RENDERED: October 18, 1996; 10:00 a.m.
NOT TO BE PUBLISHED
NO. 95-CA-2152-MR SWINFORD TRUCKING, INC. APPELLANT
APPEAL FROM FRANKLIN CIRCUIT COURT V. HONORABLE ROGER L. CRITTENDEN, JUDGE
ACTION NO. 89-CI-1476
KENTUCKY UNEMPLOYMENT INSURANCE COMMISSION APPELLEE
OPINION AFFIRMING
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BEFORE: WILHOIT, Chief Judge, EMBERTON, and GUDGEL, Judges. GUDGEL, JUDGE: This is an appeal from a judgment entered by the Franklin Circuit Court affirming an order of the Kentucky Unemployment Insurance Commission (KUIC) which determined that certain drivers were employees of appellant Swinford Trucking, Inc. (Swinford) rather than independent contractors, and that Swinford therefore was delinquent in making contributions of unemployment taxes to the state on wages paid to those drivers. On appeal, Swinford contends that the court erred by affirming the KUIC's order. We disagree. Hence, we affirm.
The evidence shows that Swinford, which has been engaged in an interstate trucking business since 1981, operates a
fleet of trucks and trailers which are driven by licensed truck drivers who meet Federal Department of Transportation guidelines for drivers in interstate commence. Swinford contacts those individual drivers on a rotating basis as jobs become available. Each driver, who may accept or reject any offered job, is responsible for planning his or her own itinerary. Moreover, in the absence of mechanical difficulties each driver consistently uses the same truck from job to job.
Swinford carries liability insurance on the drivers, and it pays for all licenses, fuel costs, and maintenance and repair costs. While on the road, each driver must call Swinford's office twice daily. However, the drivers are required to sign contracts stating that they are considered to be self-employed and that they will be compensated for each job at the rate of twenty percent of the gross freight charge. They are then individually responsible for reporting their earnings at the end of the year in accordance with self-employment income tax forms issued for that purpose. The drivers neither receive reimbursement for meals and lodging while on the road, nor receive benefits such as paid leave, insurance or retirement. Moreover, the drivers assume liability for any negligent damage which occurs to the freight they haul. Finally, although they do not often do so, drivers may accept shipping assignments from other companies or brokers.
The matter before us stems from a claim made by one of Swinford's drivers for state unemployment insurance benefits.
After it was discovered that Swinford had not paid state unemployment taxes on the drivers, an administrative proceeding was commenced which resulted in a determination that, contrary to Swinford's claim, the drivers were its employees rather than independent contractors. Accordingly, Swinford was assessed for delinquent tax contributions in the amount of $16,791.31 plus interest. That determination was affirmed on appeal to both the KUIC and the Franklin Circuit Court. This appeal followed.
First, Swinford contends that it is not liable for unemployment taxes because, pursuant to traditional common law analysis for determining employer-employee relationships, its drivers were clearly independent contractors rather than employees. We disagree.
KRS 341.050(1)(a) defines "covered employment" for purposes of unemployment insurance as including services which are performed by "[a]n individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee." The factors for making this determination, as found in the Restatement (Second) of Agency $220 (1958), are set out in Ratliff v. Redmon, Ky., 396 S.W.2d 320, 324-25 (1965), as follows:
(a) the extent of control which, by the
agreement, the master may exercise over the details of the work;
(b) whether or not the one employed is
engaged in a distinct occupation or business;
(c) The kind of occupation, with
reference to whether, in the
locality, the work is usually done under the direction of the employer or by a specialist without supervision;
(d) the skill required in the particular occupation;
(e) whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work;
(f) the length of time for which the person is employed;
(g) the method of payment, whether by the time or by the job;
(h) whether or not the work is a part of the regular business of the employer; and
(i) whether or not the parties believe they are creating the relationship of master and servant.
In the matter now before us, the KUIC's order set out the following justification for its finding that Swinford's drivers were employees:
As stated above, we look at the factors set forth in Restatement of Agency Second $ 220 (1958) in deciding whether or not an individual is an employee. In this case some factors indicate that drivers were employees while others indicate otherwise. We find in looking at all factors that the drivers were employees. They have no financial investment in appellant's business or a business of their own and are simply exchanging their personal service for pay. They perform work which is an integral, ongoing part of appellant's trucking business and while there is some element of risk to them, that risk is not significantly greater than that of employees in other situations. While detailed supervision is minimal,
appellant by controlling the trucks and the money has ultimate control over the economic livelihood of the drivers. We find that the drivers are employees.
In upholding this order, the circuit court stated:
The Commission found the following Restatement factors persuasive. A consideration of factor (a), extent of control, reveals that although Swinford does not set the drivers' itineraries, it exercises ample control over all other aspects of the work to effectively control the drivers' economic livelihood. The right to control the details of work is the primary criterion. Ratliff v. Redmon, 396 S.W.2d 320, 327 (1965).
Factor (e), the furnishing of tools and a place to work, supports a finding in favor of an employee relationship. The drivers do have not [sic] a financial investment in appellant's business, as Swinford provides the trucks, fuel, and maintenance necessary for the drivers to complete their work in exchange for wages.
Factor (h), whether the work is a part of the regular business of the employer, also supports a finding in favor of an employee relationship. Hauling freight is an integral part of Swinford's trucking business and the drivers assume no greater liability for their cargo than that of employees in similar circumstances.
There is substantial evidence in the record to support the Commission's finding. The actual employment conditions in this case reasonably lead to the conclusion that the drivers are employees rather than independent contractors. In determining whether an individual is an employee or an independent contractor, the court should "view the situation realistically in light of the business conducted and the nature of the services rendered."
Litteral v. Commonwealth, Ky., 228 S.W.2d 37, 38 (1950). The court should disregard legal fictions if the conventional relationship of employer and employee exists. Commonwealth v. Potts, et al., Ky. App., 175 S.W.2d 515, 516 (1943).
Clearly, the KUIC's order is based upon facts which are both supported by substantial evidence and essentially undisputed. Hence, the issue of whether the claimant was an employee or an independent contractor becomes one of law, and the precise issue now before us is whether the KUIC and the circuit court misapplied the relevant law in any respect in determining that Swinford's drivers are employees. See Uninsured Employers' Fund v. Garland, Ky., 805 S.W.2d 116 (1991); Kosmos Cement Co., Inc. v. Haney, Ky. 698 S.W.2d 819 (1985). Because a review of the facts of this case in light of the actual employment conditions reasonably leads to a conclusion that Swinford's drivers are employees rather than independent contractors, we must conclude that the KUIC did not err in this vein. Id.
Finally, we are not persuaded otherwise by Swinford's contention that this case is governed by an earlier IRS administrative decision which was favorable to Swinford's claim that its drivers are independent contractors. Obviously, in the absence of a federal statute or regulation which mandates such a result, a federal administrative agency's interpretation of federal law is not binding upon an independent state administrative agency's interpretation of state law. We are
aware of, and have been cited to, no such statute or regulation which would affect the outcome of this proceeding.
The court's judgment is affirmed. ALL CONCUR.
BRIEF FOR APPELLANT: James A. Anderson Benton, KY
BRIEF FOR APPELLEE: Timothy A. Sturgill Frankfort, KY