Waynes World - February 2006

CONFUSING NEW REGULATIONS REGARDING
CLAMPS AT THE SAFETY HOOK, AND...

WORKERS’ COMPENSATION
CONCERNS & MORE
By Wayne Schooling

Q: Recently, many of my customers have come in to buy U-bolt clamps for their safety cables on their trailers. Several of them have received tickets for not having the correct type, style or number of clamps. Since some of these truckers have gone to other CHP officers and had the tickets signed off (with no changes or repairs), it seems there is a certain vagueness to this issue. I have been told that the DOT has a new rule about clamps at the safety hook. Is this true? Chris Geraurd, Parts Pacific, Corona, CA.

A: Well, it looks like you were right. There were changes made on August 15, 2005 to Part 393, Subpart F, 393.70 and 393.71, however, this section is too extensive to get into with the limited space that I have here. Each section is 10 pages long! The best that I can do is give you the website where you can download these two sections and then go through them yourself. The changes are at: www.fmcsa.dot.gov/rules-regulations/administration/fmcsr/393.htm.

Q: Our trucking company uses more owner operators than company drivers. In our state, owner operators are treated as independent contractors if they meet a “control” test. In an audit, our workers’ comp insurer has now assessed a full workers’ comp premium for each of our owner operators, telling us it’s the law. Can this be right? Brian V.

A: First of all, 50 different state laws govern workers’ compensation - it is a patchwork quilt that defies a simple one-size-fits-all answer. In some states, owner operators can opt out of coverage, in other states, there is a statutory exemption, and in many states, it is determined by state law and other various indicators of control exercised by the company over the operator’s independent actions.

The problem you mention is a recent but more frequent occurrence. It is difficult for workers’ comp insurers to assess the risk of claims from owner operators. For example, owner operators ordinarily are exempt from workers’ comp in Tennessee, but because of a fluke in the statute, they can be subjected to the Workers’ Compensation Act in North Carolina. To understand better, look at this example: if a Tennessee-domiciled owner operator has an accident in North Carolina and seeks recovery there, a workers’ comp claim can be brought against the Tennessee carrier and his insurer under the North Carolina statute.

But this possibility does not mean it is fair or an exercise in good faith for a workers’ comp insurer to assess, after the fact, a full workers’ comp premium from carriers that have owner operators. In my opinion, your insurer should have worked with you from the outset to ensure you disclosed the existence of your owner operators and made sure that you were not exposed to the devastating surprise of full workers’ comp premiums by an audit. His failure to do so may give rise to an errors and omission claim.

The best practice for motor carriers with owner operators in states where workers’ comp coverage is not mandatory traditionally has been to require the owner operator to carry occupational accident insurance. This should be in their contract and actually enforced. In almost every incident, the cost of occupational accident insurance is far less than a workers’ comp premium. Depending on the state of domicile, that difference between workers’ comp (around $9,000 per year) and occupational accident (less than $2,000 per year) is costly. This is real money, and you deserve to be forewarned.

The best thing to do is to make sure that your owner operators are really independent contractors. They should all have a local motor carrier permit in the state they are domiciled in and the motor carrier should have an updated copy always on file. Next, they should all carry their own liability insurance. The motor carrier should not make any deductions for the owner operators pay settlement unless it is in writing. A motor carrier, in today’s litigation, can not afford to make any mistakes that could make the owner operator an employee. And to make matters worse, a California appeals court recently granted workers’ comp benefits to an injured undocumented worker!

Rafael Ruiz obtained employment with Farmers Brothers Coffee using fraudulent documents. He then used a fraudulent Social Security number when filling out a workers’ comp claim form for a work-related injury. Farmers argued that workers’ comp benefits should be denied because Ruiz was in violation of federal immigration law and not legally qualified to work. In addition, the company argued that the employment benefits Ruiz sought were obtained illegally, in violation of the State Insurance Code.

The court rejected both arguments. It ruled that Labor Code section 3351, which defines an employee, includes unlawfully employed aliens, and Labor Code section 1171.5, which extends protection of state law to all individuals regardless of their immigration status (except reinstatement to a job as prohibited by federal law), do not conflict with federal immigration law or policy. Further, the court ruled that it was Ruiz’ employment, and not the compensable injury, that was obtained through the use of the fraudulent documents.

If you have any doubts about how your company is treating owner operators, you can always call me at the NTA. This issue is just too big, too costly and too confusing to take the chance of making a mistake. Figure it out now and fix it (if it’s not right) before it becomes a real problem.

~ If you have any questions you’d like Wayne Schooling to address, send them to NorthAmerican Transportation Association, 2533 N. Carson Street, Suite 346, Carson City, NV 89706-0147 or send him an e-mail to wayne@ntassoc.com. Wayne can also be reached by calling (562) 279-0557 in CA or (800) 805-0040 outside CA. Until next month, “Drive Safe - Drive Smart!”