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Litigation | MONDAY, JULY 14, 2014 | S3

agreement contain certain language that qualify as a “separate business entity” or pass
A motor carrier that is unable to meet the 11-part separate busi-
reserves the right of the motor carrier to exert what is commonly called the “ABC test.” The
controlovertheowner/operator.Forexample, nessentitytestmaystillrelyonthethree-part“ABC”testtoqualify factthatamotorcarrierandowner/operator
the lease must state that the motor carrier agree in writing that there is an independent
maintains “exclusive possession, control, and owner/operators as independent contractors.
contractor relationship will not avoid liability
use of the equipment for the duration of the for misclassiication.
lease.”1 Regulations also require the motor To qualify as a separate business entity,
carrier to maintain liability and cargo insur- an owner/operator must be a sole proprietor, was appealed to the WC Appeal Board. The what is required by law, rule or regulation.
ance and the right to inspect the motor vehi- partnership, corporation or other entity that WC Appeal Board determined that the owner/ Many motor carriers were relieved by this
cle when contracting with owner/operators. satisies an 11-part test. The 11 criteria, all operator was in fact an employee, relying decision, which provided clear and binding

Further, the owner/operator must display the of which must be met in order for the driver heavily on the motor carrier’s reservation of authority as to how to properly structure the
motor carrier’s logo while transporting a load.2
to qualify as an independent contractor, are control over the owner/operator as required owner/operator relationship to avoid misclas-
The regulations also speciically state that summarized as follows:
by federal regulations.
siication liability. Their relief was short lived,
owner/operators may still properly be clas- (1) the owner/operator is free to determine The appellate division reversed the WC however, as on Jan. 10, 2014, Gov. Andrew M.
siied as independent contractors despite a on its own the means and manner of providing Appeal Board, noting that under New York law, Cuomo signed the act into law.
motor carrier lessee’s compliance with federal services, limited only by requirements to meet the factors relevant to determining whether
law and the related administrative require- the desired result or federal rule or regulation;
an employer-employee relationship exists
ments.3 This is consistent with case law, which (2) the business entity can continue to exist “include the right to control the claimant’s The Act

has held that limited control for the purpose even if its relationship with the contractor work, the method of payment, the right to The act created Article 25-C of the New
of adhering to legal regulations does not create ends;
discharge, the furnishing of equipment and York Labor Law. Most troubling for motor
an employer-employee relationship.4 None- (3) the owner/operator has substantial the nature of the work, and no single factor carriers, the act creates a legal presumption
theless, New York’s Workers’ Compensation capital investment in the business entity is dispositive.”5 The court acknowledged that any person who transports commercial
Appeal Board (WC Appeal Board) and Unem- beyond ordinary tools and equipment;
that the transportation industry is heavily goods for a commercial goods transportation
ployment Insurance Appeal Board regularly (4) the business entity owns or leases the regulated and that a motor carrier’s compli- contractor is an employee unless one of two
issued decisions inding that motor carriers capital goods and bears the risk of loss and ance with federal regulations cannot serve tests is fully satisied. The term “commercial
misclassiied owner/operators as independent proit;
as the basis of a inding of employee status. goods transportation contractor” is broadly
contractors by maintaining the limited control (5) the business entity is free to perform The court further noted that a motor car- deined in the act to essentially include any

required by the federal regulations.
services to others and the general public on rier dispatcher advising an owner/operator business or person that compensates a driver
In 2011, motor carriers inally obtained a continuing basis;
of where and when to pick up and deliver a with a state driver’s license who transports
some relief. In Matter of Choto v. Consolidated (6) the business entity receives a 1099 for load is not dispositive of whether there is goods in New York and operates a commercial
Lbr. Transp., 82 A.D.3d 1369 (3d Dep’t 2011), an services provided to the contractor;
employee status.
motor vehicle.
owner/operator claimed he was an employee (7) there is a written contract between the Matter of Choto clariied that motor car- For owner/operators to legally qualify as
of the motor carrier and was therefore entitled business entity and contractor, specifying riers may properly classify owner/opera- independent contractors under the act, their
to collect workers’ compensation beneits. their relationship as independent contractors tors as independent contractors provided compensation must be reported on a Federal
After an administrative hearing, the matter
or separate business entities; » they do not exert control over them beyond
Income Tax Form 1099 and they must either
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