The ‘Agent Model’ is commonly used by motor carriers operating with independent
contractors (“ICs”) to increase capacity in various markets. The model allows the motor
carrier to align certain increased costs; e.g., sales, administrative, recruiting ICs, with a
payment structure that is based upon the agent’s productivity. A common misconception
is that the model in itself distances the motor carrier from the ICs by virtue of the agent
acting as an intermediary. Sometimes the ‘agent’ is just an ‘agent’ performing some or
all of the functions mentioned above, while at other times the ‘agent’ may also be a small
fleet owner that provides equipment/drivers to the motor carrier. Both scenarios require
the motor carrier and the agent to carefully consider the elements of control between
the parties to preserve the intended independent contractor, vendor/vendee type of
relationship.
This type of relationship was recently reviewed by the Federal District Court for the
Southern District of West Virginia in Edwards v. McElliotts Trucking,1 whereby the court
analyzed the power and the right of control a motor carrier possessed over an agent,
as an agent, and as a small fleet owner operating with its equipment under the motor
carrier’s operating authority.
In Edwards, Defendant McGowan, entered into an Exclusive Sales Agency Agreement
(“Agency Agreement”) with a motor carrier, Defendant Cardinal Transport (“Cardinal”).
McGowan, as the sole owner of McElliotts Trucking (“McElliotts”), also entered into an
Independent Contractor Agreement (“IC Agreement”) which provided him the ability to use
his equipment and operate under Cardinal’s operating authority under a typical IC/owner-
operator arrangement.
Under the Agency Agreement, McGowan solicited business for Cardinal and arranged
for the transportation of shipments with McElliotts’ equipment. McGowan was paid
an 8.5% commission based on revenue generated under the Agency Agreement, and
received 76% of the “shipping fees” under the IC Agreement from which McElliotts was
responsible to pay for a driver, fuel, maintenance and other operating expenses, as is
typical in an IC/owner-operator arrangement.
On occasion, shippers would tender shipments to Cardinal that did not fill an entire trailer,
and McGowan would arrange to have the partial load transported to his yard for offloading
until he received another shipment which he could combine with the original shipment.
FLASH NO. 63
EMPLOYEE v. IC: DUAL ROLE OF AGENT AND
SMALL FLEET OWNER
(continued)
The InterConnect FLASH!
Practical Bursts of Information Regarding Critical Independent Contractor Relationships
www.beneschlaw.com
Benesch has been named
Law Firm of the Year
in Transportation Law
in the 2017 Edition of
U.S. News & World
Report/Best Lawyers®
“Best Law Firms” ranking.
Only one law firm per practice area in the U.S. is
receiving this recognition, making this award a
particularly significant achievement. This honor
would not have been possible without the support
of our clients, who both enable and challenge
us every day, and the fine attorneys of our
Transportation & Logistics Practice Group.
The U.S. News & World Report/Best Lawyers® “Best Law
Firms” rankings are based on an evaluation process that
includes the collection of client and lawyer evaluations, peer
review from leading attorneys in their field and review of
additional information provided by law firms as part of the
formal submission process. For more information on Best
Lawyers, please visit www.bestlawyers.com.
August 2017
LAW FIRM
2017
OF THE YEAR
TRANSPORTATION LAW
