Page 10 - Litigation

S10 | MONDAY, JULY 14, 2014 | Litigation
| NYLJ.COM

Trucking
where and when to pick up and deliver loads. struction Industry Fair Play Act, there are no in civil and criminal liability. A irst violation

Because of the new statutory presumption, published opinions analyzing their meaning. may result in a $1,500 penalty, with a $5,000
however, such limited control is now arguably Thus, it remains challenging for attorneys to penalty for each subsequent violation. If it
« Continued from page S3
dispositive of employee status. This is prob- counsel clients on compliance with the test.
is determined that the employer willfully
(8) if the services require a license or per- lematic for motor carriers who, as a practical violated the law, a penalty of up to $2,500 is
mit, the business entity pays for the license matter, must use dispatchers to meet their Violations
authorized for the irst violation, with a $5,000
or permit under its own name, or, where per- customers’ needs.
penalty for each subsequent violation, per
mitted by law, pays for reasonable use of the As a inal point, employers should be aware employee, within a ive year period. Afiliated
contractor’s license or permit;
that all commercial goods transportation
(9) the business entity may hire its own ‘ABC’ Test
companies are required to display a poster entities are generally liable for civil penalties
as well.
employees without contractor approval, A motor carrier that is unable to meet the prepared by the NYSDOL regarding the act. Willful violations can result in criminal lia-
subject to applicable statutory or regulatory 11-part separate business entity test may still The poster, which is available on the NYS- bility and increased ines as well as debarment
requirements, and the business entity pays its rely on the three-part “ABC” test to qualify DOL’s website, must be prominently displayed from public works contracts for one year. An
employees directly without reimbursement owner/operators as independent contractors. in an accessible location where commercial oficer or a shareholder who owns or controls
from the contractor;
Under the ABC test, irst, the driver must be goods transportation activity occurs. Even if at least 10 percent of the outstanding stock
(10) the business entity is not required to free from the control and direction of the a company classiies all drivers as employ- of a corporation and who knowingly permits
presents itself as an employee of the con- contractor in performing services, both in ees, it must still display the poster. Employers
tractor; and
the contract and in its application. Second, should also be cautioned that the act prohibits a willful violation is personally subject to the
civil and criminal penalties.
(11) the business entity is free to perform the service provided by the driver must be retaliation of any kind against individuals who It is critical for motor carriers and bro-
similar services for others on whatever basis different from the services provided by the report alleged violations.
kers to review their written contracts and
and whenever it chooses.6
contractor or otherwise not part of the usual The potential consequences of a violation evaluate actual day-to-day relationships with
While the act is new, the elements of the business of the contractor. Third, the driver are serious. Violations of the act will trigger owner/operators for compliance with the act.
separate business entity test are generally must be customarily engaged in carrying out liability for unpaid unemployment and work- Too often, companies wait until after a claim
consistent with the holding in Matter of Choto, the same services as an independent estab- ers’ compensation insurance contributions
particularly since the act contains a carve lished trade or profession rather than simply as well as business, corporate and personal has been iled or an audit begins to address
out allowing a motor carrier to retain control working for the contractor. Finally, although tax liabilities. Such liability can be signiicant, this issue. There is incredible value in com-
over owner/operators provided such control not separately listed in the ABC test, the as many owner/operators receive revenue panies being proactive by conducting self-
audits and examining contracts well before a
is required by law, rule or regulation. However, owner/operator must receive a Form 1099 through a contractor relationship that is much complaint is iled or an investigation begins.
the legal presumption of employee status is for compensation received for services.
higher than what employee drivers are paid.
signiicant, leaving it unclear whether Matter The irst part of the ABC test has been fre- The NYSDOL will generally treat all such rev- •••••••••••••••••••••••••••••
of Choto remains entirely good law.
quently litigated and should not be dificult enue as unreported income for purposes of
More speciically, Matter of Choto recog- for attorneys to analyze. The second and third determining owed unemployment and work- 1. 49 C.F.R. §376.12.
2. See 49 U.S.C. §14102; 49 C.F.R. §§376.11-12.
nized that some degree of control beyond elements, however, are somewhat ambiguous ers compensation contributions, resulting in 3. 49 C.F.R. §376.12(c)(4).
federal regulations could exist in an indepen- and are not deined by statute or regulation. an over inlation of wages upon which the 4. See Matter of Charles W. Wannen, 57 A.D.3d 1029 (3d
dent contractor relationship, such as a dis- While those elements are also found in simi- assessment is based.
Dept. 2008).
patcher communicating to owner/operators
lar statutes such as the New York State Con-
Additionally, violations of the act may result
5. Matter of Choto, 82 A.D.3d at 1369.
6. See N.Y. Labor Law §862-b.

Pleading
rns & Co., 683 F.3d 239 (6th Cir. 2012); In re Lehm-
an Brothers Sec. & ERISA Litig., 2013 WL 3989066
(S.D.N.Y. July 31, 2013); Dexia SA/NV v. Bear, Stearns
« Continued from page S4
& Co., 929 F. Supp. 2d 231 (S.D.N.Y. 2013); Union Cent. Life Ins. v. Credit Suisse Sec. (USA), 2013 WL 1342529
amplified where a single ruling on a broadly (S.D.N.Y. March 29, 2013); Woori Bank v. Citigroup,
alleged fraud may lead to copy-cat claims. 2013 WL 1235648 (S.D.N.Y. March 27, 2013); Dodona I
v. Goldman, Sachs & Co., 847 F. Supp. 2d 624 (S.D.N.Y.
Financial crises can cause hundreds of bil- 2012); In re Bear Stearns Mortg. Pass-Through Certii-
lions of dollars to evaporate overnight due cates Litig., 851 F. Supp. 2d 746 (S.D.N.Y. 2012); Woori
to a messy confluence of factors. The U.S. Bank v. RBS Sec., 910 F. Supp. 2d 697 (S.D.N.Y. 2012);
Supreme Court recognized this recently Landesbank Baden-Wurttemberg v. Goldman, Sachs &
in Dura and again in Erica P. John Fund.14 Co., 821 F. Supp. 2d 616 (S.D.N.Y 2011); Footbridge v.
The potential scope of liability and range Countrywide Home Loans, 2010 WL 3790810 (S.D.N.Y. Sept. 28, 2010).
of defendants is as broad as the markets 2. See Cognex v. Microscan Sys., 2013 WL 6906221
themselves. There is also no shortage of (S.D.N.Y. Dec. 31, 2013) (Rakoff, J.) (quoting Exer-
public speculation and theories about who gen v. Wal-Mart Stores, 575 F.3d 1312, 1327 (Fed. Cir.
2009)).
or what may be responsible.
3. 929 F. Supp. 2d 231 (S.D.N.Y. 2013).
The cases addressing Rule 9(b) in this 4. 2013 WL 1235648 (S.D.N.Y. March 27, 2013).
context suggest that while particularly 5. Dexia, 929 F. Supp. 2d at 238.
pleaded fraud claims will continue to 6. Woori, 2013 WL 1235648 at *5.
survive pleading motions, the Rules are 7. Id. at *4.
still not amenable to litigation from par- 8. Id.
9. Memorandum of Law in Support of Citigroup
ties that claim only a generalized fraud Defendants’ Motion to Dismiss the Complaint at 1-2,
that is coincident with a major financial Woori Bank v. Citigroup, 2013 WL 1235648 (S.D.N.Y. for quality, variety, and personalized service,
disruption.
March 27, 2013) (No. 12 Civ. 3868).
attorneys trust The Tasa Group.
10. See Lentell v. Merrill Lynch & Co., 396 F.3d 161,
The evolving application of Rule 9(b) to 172 (2d Cir. 2005).
require that plaintiffs make a particular- 11. Dexia, 929 F. Supp. 2d at 238.
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ized showing that broadly alleged miscon- 12. In re Initial Pub. Offering Sec. Litig., 241 F. Supp. witnesses than The TASA Group. Since 1956, we have helped thousands of attorneys
duct particularly caused the claimed loss 2d 281, 326 (S.D.N.Y. 2003).
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advances Rule 9(b)’s purpose of ensuring 13. 350 F. Supp. 2d 455, 469-70 (S.D.N.Y. 2004).
14. Dura Pharm. v. Broudo, 544 U.S. 336, 345 (2005) is designated or engaged. And we continue to lead the industry through innovative
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cumstances, changed investor expectations, new industry-specific or firm-specific facts, conditions,
1. See, e.g., Republic Bank & Trust Co. v. Bear Stea-
or other events.’”) (quoting Dura, 544 U.S. at 342-43).