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

Client Alert

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.


Valley National Bank/Trulieve Loan: A Big Step Out of the Shadows

In a late December press release, Trulieve announced that it had secured a $71.5 million commercial bank loan. In addition to the amount of the loan, which may be the largest commercial bank loan to date to a cannabis company, the release prominently identified Valley Bank and featured both a quote from Valley’s Senior Vice President, John Myers, and a description of the Bank’s service platform and commitment to the cannabis industry.

The End of Non-Competes? The Impact It Will Have on the Healthcare Industry

On January 5, 2023, the Federal Trade Commission (“FTC”) announced a proposed rule that, if enacted, will ban employers from entering into non-compete clauses with workers (the “Rule”), and the Rule would void existing non-compete agreements. In their Notice, the FTC stated that if the Rule were to go into effect, they estimate the overall earnings of employees in the United States could increase by $250 billion to $296 billion per year. The Rule would also require employers to rescind non-competes that they had already entered into with their workers. For purposes of the Rule, the FTC has defined “worker” to also include any employees, interns, volunteers, and contractors.”

2022 Healthcare Recap and 2023 Healthcare Check-Up

As the country begins to return to a new “normal” following the COVID-19 pandemic, there are many healthcare rules changing on both the federal and state levels as a result. Thus, it is important for healthcare providers and their employers to be aware of these changing rules, and any implications they may have on their practice. Look back on healthcare in 2022 and find a checklist for 2023.

Direct Support Professional Retention Payments

On December 15, the Ohio Senate and House passed House Bill 45, which authorizes the Department of Developmental Disabilities (DODD), in conjunction with the county boards of developmental disabilities, to launch their initiative to issue retention payments to Direct Support Professionals (DSPs). These retention payments will be distributed quarterly to participating home and community-based waiver providers to address the workforce crisis in the direct provider sector. Governor DeWine needs to sign the Bill to begin the payments, but he is expected to do so by the end of 2022.

Real Estate Investors Position for 2023 Opportunities

Real estate investors weathered another year in a post-pandemic world, with the year closing with yet another interest rate increase coupled with both uncertainty and heightened interest carrying into 2023. Just last Wednesday, the Federal Reserve raised its benchmark interest rate 0.50 percentage points, shifting the target range to 4.25% to 4.50%. The new level is the highest the fed funds rate has been since December 2007 and marks the seventh rate hike this year. So what does this mean to investors, brokers, lenders, and others in the real estate world? Read a few perspectives below from stakeholders familiar with our BMD clients and the markets in which they do business.