Judge, and Garrett, Judge.

GARRETT, J.

CEVA Freight, LLC, a for-hire carrier licensed to transport commodities in interstate commerce, petitions for judicial review of an order of an administrative law judge (ALJ) for the Office of Administrative Hearings upholding the Employment Department's assessments of unemployment compensation taxes on remuneration that CEVA paid to “owner operator” truck drivers for the audit period from the first quarter of 2009 through the second quarter of 2011. The ALJ upheld the assessments after determining that the services of the owner-operators constituted “employment” that was not exempt as services of independent contractors under ORS 657.040, ORS 670.600(2), or under ORS 657.047.

We review the ALJ's order for substantial evidence and errors of law, ORS 183.482(8)(a) ; ORS 657.684 (providing for judicial review as in review of orders in contested cases in ORS chapter 183). As explained below, we reverse the assessments based on our conclusion that CEVA established that the owner-operators were independent contractors and that their services were therefore excluded from employment, ORS 657.040 ; 670.600(2). We therefore do not reach the question whether CEVA, a for-hire motor carrier licensed and authorized to transport commodities in interstate commerce, also established that the transportation services it provided through the use of leased vehicles and owner-operators were exempt from employment under ORS 657.047.

We draw our summary of the relevant facts from the ALJ's findings, which are not challenged on judicial review. CEVA is a “full-service logistics provider,” licensed and authorized by the United States Department of Transportation (USDOT) to operate as an interstate motor carrier.¹ At the relevant time, CEVA's services included freight forwarding, order fulfillment, warehousing, and air and ground transportation of goods. To carry out its transportation services, CEVA worked with different types of drivers: (1) its own employees; (2) drivers who worked for carrier agents who operated under their own motor carrier authority; (3) owner-operators who provided trucks and drivers to CEVA and performed their services under CEVA's operating authority; and (4) drivers who worked for owner-operators.

The dispute in this case concerns only those services provided by owner-operators and the drivers who worked for them. CEVA's standard form agreement with its owner-operators during the relevant time period, entitled “Agreement for Leased Equipment and Independent Contractor Services (Pick-up & Delivery),” is central to our resolution. The agreement stated that the owner- operator leased the vehicle to CEVA for the purpose of

“rendering certain pick-up and delivery services to facilitate the transportation of shipments of goods around-the-clock seven days-a week, 365 days-a-year to and from [CEVA] customers within the time-sensitive service parameters required by [CEVA's] customers.”

The agreement provided that the owner-operator was either self-employed “for all purposes,” or “the authorized representative of a business entity” unrelated to CEVA. It provided that the owner-operator was not to be considered an employee of CEVA for any purpose.

As an interstate motor carrier, CEVA's operations are subject to an extensive body of federal law. CEVA's agreement with its owner-operators included the following paragraph entitled “Compliance with FHWA [Federal Highway Administration] Regulations”:

“To the extent required by the Federal Motor Carrier Safety Regulations * * * Contractor agrees to relinquish to CEVA exclusive possession, control and use of the Leased Vehicle while it is in service to CEVA and its customers under this Agreement and CEVA agrees to assume responsibility for same.”²

Owner-operators either owned or leased their vehicles. To operate their vehicles, owner-operators incurred significant expenses that were not reimbursed by CEVA, including expenses for business licenses, insurance, fuel, tires, operations, repairs, maintenance, tools, uniforms, and cleaning materials. CEVA advanced payment for owner-operators' state registration and permit fees, but deducted those expenses from its payments to owner-operators.

All of CEVA's drivers completed an application that included driver license information, safety history, drug and alcohol history, and previous employment. CEVA performed annual checks of driving records and had a “zero tolerance” policy for drug and alcohol offenses by drivers. Owner-operators could hire and fire nondriver helpers without CEVA's permission, but the hiring of drivers was subject to CEVA's written approval. CEVA's agreement prohibited owner-operators and their drivers from carrying passengers who were not helpers without CEVA's written approval when the vehicle was laden with cargo for CEVA. Owner-operators who hired their own drivers or helpers also paid employment taxes.

The agreement required drivers to attend periodic safety meetings sponsored by CEVA or the Transportation Safety Administration (TSA). Although the agreement required that new drivers attend an orientation and information session regarding CEVA's business, policies, operational procedures, service offerings, and pick-up and delivery and driving techniques, the ALJ found that in reality, CEVA did not have an orientation program for new owner-operators or their drivers; rather, it held one-on-one meetings with new owner-operators to explain CEVA's procedures and requirements, and encouraged new drivers to ride with experienced owner-operators.

Owner-operators could accept or reject dispatches offered by CEVA, choose their days and times to work, determine routes and parking sites, and perform repairs. CEVA expected owner-operators to notify them if they would be unavailable and, once a route was accepted, an owner-operator was required to make deliveries within an anticipated time frame. The agreement prohibited an owner-operator from soliciting or performing services for compensation for any customer for whom the owner-operator had performed services during the agreement's term. But, with notification to CEVA, owner-operators could use vehicles leased to CEVA for other carriers, as long as all of CEVA's identifications and permit markings were concealed.

CEVA required that all vehicles be white, without visible body damage, and not older than five to seven years. Owner-operators were required to maintain and submit driving logs, conduct daily inspections of their vehicles, and provide inspection reports to CEVA. Vehicles were required to have an “activation” notice from CEVA.

Owner-operators paid half the cost for large decals with CEVA's logo and name, which were applied by body shops. Owner-operators were required to purchase and wear uniforms with CEVA's name and carry a CEVA photo identification. But the ALJ found that drivers who did not wish to wear a uniform could still make deliveries.

CEVA sorted freight at its loading dock at the Portland airport and arranged the freight for owner-operators to pick up. Owner-operators notified CEVA's dispatcher when they arrived at CEVA's facilities, and the dispatcher then gave each contractor a route of deliveries. CEVA assigned loads based on the size of the vehicle, the weight of the load, and the time of the driver's arrival at CEVA's facility.

Owner-operators were required to obtain customers' signatures as proof of delivery in order to be paid. Certain customers had specific requirements with which owner-operators were expected to comply; if a customer complained about a delivery to CEVA, CEVA would contact the owner-operator, who was expected to correct the cause of the complaint and cover any associated costs.

CEVA communicated with owner-operators and drivers by cell phone, which the owner-operator either provided or rented from CEVA. Owner-operators paid CEVA a monthly “messaging fee” and were required to download to their cell phones a software application that tracked delivery information entered by the contractor. Owner-operators were required to contact CEVA immediately if a delivery could not be made, and CEVA would contact another driver to complete the delivery.

Owner-operators were compensated based on a percentage of the tariff for each shipment, less deductible expenses. The compensation rate was generally 65 percent and bore no relationship to the size or type of vehicle, or whether it was owned or leased by the owner-operator. An owner-operator's compensation and deductions were listed in a “settlement statement” for each vehicle, which CEVA provided to the owner-operator at least bi-weekly. Owner-operators could decide how to allocate compensation between use of the vehicle and the driver's services.

Owner-operators were liable for property damage or damage to freight in their possession and bore the risk of loss for any customer service claims. The agreement required owner-operators to carry $1 million in liability insurance, with no deductible, and $1 million per...