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Motor Carriers Beware - Lack of Written Independent Contractor Agreement Can Be Costly

Given recent changes in Ohio workers’ compensation law, “motor carriers” (as defined by Ohio law) operating in Ohio should carefully review their arrangements with independent contractor drivers and promptly implement changes to ensure compliance with statutory criteria. 

This past year, the Ohio Legislature revised the definition of “employee” as applicable to motor carriers. The statutory revisions can be viewed as either a burden or benefit to the motor carrier. For the motor carrier that carefully examines its practices and ensures compliance with the statutory criteria, the new law can certainly be viewed as additional protection against increased exposure to administrative actions, lawsuits, and substantially higher workers’ compensation premiums. 

Until recently, Ohio courts and the Bureau of Workers’ Compensation (and Industrial Commission) utilized a test developed at common law to determine whether a driver performing services for a motor carrier was an independent contractor or employee. The common law test required an analysis as to whether the carrier controlled the means and manner of the driver’s work – a test often subject to inconsistent application and, consequently, inconsistent rulings by the applicable tribunal. Motor carriers were left with little direction. 

Revised Code 4123.01(A)(1)(d) provides the motor carrier with a test which, if followed, should help the decision-maker find that the carrier’s independent contractors remain as such in the eyes of administrative agencies and the courts. If the driver meets the following seven criteria, the driver will likely not be regarded as an “employee” for purposes of workers’ compensation: 

  1. The contractor owns the vehicle or vessel that is used in performing the services for or on behalf of the carrier, or the contractor leases the vehicle or vessel under a bona fide lease agreement that is not a temporary replacement lease agreement. For purposes of this division, a bona fide lease agreement does not include an agreement between the contractor and the motor carrier transporting property for which, or on whose behalf, the person provides services;
  2. The contractor is responsible for supplying the necessary personal services to operate the vehicle or vessel used to provide the service;
  3. The compensation paid to the contractor is based on factors related to work performed, including on a mileage-based rate or a percentage of any schedule of rates, and not solely on the basis of the hours or time expended;
  4. The contractor substantially controls the means and manner of performing the services, in conformance with regulatory requirements and specifications of the shipper;
  5. The contractor enters into a written contract with the carrier for whom the contractor person is performing the services that describes the relationship between the contractor and the carrier to be that of an independent contractor and not that of an employee;
  6. The contractor is responsible for substantially all of the principal operating costs of the vehicle or vessel and equipment used to provide the services, including maintenance, fuel, repairs, supplies, vehicle or vessel insurance, and personal expenses, except that the carrier may pay the contractor from the carrier’s fuel surcharge and for incidental costs, including tolls, permits, and lumper fees; and
  7. The contractor is responsible for any economic loss or economic gain from the arrangement with the carrier. 

With this test, motor carriers operating in Ohio should expect greater predictability in terms of application and enforcement. Motor carriers that do not effectively implement the necessary changes may find themselves deemed “noncomplying” by BWC and thus subject to costly lawsuits by injured drivers, loss of common law defenses, and administrative enforcement proceedings and assessments. Note that this test is also now used to determine the driver’s status for purposes of unemployment compensation and minimum wage and overtime laws. Motor carriers should be quick to examine their written agreements and practices.

For more information on these recent changes, contact Stephen Matasich or Richard Williger.

Explosive Growth in Pot of Gold Opportunity for Bank (and Other) Cannabis Lenders Driving Erosion of the Barriers

Our original article on bank lending to the cannabis industry anticipated that the convergence of interest between banks and the cannabis industry would draw more and larger banks to the industry. Banks were awash in liquidity with limited deployment options, while bankable cannabis businesses had rapidly growing needs for more and lower cost credit. Since then, the pot of gold opportunity for banks to lend into the cannabis industry has grown exponentially due to a combination of market constraints on equity causing a dramatic shift to debt and the ever-increasing capital needs of one of the country’s fastest growing industries. At the same time, hurdles to entry of new banks are being systematically cleared as the yellow brick road to the cannabis industry’s access to the financial markets is being paved, brick by brick, by the progressively increasing number and size of banks that are now entering the market.

2021 EEOC Charge Statistics: Retaliation & Impact of Remote Work

The U.S. Equal Employment Opportunity Commission (EEOC) released its detailed information on workplace discrimination charges it received in 2021. Unsurprisingly, for the second year in a row, the total number of charges decreased as COVID-19 either shut down workplaces or disconnected employees from each other. In 2021, the agency received a total of approximately 61,000 workplace discrimination charges - the fewest in 25 years by a wide margin. For reference, the agency received over 67,000 charges in 2020, and averaged almost 90,000 charges per year over the previous 10 years.

Ohio’s Managed Care Overhaul Delayed – New Implementation Timeline

At the direction of Governor Mike DeWine, the Ohio Department of Medicaid (ODM) launched the Medicaid Managed Care Procurement process in 2019. ODM’s stated vision for the procurement was to focus on people and not just the business of managed care. This is the first structural change to Ohio’s managed care system since the Centers for Medicare & Medicaid Services' (CMS) approval of Ohio’s Medicaid program in 2005. Initially, all of the new managed care programs were supposed to be implemented starting on July 1, 2022. However, ODM Director Maureen Corcoran recently confirmed that this date will be pushed back for several managed care-related programs.

Laboratory Specimen Collection Arrangements with Contract Hospitals - OIG Advisory Opinion 22-09

On April 28, 2022, the Department of Health and Human Services, Office of Inspector General (“OIG”) published an Advisory Opinion[1] in which it evaluated a proposed arrangement where a network of clinical laboratories (the “Requestor”) would compensate hospitals (each a “Contract Hospital”) for specimen collection, processing, and handling services (“Collection Services”) for laboratory tests furnished by the Requestor (the “Proposed Arrangement”). The OIG concluded that the Proposed Arrangement would generate prohibited remuneration under the federal Anti-Kickback Statute (“AKS”) if the requisite intent were present. This is due to both the possibility that the proposed per-patient-encounter fee would be used to induce or reward referrals to Requestor and the associated risk of improperly steering patients to Requestor.

Property Owner Protection from Tax Valuation Challenges

New legislation provides significant new protections for commercial property owners against challenges to valuation primarily by local school boards and prohibiting side agreements to avoid tax valuation changes. The Ohio Legislature has approved House Bill 126 which will go into effect July 2022 but will effectively apply to the 2023 tax valuation year.