Judge Rules for 2 Large Fleets in Cases Involving Contractors
By Jonathan S. Reiskin, Associate News Editor
This story appears in the Feb. 16 print edition of Transport Topics.
Two of the nation’s largest trucking companies won legal victories in Massachusetts when a U.S. District Court judge overturned two of his earlier decisions on independent contractor cases so they would line up with an appeals court decision.
Judge Richard Stearns issued orders Feb. 5 in favor of FedEx Ground and J.B. Hunt Transport, which had been sued by owner-operators working for the motor carriers. The drivers claimed they were misclassified as independent contractors and should have been considered employees.
Stearns said he issued the orders to mesh with an October decision by the 1st U.S. Circuit Court of Appeals in Boston in the case Massachusetts Delivery Association vs. Martha Coakley.
“In MDA, a case virtually identical to this one in its relevant respects, the First Circuit rejected the view I shared with Judge [Denise] Casper that the Federal Aviation Administration Authorization Act did not preempt the second prong” of a Massachusetts state law, Stearns wrote in his FedEx order.
Casper, also a U.S. District Court judge in Boston, heard the Massachusetts Delivery case at trial, whereas FedEx and Hunt were on Stearns’ docket.
FAAAA is important for trucking because of a section that says states may not regulate the industry based on pricing, routes or services. Congress reserved that authority for itself because most trucking is interstate commerce, said Richard Pianka, deputy chief counsel of American Trucking Associations.
“Congress wanted motor carriers to operate on a basis of national rules,” said Pianka, adding that Congress passed FAAAA in 1994, in part, to correct problems associated with deregulating trucking in 1980.
FedEx Ground and J.B. Hunt Transport are subsidiaries of FedEx Corp. and J.B. Hunt Transport Services, which rank Nos. 2 and 3, respectively, on the Transport Topics Top 100 list of the largest for-hire carriers in the United States and Canada.
Massachusetts addresses labor classification with a three-part test, Stearns said. It is the second piece of the test that has caused major problems for trucking companies using the independent contractor model.
The second part says a truly independent contractor must provide a service that is “performed outside the usual course of the business of the employer.”
The other two prongs say a proper independent contractor should be “free from control and direction” in the performance of the service and that he or she should be “independently established” in a relevant “trade, occupation, profession or business.”
ATA’s Pianka said Massachusetts courts have decided that for trucking, what an owner-operator does is not outside the usual course of what a motor carrier does.
That has the effect of “turning the test into a ban,” he said of prong two.
Attorneys for the drivers said they are pursuing appeals.
“The case is being appealed [Feb. 11],” said Harold Lichten, the Boston-based attorney representing 10 drivers who sued FedEx. “The decision is an outlier and very unlikely to stand up on appeal.”
“We are planning to file a motion for reconsideration with Judge Stearns,” said Hillary Schwab, also a Boston lawyer, who represents William Remington and Musan Durakovic, the drivers who sued Hunt. “I expect that we will be filing that motion within the next week or so.”
The 1st U.S. Circuit also covers Maine, New Hampshire, Rhode Island, and Puerto Rico. The Massachusetts Delivery decision said trial courts must not uphold state regulation of price, routes and services unless there is a very compelling reason to do so.
FAAAA’s provision for price, routes and services is also a key part of the argument by Penske Logistics to overturn a California law that mandates rest breaks. Penske and American Trucking Associations have asked the U.S. Supreme Court to hear Penske’s appeal regarding the law.
Indiana is testing weigh ‘stations’ that requires no stopping
If you drive along I-94 in northwest Indiana, you can expect to be part of a pilot program for a virtual weigh station that uses sensors embedded in the pavement.
The Indiana Department of Transportation, Indiana Department of Revenue, Indiana State Police and Purdue University are partnering with Kapsch TrafficCom to study a new process to weigh trucks traveling on the highway.
The system combines cameras with in-pavement scales to identify and weigh trucks as they pass. This eliminates the need for trucks to slow down to go through a weigh station. When combined with federal and state compliance information, the system can provide a compliance assessment, according to INDOT, to help law enforcement target overweight trucks.
Cameras will capture the DOT and license numbers of passing trucks, allowing law enforcement to access details about a carrier’s’ operation.
Members of the Joint Transportation Research Program at Purdue University will review the results of the pilot program to ensure accuracy of the sensors and provide recommendations for possible legislative changes to enforcement policies.
Indiana lawmakers would have to pass a new law to allow for the collected data to be used to issue citations.
FAAAA General Information
U.S. Congress enacted a statute (49 U.S.C. § 14501(c)(1))
that controls over state and local law:
a State, political subdivision of a State, or political authority of 2 or more
States may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier (other than a carrier affiliated with a direct air carrier covered by section 41713(b)(4)) or any motor private carrier, broker, or freight forwarder with respect to the transportation of property. Similar provision in 14501(b) focused exclusively on freight forwarders and brokers
1978: Airline Deregulation Act – Preempts “any law, regulation, or other provision having the effect of law related to a price, route, or service of an air carrier”
December 29, 1995: ICCTA – Recodified 49 U.S.C. § 11501(h) at 49 U.S.C. § 14501(c)(1) – Expanded protections to brokers and others
Courts have recognized that, in order to understand the scope of the FAAAA, courts should look at the the ADA as an “analogical template”
The U.S. Supreme Court has held:
Congress intended ADA preemption to be very broad due in large part to the “relating to” phrase
Morales v. Trans World Airlines, 504 U.S. 374 (1992)
Congress did not intend to bar adjudication of routine breach of contract claims American Airlines, Inc. v. Wolens, 513 U.S. 219 (1995)
ADA cases have involved freight claims, freight charge disputes, personal injuries, and many other types of other claims
Haley Hill Designs, LLC v. United Parcel Service, Inc., 2009 WL 4456209 (C.D. Cal. 2009) • Plaintiff brought a putative class action suit for unjust enrichment, restitution, breach of contract and breach of the implied covenant of good faith and fair dealing, arising out of defendant's billing for packages which it did not ship. • In construing the claims before it, the United States District Court for the Central District of California noted that "[t]he Supreme Court has held that these preemption provisions have a 'broad scope' and 'expansive sweep‘” and held: “Therefore, Plaintiffs' state law claims relate to prices and/or services and (with the exception of the breach of contract and breach of implied covenant for good faith and fair dealing claims, see infra) are preempted under FAAAA.”
Sanchez v. Lasership, Inc., (D. Mass. April 3, 2013)
Motor Carrier claims that Section 148B (contractor’s service must be “outside the usual course of business for which service is performed”) is preempted. – Court agrees that statute is preempted because it “relates to” or has a “connection with” the motor carrier’s prices, routes, and services because “it
(1) dictates the employment relationship carriers must utilize in its operations, thereby affecting carriers’ rates and services,
(2) significantly increases carriers’ costs such as to have a significant effect upon carriers’ prices, routes and services, and
(3) materially alters the common law test for independent contractor status, leading to a patchwork of varying state laws and resulting liability . . . .” •
Statutory Exceptions FAAAA does NOT preempt
Safety regulatory authority of a State with respect to motor vehicles
A State’s ability to impose highway route controls / size or weight limits / hazardous cargo controls, etc.
A State’s ability to require minimum amounts of financial responsibility
Intrastate transportation of household goods
Sanchez v. Lasership – Eastern District of Virginia 2013: http://law.justia.com/cases/federal/district-courts/virginia/vaedce/1:2012cv00246/277797/163/
Mass. Delivery Ass’n v. Coakley – First Circuit 2014 http://law.justia.com/cases/federal/appellate-courts/ca1/13-2307/13-2307-2014-09-30.html
Godfrey v. Oakland Port Services - California Court of Appeal 2014: http://law.justia.com/cases/california/court-of-appeal/2014/a139274.html
Villalpando v. Exel Direct – Northern District of California 2015: http://barclaydamon.com/documents/transportation2016/Villalpando_v._Exel_Direct_Inc.__2015_U.S._Dist._LEXIS_118065.PDF
Costello v. BeavEx, Inc. – Seventh Circuit 2016: http://law.justia.com/cases/federal/appellate-courts/ca7/15-1109/15-1109-2016-01-19.html
Schwann v. FedEx Ground Package System – First Circuit 2016: http://law.justia.com/cases/federal/appellate-courts/ca1/15-1214/15-1214-2016-02-22.html