DONALD FLOERCHINGER, Applicant

NESTLE TRANSPORTATION, Employer

TRANSPORTATION INSURANCE COMPANY, Insurer

Nestle Transportation and Transportation Insurance Company (respondents) submitted a petition for commission review alleging error in the administrative law judge's Finding and Interlocutory Order issued in this matter on March 8, 2001. Briefs have been submitted by the parties. At issue is whether the applicant is an independent contractor pursuant to Wis. Stat. § 102.07(8).

The commission has carefully reviewed the entire record in this matter and hereby reverses the administrative law judge's Findings and Interlocutory Order. The commission makes the following:

The applicant, whose birth date is September 4, 1941, is the owner/operator of a Kenworth semi-tractor. He began hauling freight for Respondent Nestle Transportation Company in September of 1995. At this time, he signed a "Contractor Operating Agreement" with Nestle whereby he agreed to provide his personal driving services and the exclusive use of his tractor to Nestle. This contract included a stipulation that the applicant perform his services under Nestle's Federal Motor Carrier operating authority, which required him to prominently affix Nestle's name to his tractor. The agreement further provided Nestle with exclusive possession and control of the applicant's tractor during its term, and thus the applicant was not free to haul freight for any other entity. The agreement was subject to immediate termination by either party, with or without cause, upon receipt by the other party of written notice of termination, either sent through the mail or delivered in person.

The agreement contemplated that the applicant would provide his services as an independent contractor who would be "free . . . to determine the means and methods of performance of all transportation services undertaken . . . ." In practice, the applicant was free to refuse to haul loads offered to him; however, when he did so Nestle would place his name at the bottom of the dispatch list, or on occasion offer him shorter, less desirable trips for his next dispatch. Nevertheless, the reasonable inference from the applicant's testimony is that he refused loads for various reasons, and that Nestle regularly offered him trips of sufficient distance to satisfy his economic needs and motivate him to continue his contractual relationship with Nestle.

Nestle paid the applicant at the rate of 85 cents per mile for all except infrequent short hauls paid on a different basis. The 85 cents per mile was based on the most direct route as calculated by Nestle, leaving the applicant to sustain the loss should he for some reason choose or be required to take a different route. From this 85 cents per mile, the applicant was responsible for his tractor financing payments, fuel, highway use taxes, maintenance and repairs, insurance, meals and lodging, and license fees. Nestle reimbursed the applicant for tolls but only in accordance with Nestle's determination of how many tolls were authorized. Nestle provided the applicant with a credit card for fuel purchases for accounting convenience, but the fuel cost accrued to the applicant. Nestle also provided the applicant with logbooks and trip sheets. Nestle reimbursed the applicant for payments made to lumpers.

Nestle employs approximately the same number of "employee" drivers as it does "independent contractor" drivers, and pays the former only 30 cents per mile, but pays expenses and provides those individuals with all the common employee benefits such as pension, insurance, etc. The applicant could have applied with Nestle for employment as an employee driver, but there was never any communication between him and Nestle regarding this alternative.

Nestle also required the applicant to install a satellite tracking and communication device in his tractor cab. Nestle paid for this device and for its installation, but charged the applicant a rental fee for it. Nestle owned the trailers used for hauling. If the applicant broke down on a trip, he would be paid at his regular rate for the number of miles driven up to the point of breakdown, and would be paid at a lesser rate if he had to "deadhead" or "bobtail" to another location before picking up another load.

The applicant also purchased liability insurance through Nestle, whereby his exposure to loss was limited to $1,000.00. The Contractor Operating Agreement required the applicant to purchase his own worker's compensation insurance policy and thereby hold Nestle harmless for any injury, but he failed to purchase such policy. His claim is for an injury which occurred on or about May 13, 1998.

The applicant filed a sole proprietorship tax return (Schedule C) in each year of his agreement with Nestle. He has owned a number of tractors and has been an owner/operator of them since 1965. He has a federal employer identification number which is required to pay road use taxes.

The administrative law judge found that it had not been demonstrated that the applicant satisfied all the required tests which must be met for an independent contractor not to be an employee under Wis. Stat. § 102.07(8)(b). She found that he did not maintain a separate business, did not control the means of performing the work, and was not responsible for satisfactory completion of the work and liable for failure to complete the work. The commission finds that the applicant met all nine conditions for independent contractor status under Wis. Stat. § 102.07(8)(b). The commission will set forth below its findings with respect to each statutory condition.

1. Maintains a separate business with his or her own office, equipment, materials and other facilities.

The applicant maintained a separate business as an independent owner/operator of his truck tractor. He did not have a formal office for his trucking business, other than his home, where it is inferred that he stored his business records. He completed necessary paperwork on the road or at Nestle facilities where he made deliveries. Accordingly, his home and his truck cab together served as the only office he needed to maintain his business. The applicant owned a 1994 Kenworth tractor when he began driving for Nestle, and financed the purchase of a new tractor in 1997, thus constituting a major piece of business equipment. He also owned and utilized other equipment and materials such as tools, tire chains, load locks, belts, flares, and licenses.

The administrative law judge found that since the agreement between Nestle and the applicant provided that the applicant and his tractor were to be in the exclusive service of Nestle during the period of the agreement, it could not be found that the applicant maintained a separate business. However, the applicant has driven his own truck as an owner/operator for various companies since 1965. He acknowledged that he possessed everything he needed to operate his tractor for any other company which had federal operating authority, and his agreement with Nestle was severable at his discretion upon written notice submitted to Nestle. Accordingly, the applicant's voluntary agreement to operate his tractor exclusively for Nestle during the period he chose to continue that agreement, merely constituted one exercise of his owner/operator business. Had Nestle ceased to exist as a business entity, the applicant could have conducted his business with numerous other transportation companies, just as he had in the past. This fact was recognized under similar circumstances in Blose v. Roberts Trucking Inc. and Westbend Mutual Insurance Co., WC Claim No. 1998040771 (LIRC December 8, 1999). Considering the particular facts of the applicant's case, the reasonable inference is that he met the separate business requirement of Wis. Stat. § 102.07(8)(b)1.

2. Holds or has applied for a federal employer identification number with the federal internal revenue service or has filed business or self-employment income tax returns with the Federal Internal Revenue Service based on that work or service in the previous year.

It is undisputed that the applicant had applied for and received a Federal Employer Identification Number, and that he had consistently filed business tax returns with the Internal Revenue Service. Therefore, both conditions of Wis. Stat. § 102.07(8)(b)2 were met.

3. Operates under contracts to perform specific services for work or specific amounts of money and under which the independent contractor controls the means of performing the services or work.

The applicant contracted with Nestle to perform specific transportation services for specific amounts of money. While the contractual terms for each long-haul delivery the applicant made did not vary, if the applicant was not content with these terms he was free to sever the contract at any time. He informed the dispatcher of the type of deliveries he needed in order to maintain a profitable business, and was assigned such deliveries. On occasion, he agreed to perform short haul deliveries for Nestle at different rates of reimbursement.

The administrative law judge found that because Nestle established delivery deadlines and based the applicant's compensation on the most direct routes to and from the delivery sites, the applicant did not control the means of performing the work. However, delivery deadlines and completion deadlines are frequently an integral part of business contracts. A customer's demand for completion of a service by a certain date and time is merely one more responsibility of the business contractor providing the service. Such demand does not constitute control of the means of performing the work. Furthermore, the applicant acknowledged that on occasion he rejected a load when he didn't believe he could complete it by the deadline set by Nestle.

Nestle's computation of the most direct route for delivery constituted its offer for the amount of compensation it would pay for a particular delivery job. The applicant was free to accept or reject this contractual condition at the time he entered into agreement with Nestle. The condition was reasonable and the applicant accepted it each time he drove for Nestle. This meant that if for any reason he took a less-than-direct route to the delivery site, he ended up with less money for his services. Such risk of loss is consistent with a business enterprise. In addition, the applicant acknowledged that on numerous occasions, and for various reasons, he refused loads offered to him by Nestle. It is clear from these facts that the applicant controlled the means of performing his services for Nestle.

4. Incurs the main expenses related to the service or work that he or she performs under contract.

The applicant paid for virtually every expense related to the services he performed under contract with Nestle. His agreement with Nestle provided for this fact, and that was the actual practice with the exception of road tolls. The agreement provided that tolls were the applicant's responsibility, but in practice, Nestle paid most of those. Nevertheless, there is no question that the applicant incurred the main expenses related to his services for Nestle.

5. Is responsible for the satisfactory completion of work or services that he or she contracts to perform and is liable for a failure to complete the work or service.

The applicant was responsible for the satisfactory completion of his services and was liable for failure to complete them. The administrative law judge found this was not true because on those unspecified occasions when the applicant's tractor broke down during a delivery trip, Nestle would send another tractor to the location of the breakdown to complete the delivery. Furthermore, Nestle paid the applicant at the regular, per-mile rate for the miles driven to the point of the breakdown. The agreement between Nestle and the applicant provided in relevent part:

"If for any reason, Contractor fails to complete a delivery in transit, or abandons a shipment or otherwise subjects Nestle to liability to shippers or governmental agencies on account of its acts or omrnissions (sic) enroute, Contractor expressly agrees that Nestle shall have the right to complete performance using the same or other equipment, and hold Contractor liable for the cost thereof and for any other damages. Contractor hereby waives any recourse against Nestle for such action and agrees to reimburse Nestle for any costs and expenses incurred by Nestle as a result of its having to complete such trip, and to pay to Nestle any damages for which Nestle may be liable to shipper arising out of such default by Contractors."

It is clear from this contractual provision that the applicant was responsible for completing the delivery service and liable for any failure to complete it. Those infrequent occasions on which the applicant's tractor broke down, and Nestle protected its business interests by timely completing the delivery itself, constituted ad hoc responses to isolated business emergencies. The overall responsibility and liability remained with the applicant. Had the applicant failed to deliver any load for a reason other than a breakdown, it is clear from the contractual language and his testimony that he would have suffered the financial consequences. The compensation Nestle paid the applicant for the miles he had driven to the point of breakdown was consistent with the contractual agreement for compensation for services performed, and did not change his responsibility or liability to complete his services.

6. Receives compensation for work or service performed under a contract on a commission or per job or competitive bid basis and not on any other basis.

The applicant received compensation from Nestle on a per job basis, in accordance with the number of miles the particular hauling job entailed. Each hauling job was independently offered by Nestle and accepted by the applicant, on the basis of compensation which the applicant could accept or reject by accepting or rejecting the load, or by giving unilateral notice of termination of the Contractor Operating Agreement.

7. May realize a profit or suffer a loss under contracts to perform work or service.

For each contractual load the applicant delivered he could realize a profit or suffer a loss based on numerous factors such as the price of fuel, maintenance and repair expense, accidents, etc.

8. Has continuing or recurring business liabilities or obligations.

No reasonable person could dispute the fact that the applicant had continuing and recurring business obligations in the operation of his trucking business. He was obligated to perform delivery of each load he accepted from Nestle, in accordance with the contractual terms.

9. The success or failure of the independent contractor's business depends on the relationship of business receipts to expenditures.

The success or failure of the applicant's trucking business did depend on the relationship of his receipts from Nestle compared with the expenditures he made in operating and maintaining his trucking service. His Schedule C tax returns attest to this fact, e.g., in 1997 his trucking business made a net profit of $2,632.35, but in 1996 the trucking business sustained a net loss of $1,153.14.

The applicant was an independent contractor pursuant to Wis. Stat. § 102.07(8), and his application will therefore be dismissed.

The Findings and Interlocutory Order of the administrative law judge are reversed. The application is dismissed.

Dated and mailed August 15, 2001
floerdo . wrr : 185 : 8  ND § 2.13  § 2.14 

/s/ David B. Falstad, Chairman

/s/ James A. Rutkowski, Commissioner

cc: 
Attorney Thomas A. Siedow
Attorney Alan E. Seneczko

Appealed to circuit court. Affirmed February 27, 2002. Appealed to the Court of Appeals. Affirmed November 7, 2002 (unpublished per curiam opinion).

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