PROTECTING YOUR SMALL TRUCKING COMPANY

The State of California has sued Dick Simon Trucking, a Salt Lake City based carrier, to pay for the damage done by a company driver who slammed his big rig into the State Capitol building last January. The suit seeks $13.5 million in actual damages and $100 million in punitive damages from Dick Simon Trucking Inc.

Truck driver Mike Bowers, who had a history of legal and mental problems, rammed his vehicle into the Capitol’s south portico. The truck, which was carrying a load of canned milk, caught fire, killing Bowers and leaving the building with fire, smoke and water damage. Repairs are still being made to the heavily-damaged building.

The suit says the company was aware of Bowers’ emotional problems and hired him anyway. So when it comes time to change jobs or carriers, don’t get too bent out of shape when they insist on you giving them some names and addresses of where you have worked in the last seven years. This case will be an eye-opener for some companies, and who knows where the lil’ skunk will land?

PROTECTING YOUR SMALL BUSINESS

Here is another true story that I recently ran across. I have changed the names but the basic facts are still present. This sad tale unfolds further ramifications that can take place when you don’t have a viable contract in place. Consider the sad story of John Smith. Mr. John Smith and his wife run a small local trucking company called ABC Trucking. ABC uses independent contractors who drive ABC’s trucks. ABC pays for the truck insurance, fuel and repairs of the tractor. ABC further supplies a cell phone and a fuel card. Nothing wrong with this situation as many of the larger carriers have similar lease programs.

John Smith’s wife works in an attorney’s office. She had the foresight to have a contract drawn up and had her boss review it. You may think, so far so good, John and his wife have made some good business decisions. But have they? Was the attorney knowledgeable in the trucking industry? Was it a transportation agreement at all? Was it a lease agreement?

Now ABC gets a client that requires a special kind of trailer for loading of its freight. The independent contractor that took the empty out to the customer for loading took the wrong type of trailer. The customer at the other end refuses to pay ABC because it can’t unload the trailer so ABC tells the driver he won’t get paid because he made the mistake.

The driver claimed he was still owed money. The driver gets mad and quits. Later, he files a complaint with the local labor board regarding the monies, which he felt were still due him. About a month later, ABC and the independent driver come to an agreement about the monies due and the company pays the driver. Problem is, the complaint isn’t withdrawn and both parties still have to face the labor board.

At the hearing, ABC asserts that prior to entering into the independent contractor agreement with the driver, legal advice was obtained which legitimizes the agreement. ABC further states that the driver was aware of and was in agreement with this arrangement, although his signature was never put on the written agreement. ABC also stated that the driver was responsible for the payment of the insurance deductibles due to damage caused to ABC’s truck by the independent driver.

The labor board quickly established that the independent driver was really an employee. The labor board stated that although ABC asserts that the independent driver agreed to sign the contract between the parties regarding employment as an Independent Contractor, it is undisputed that no document was ever signed by the driver. Further, ABC did not have a signed written authorization from the driver authorizing any deductions from his settlements.

The labor board stated, "With regard to the cell phone deductions, an employer may not take deductions from an employee’s wages other than required by law or for other purposes as authorized by the employee for such matters as benefit premiums and charitable contributions. A deduction from an employee’s earnings, not specifically allowed by law or by a voluntarily executed written authorization from the employee for a specific amount, constitutes a pre-judgement attachment of the employee’s wages and is an abridgement of due process of law.” Now here comes the kicker.

Since ABC could not prove the individual an Independent Contractor, the board had no choice but to make him an employee. And since he was now established as an employee, Labor Code Section 201, which requires that employees receive their final wages in full at the time of discharge, comes into effect. Wages are not ordinary debts. They are preferred over all other claims because of the economic position of the average worker. Labor Code 203 provides that the wages of an employee shall continue from the date due until the wages are paid, up to a maximum of 30 days, when an employer willfully fails to comply with the requirements of Labor Code Section 201. The term "willfully" as used in Labor Code Section 203 merely means that the employer failed to perform a required act.

The testimony at the hearing established the driver was not paid his full wages and Labor Code Section 201 requires all wages to be paid at termination. Accordingly, the driver was entitled to recover $6,255.30 in waiting time penalties, calculated at the driver’s daily rate of $208.51 per day (208.51 X 30 days). To make matters worse, ABC still had to pay several thousand dollars to their lawyer for representation.

A well-written and signed Independent Contractor Agreement would have eliminated all this unpleasantness. In fact, ABC probably would not have had to pay the driver anything if they had had the proper signed and written documents in place. Good Independent Contractor Agreements serve two purposes: they help small businesses avoid costly misunderstandings and legal disputes, and they can prevent problems with the IRS and other government agencies by making it clear that the person your are hiring is an independent contractor, not an employee.