JERRY'S TRUCKING INC., Employer
An administrative law judge (ALJ) for the Division of Unemployment Insurance of the Department of Workforce Development issued a decision in this matter. A timely petition for review was filed.
The commission has considered the petition and the positions of the parties, and it has reviewed the evidence submitted to the ALJ. Based on its review, the commission agrees with the decision of the ALJ, and it adopts the findings and conclusion in that decision as its own.
The decision of the administrative law judge is affirmed. Accordingly, this matter is remanded to the department to calculate the employer's unemployment contribution liability consistent with the decision of the administrative law judge.
Dated and mailed August 18, 2008
jerryst . ssd : 110 : EE 421
James T. Flynn, Chairperson
/s/ Robert Glaser, Commissioner
/s/ Ann L. Crump, Commissioner
Issues -- This case presents the issue of whether, during the 4th quarter of 2004 and the 1st quarter of 2005, certain truck drivers were employees of Jerry's Trucking, whose trucks they drove for third party carriers.
Resolving such an issue is a multi-step process, in which the first step is to determine if the individuals "performed services for" the putative employer within the meaning of Wis. Stat. § 108.02(12)(a). If it is determined that the individuals did not perform services for the putative employer within the meaning of that provision, the inquiry is at an end; the individuals are not its "employees". If on the other hand it is determined that the individuals did perform services for the putative employer within the meaning of that provision, this creates a presumption that the individuals are its "employees" and shifts the burden to the putative employer to establish that the individuals are exempted under the applicable subsection of § 108.02(12).
The ALJ concluded that (with one exception, noted below) the drivers did perform services for Jerry's Trucking within the meaning of § 108.02(12)(a), thus creating a presumption that they were its employees. He also concluded that the applicable tests for determining if the drivers were exempted from the definition of "employee" were those in § 108.02(12)(bm), and that it was not demonstrated that the drivers satisfied enough of the conditions of that provision to be exempted from being considered "employees".
In its arguments supporting its petition for review of the ALJ's decision, Jerry's Trucking does not challenge the ALJ's conclusion that the drivers were not shown to have met a sufficient number of the conditions of § 108.02(12)(bm). Indeed, the briefs submitted on behalf of Jerry's Trucking do not even refer to that provision at all. Instead, Jerry's Trucking relies entirely on the argument that the drivers did not "perform services for" it within the meaning of Wis. Stat. § 108.02(12)(a).
The question of whether the drivers "performed services for" Jerry's Trucking
ultimately comes down to an issue of fact about what leasing arrangements may or
may not have existed between Jerry's Trucking, the individual drivers, and a
number of outside carriers. It is undisputed that Jerry's Trucking owned the
trucks in question, and that it had lease agreements by which it leased those
trucks to various outside carriers. Subsequently, it entered into agreements
which purported to also lease the trucks to the drivers. (1) What is in dispute, is whether the drivers then entered into their own leases with any of the outside carriers during the time period at issue here (i.e., the 4th quarter of 2004 and the 1st quarter of 2005). The department conceded that if it was shown that a driver entered into a truck lease with an outside carrier, the department would not take the position that that driver was providing services "for" Jerry's Trucking. The corollary assertion by the department, however, was that if the drivers were not parties to any truck leases with outside carriers, then they would have to be viewed as performing their driving services "for" Jerry's Trucking. Jerry's Trucking has effectively accepted this distinction; it relies on arguing that the evidence is sufficient to establish that the drivers had truck lease agreements with the outside carriers.
Discussion - As noted above, it is undisputed that the trucks here were actually owned by Jerry's Trucking. There is also no dispute that, prior to and right up to September 1, 2004, Jerry's Trucking was leasing those trucks to a number of outside carriers, for which they were driven, under those carriers' authorities, by drivers that Jerry's Trucking hired and paid. The question is, whether that relationship was changed by what occurred after September 1, 2004.
After September 1, 2004, in the fall of 2004, Jerry's Trucking entered into written lease agreements with most (2) of the drivers whose status is at issue here. These agreements purported to lease these same trucks to those drivers.
It is difficult to understand how, if a truck was still under lease to a carrier, Jerry's Trucking could at the same time "lease" that truck to someone else (i.e., a driver) in anything like a conventional meaning of the word "lease". First and foremost, the right which a lessee acquires under a lease is the right of possession, and once Jerry's Trucking gave that right to the carrier by leasing the truck to them, it could not very well give that same right to someone else while its lease to the carrier was in effect. It thus becomes important to know whether or when the truck leases between Jerry's Trucking and the carriers ended.
On that point, however, the owner of Jerry's Trucking was vague. He testified that he never terminated the leases of the trucks to those carriers, and that he did not know when those leases ended. He also testified that he could not say for sure if any of the leases with the carriers that he had as of the day before he changed the arrangement, expired during the 4th quarter of 2004 and the 1st quarter of 2005.
Even accepting for the sake of argument that Jerry's Trucking could have assigned its interest as a lessor under these leases with carriers, to the drivers, so that they theoretically stood in its shoes vis-à-vis the truck and the carrier-lessee, there is no evidence that it in fact did so. The leases between Jerry's Trucking and the drivers contain no reference to leases between Jerry's Trucking and the carriers, and they contain no provisions indicating that any such leases are being assigned. On the contrary, the owner of Jerry's Trucking testified directly that he never assigned Jerry's Trucking's lease rights with the carriers, to the drivers who were supposedly leasing the truck from it.
More important than the foregoing, however, is the fact that there is (with one exception) a conspicuous lack of evidence that the drivers actually entered into lease agreements with the outside carriers.
The owner of Jerry's Trucking testified that he was "not exactly sure" if the drivers entered into leases with the carriers; that while he would "guess" they did, he was "not sure"; and that he couldn't say if any of the drivers leased the trucks to somebody else. This testimony is clearly inadequate to establish that the drivers entered into lease agreements with any outside carriers.
Only two drivers testified. One, Terry Miller, testified directly that he entered into a lease agreement with a carrier; the ALJ decided that this served to establish that he had been performing services "for" the carrier rather than Jerry's Trucking, and the department does not dispute this. The other driver who testified, Jeffery Lewis, stated directly that he did not sign a lease leasing a truck to an outside carrier. (Indeed, the record does not even contain a copy of any lease agreement between Jerry's Trucking and Lewis). (3)
Richard John Cornelius, who works for one of the outside carriers involved in this case (Goemann) testified that Goemann leased the trucks from Jerry's Trucking. When questioned by the department's counsel about the existence of any lease agreements directly between the drivers and Goemann, Cornelius asserted that Goemann's corporate office "maintained some records on that", and he claimed to know that "as they became owner/operators", the drivers had to sign a lease agreement and an application with Goemann. However, he did not have copies of any such agreements with him.
The commission weighs against this testimony by Cornelius, the fact that it was inconsistent with that of Giebel in at least one respect. Cornelius testified that the owner/operators under the lease agreement did the permitting and registering of their own trucks. However, Giebel testified, "[w]hen we enter into an arrangement like this, leasing, you don't have to do anything with the Department of Transportation, truck title, or anything like that", indicating that permitting and registering stayed in his name when he entered into his agreements with the individual drivers.
What the commission finds most significant on the question of whether the drivers entered into lease agreements with outside carriers, is what is not in the record: copies of any such agreements.
Jerry's Trucking repeatedly makes excuses for the fact that the supposed leases between the drivers and the carriers were never produced. It argues that it is unreasonable to expect it to have been able to present evidence of the leases supposedly entered into by the drivers with carriers, because by the time the hearing took place, all of those agreements would have been replaced and superseded by later written agreements and the earlier agreements would no longer exist. Initial Brief of Appellant Jerry's Trucking, Inc., p. 2. It also asserts that "[o]bviously it would have been ideal if Jerry's Trucking could have produced copies of those leases, but the company was not a party to those agreements and did not have them in its files". Id., p. 5. It also asserts that "the new lease agreements with the carriers were no longer available to be introduced into evidence". Id., p. 9. Finally, it argues that "[n]either Mr. Giebel nor Jerry's Trucking, Inc. would have been a party to the written lease agreements between the drivers and the carriers" and that therefore Giebel's lack of first-hand knowledge concerning those agreements is "hardly surprising". Rebuttal Brief of Appellant Jerry's Trucking, Inc., p. 3.
This argument relies on a representation, not merely generally implied but also stated expressly, that if there had been lease agreements entered into between the drivers and outside carriers, Jerry's Trucking would not have had copies of those agreements. The problem is, that the record provides reason to doubt that representation.
The agreements entered into between Jerry's Trucking and various drivers all provided expressly that the drivers had an obligation to advise Jerry's Trucking of their operations and any changes therein, specifically including an obligation to provide Jerry's Trucking with a copy of any permanent lease the driver entered into with a certificated carrier:
If LESSEE [i.e., driver] is operating under a permanent lease to a certificated carrier, he must provide LESSOR [i.e., Jerry's Trucking] with a copy of said lease, and LESSEE may not lease to a different certificated carrier without written permission of LESSOR, which permission may not be unreasonably withheld.
Exs. 1-10, part 7.e., p. 4 (emphasis added). If there had been any such leases, and if these provisions had been complied with, Jerry's Trucking would have had copies of any leases entered into by the drivers with outside carriers. Even if there had been subsequent leases which "superseded" initial leases entered into by those drivers, Jerry's would also have had copies of those subsequent leases (as well, presumably, as copies of its own written permissions to the drivers to change their sub-lease to a different certificated carrier).
If all of the drivers whose status is at issue here had in fact entered into their own leases with outside carriers, the complete absence of any paper trail whatsoever indicating that there were any such leases, is inexplicable. It seems highly unlikely that all of the drivers would have chosen to ignore the requirement in their agreement with Jerry's Trucking that they provide it with copies of their lease with an outside carrier.
It also seems highly unlikely, if any of the drivers had in fact entered into such leases, and did in fact provide Jerry's Trucking with copies of the leases, that Jerry's Trucking would have lost or thrown away those copies. It should be noted in that regard that when the department began its audit of Jerry's, which according to materials in the file occurred in March, 2006, most of the driver agreements introduced into the record in this case were still in effect and ongoing (Exs. 1, 6, 7, 8, 9, 10). The commission doubts that, faced with an audit questioning the status of these individuals, Jerry's Trucking would have been likely to throw away any copies of any documents it had evidencing their relationship with outside carriers. The commission infers that the reason Jerry's Trucking has no copies of any such leases
now, is that it never had them, because the drivers had never provided it with copies of any such leases - because there had been no such leases.
Conclusion - At least up until September 1, 2004, the trucks involved here were owned by Jerry's Trucking and were subject to leases by Jerry's Trucking to outside carriers. Notwithstanding that after that date, Jerry's Trucking entered into certain agreements with the drivers in this case, the commission finds no persuasive evidence and no reason to believe that Jerry's Trucking's pre-existing leases with the outside carriers ended in the months that followed. It also finds no persuasive evidence and no reason to believe that, during that time, the drivers entered into lease arrangements with any of the outside carriers. It is thus most reasonable to conclude, that the drivers were continuing to provide services "for" Jerry's Trucking, within the meaning of Wis. Stat. § 108.02(12)(a). The ultimate conclusion that they were "employees" of Jerry's Trucking then follows, since Jerry's Trucking did not establish the applicability of the conditions necessary to defeat the presumption of employee status. For these reasons, the commission agrees with and affirms the decision of the ALJ.
cc:
Andrew F. Davis, CPA
Attorney Richard A Westley
Attorney Peter Zeeh
Appealed to Circuit Court. Set aside and remanded, April 14, 2009.
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