Whomped by workers’ comp

Federal Motor Carrier Safety Administration proposed a Unified Registration System that would apply to every motor carrier, freight forwarder and broker required to register with the Department of Transportation except Mexico-domiciled motor carriers registering to operate between Mexico and points in the United States beyond border commercial zones along the U.S.-Mexico international border. The proposal responds to 1995 legislation that requires DOT to propose regulations to replace four identification and registration systems with a single online federal system. Comments are due Aug. 17. For more information, visit this site and search Docket No. 2349.

FedEx Ground Package System cannot compel arbitration of the complaints of three former independent contractors who claimed that the carrier’s oral representations and implied agreements misrepresented the income they would receive and the assistance that would be provided for truck resale. The U.S. Court of Appeals for the Tenth Circuit ruled that the carrier’s arbitration clause did not apply because the alleged misrepresentations were made during the recruiting process – before execution of the operating agreement. [Cummings vs. FedEx Ground Package System; Case No. 04-1247]

U.S. Court of Appeals for the Fifth Circuit upheld a district court ruling that a driver had failed to prove that his termination by Saia Motor Freight for failing to meet its physical capabilities standards was a pretext for age discrimination. [Collins vs. Saia Motor Freight Lines; Case No. 04-30958]

Q Our trucking company uses more owner-operators than company drivers. In our state, owner-operators are treated as independent contractors if they meet a “control” test. In an audit, our workers’ comp insurer now has assessed a full workers’ comp premium for each of our owner-operators, telling us it is the law. Can this be right?

A Workers’ compensation is governed by 50 different state laws, and it is a crazy patchwork quilt that defies a simple one-size-fits-all answer. In some states, owner-operators can opt out of coverage. In other states, there is a statutory exemption, and in many states, it is determined by state law and various indicia of control exercised by the company over the owner-operator’s independent actions.

The problem you mention is a recent but more frequent occurrence. It is difficult for workers’ comp insurers to assess the risk of claims from owner-operators. For example, owner-operators ordinarily are exempt from workers’ comp in Tennessee, but because of a fluke in the statute, they now are subject to the workers’ compensation act in North Carolina. If a Tennessee-domiciled owner-operator has an accident in North Carolina and seeks recovery there, a workers’ comp claim can be brought against the Tennessee-domiciled carrier and his insurer under the North Carolina statute.

However, this possibility does not mean it is fair or an exercise in good faith for a workers’ comp insurer to assess, after the fact, a full workers’ comp premium from carriers that have owner-operators. Your insurer should have worked with you from the outset to ensure you disclosed the existence of your owner-operators and made sure that you were not exposed to the devastating surprise of full workers’ compensation premiums by audit; his failure to do so may give rise to an errors and omissions claim.

Best practices for carriers with owner-operators in states where workers’ compensation coverage is not mandatory traditionally has been to require the owner-operator to carry occupational accident insurance and for the motor carrier to secure contingent liability coverage indemnifying it against any workers’ comp claim brought against it, notwithstanding the owner-operator’s recourse to his own policy.

In almost every incident, the combined cost of occupational accident insurance and contingent coverage for the carrier is far less than a workers’ comp premium. Depending on the state of domicile, that difference can be $2,000 to $3,000 per year per owner-operator unit. That is real money, and you deserve to have been forewarned.