379 P.3d 602
Or. Ct. App.2016Background
- May Trucking employed ~1,000 drivers (≈800 W-2 employees; ≈200 1099 "owner-operators") and operated six U.S. centers; drivers were dispatched via a QualComm unit installed in their trucks.
- Federal hours rules require a 34-hour "down time" after extended driving; during down time drivers parked trucks at drop yards, truck stops, Walmart lots, or, with permission, at home.
- The Employment Department audited May’s unemployment-tax reporting and determined wages should be reported to the state where drivers regularly parked during extended down time (the alleged "base of operations").
- May sought a larger tax credit than the Department allowed, arguing (1) the ALJ erred by treating parking location during down time as the drivers’ "base of operations," and (2) the ALJ erred in treating certain owner-operators as employees rather than exempt contractors under ORS 657.047.
- The ALJ upheld the Department; the Court of Appeals reviewed for substantial evidence and errors of law, affirmed in part, reversed in part, and remanded.
Issues
| Issue | May's Argument | Dept's Argument | Held |
|---|---|---|---|
| Whether a driver’s parking location during extended down time can be the driver’s "base of operations" for reporting wages | Parking location is unrelated to the Program Letter 291 factors; base should be tied to operational center or other work-connected place | Department’s interpretation (report to state where driver parks during extended down time) is consistent with other states and legislative intent | Court upheld Department’s determination: parking location can satisfy the "base of operations" criteria because drivers start work and receive dispatches at their trucks; substantial evidence supports the finding |
| Whether services by owner-operators are exempt from "employment" under ORS 657.047 (leasing equipment to carrier and personally operating/furnishing/maintaining it) | Many contractors leased or bought trucks from May or entered IC agreements; May contends contractors provided transferable interest, personal operation, and maintenance so services are exempt | Department contends agreements show lack of transferable interest or personal maintenance/operation sufficient to deny exemption | Court affirmed that drivers who leased/purchased from May (no transferable interest) do not qualify for exemption. For contractors who owned vehicles outright: court reversed/remanded (ALJ erred on lease-duration, allocation of consideration, and on requirement that maintenance be physically performed by owner). Overall: assessments for outright vehicle owners reversed and remanded; other assessments affirmed |
Key Cases Cited
- Mitchell Bros. v. Emp. Div., 284 Or. 449 (burden to show assessment incorrect)
- Zimmerman v. Allstate Property and Casualty Ins., 354 Or. 271 (specialized industry meaning of terms)
- Springfield Education Assn. v. School Dist., 290 Or. 217 (agency deference to interpretation of inexact statutory terms)
- Charles C. Steward Mach. Co. v. Davis, 301 U.S. 548 (history of federal-state unemployment program)
- Puget Sound Bridge & Dredging Co. v. S.U.C.C., 168 Or. 614 (situs principles for unemployment coverage)
- 3P Delivery, Inc. v. Employment Dept., 254 Or. App. 180 (transferable interest requirement for ORS 657.047 exemption)
- Market Transport, Ltd. v. Employment Dept., 279 Or. App. 515 (rejection of requiring separate allocation of equipment consideration)
- Delta Logistics v. Employment Dept. Tax Section, 279 Or. App. 498 (treatment of contractors who hire other drivers under ORS 657.047)
- Avis Rent A Car System, Inc. v. Dept. of Rev., 330 Or. 35 (lease essential elements)
- Shepherd v. Hub Lumber Co., 273 Or. 331 (indefinite personal property leases are terminable at will)
- Lund v. Arbonne International, Inc., 132 Or. App. 87 (agreements of indefinite duration terminable at will)