TRANSTRENDS MONTHLY NEWSLETTER- December 2005
12/07/2005

A PUBLICATION OF THE TRANSLAW GROUP, INC.
EDITOR: JAMES M. BURNS
48 ROBBINS ROAD, SPRINGFIELD, MA 01104
TOLL FREE 800 637 0754
TEL 413 732 8588
FAX 413 732 8553
EMAIL: informatioverett-associates.com

IN THIS ISSUE
1 Fuel Line
1 No Skid Zone
2 Not the Biggest Loser
3 City of Brotherly Love
6 NYC Tolls
7 Shipping Term, FOB
7 Employee Definition

NEWS ALERT - Important Renewals…
Bay State IFTA Account
Single State Registration
NY HUT Decals

FUEL LINE
Each issue we will feature as the first item the FUEL LINE which will alert you to those states that are planning tax increases, toll hikes and other fees.

Again, carriers should consider the implementation of a fuel surcharge program due to the constant fluctuation in the price of oil. Obviously, this situation will not change soon.

NO SKID ZONE
Bill O’Reilly may have the “No Spin Zone” but the Translaw Group has the “No skid Zone”. Each issue will highlight the absurdity of a particular rule, regulation, law or government action that just doesn’t make common sense.

GEORGIA LAWMAKER FOUND GUILTY OF DUI
DESPITE IMMUNITY PLEA
A Georgia state lawmaker has been convicted on a drunken driving charge despite his attempt to claim legislative immunity. State Court Judge Irma Glover found Rep. David Graves, R-Macon, guilty of driving under the influence Nov. 2. Glover said she would hold off on sentencing Graves until after a trial slated to start later this month on another DUI charge against the representative from last year in Cobb County.

The lawmaker was stopped Feb. 15 at a roadblock in Vinings, GA. He acknowledged that he had four glasses of wine during a dinner meeting with other legislators and that sounds like a bottle of wine to us. Graves claimed that his legislative immunity should have trumped his arrest. The provision stipulates that lawmakers cannot be arrested during sessions of the General Assembly or its committees, or while traveling to either one. Exceptions apply, but the law was written to prevent politicians from ordering the arrests of their rivals. According to the newspaper, during the stop Graves told police: “I’m playing every card I got in the deck,” referring to the provision.

Glover ruled that even though the Legislature was in session on the day of his arrest, there was no evidence that the dinner he was driving to when stopped was either a committee meeting or part of any legislative session. Graves resigned in September as chairman of the House Regulated Industries Committee. The panel handles liquor industry legislation.

ONE SIZE DOES NOT FIT ALL!
An Oregon trucker has won a lawsuit after his company suspended him, claiming his weight interfered with his ability to do his job. John McDuffy, who stands 6-feet-tall and weighs about 550 pounds, truly a big boy, had been employed for 14 months by Interstate Distributor Co. in Tacoma, WA, when the company assigned him to a new truck in May 2004.

Unlike his usual truck cab, this new one was smaller, with a broken steering wheel adjuster, which prevented him from fitting inside the truck. After McDuffy reported the problem to the company, he was suspended from his job without pay until further notice, according to The Associated Press. McDuffy was allowed back and given a bigger truck later that month, but was again suspended 10 days later until he found a doctor who would declare him fit to work. A doctor found that McDuffy was morbidly obese and did have some limited abilities, but was still able to drive a truck. However, the company did not allow him to return to work.

McDuffy sued, and was awarded $109,000 on Oct. 5, after video evidence showed him adequately performing his work duties. “I could see them suspending me if I did something wrong, or if I couldn’t do my job,” McDuffy told The AP. “But I’d been there 14 months. I’d always done my job. I did whatever I was asked to do.” But, it would appear to us that it was only a matter of time that he would no longer be able to hop into the rig.

Obesity is not uncommon in the trucking industry, according to research from the OOIDA Foundation. In a 2004 survey, researchers found that the average OOIDA member was 5’10” tall and weighed 216 pounds – a 31 percent body mass index (BMI) number, or 1 percent over what the Centers for Disease Control and Prevention considers obese. In an earlier 2001 survey, the OOIDA Foundation found that roughly 87 percent of truckers polled were either overweight or obese. OOIDA is a fountain of useful and useless information.

SCHNEIDER IMPROVES FUEL SURCHARGE PROGRAM
Schneider National Inc. announced Thursday, Nov. 3, that it has made significant improvements to its fuel surcharge program for owner-operators and fleet owners. Effective now, Schneider will pay fuel surcharges on both empty and loaded miles. The company projects that the program will increase revenues for owner-operators and fleet owners amid volatile and rapidly rising fuel costs.

Schneider will now pay a fuel surcharge on both empty and loaded miles, resulting in a significant commitment to the livelihood of the company’s owner-operators. Additionally, a press release reported a new and easy-to-understand payout table will replace the company’s previous fuel program formula, with the payout rate based on price bands relative to the weekly Department of Energy fuel price.

Finally, the company will eliminate the lag in paying out the fuel surcharge and compensate owner-operators and fleet owners for both the loads and fuel surcharge on the same weekly settlement. Schneider National contracts with nearly 3,000 owner-operators and fleet owners across North America.

CITY OF BROTHERLY LOVE
For a time, a few years back, many truckers driving through Philadelphia were encountering problems with truck enforcement officers who seemed bent on bleeding them of their finances. But trucking groups say the bloodletting has all but dried up. It all began in spring 2001. Philadelphia authorities took to the streets intent on doing battle with truck regulation violators in the name of safety. City police invoked a never-used, 2-year-old state law allowing them to impound unsafe trucks.

A nine-member, Philadelphia Police truck force took to the streets with the power to stop any truck for inspection, without cause. If tickets issued exceeded $250, trucks could be impounded. Offending drivers were required to go to traffic court and pay truck bail. The bail covered fines, court costs, towing, storage and paperwork.

To boot, drivers were required to fix the rig at the tow lot or have it towed elsewhere for repairs. In the first 12 months of enforcement, more than 1,600 trucks were pulled off Philadelphia-area roads and seized, The Philadelphia Inquirer reported. Gail Toth, executive director of the New Jersey Motor Truck Association, stated that truckers were backed into a corner because of what appeared to be overzealous enforcement.
The truck “swat” team has now taken a more realistic approach to enforcement and things are retuning to normal.

TOLLS FOR DRIVERS IN CONGESTED AREAS OF NYC
If they build them no one will come
If one New York City-area business association gets its way, motorists could soon be paying dearly for the “pleasure” of driving during heavy traffic in Manhattan. Under a proposition by the Partnership for New York City, drivers who travel into the city during the busiest parts of the day and through the busiest areas – most likely, south of 60th Street – will face charges of up to $7 a day, while those starting and ending their traveling within the designated area would pay up to $4 a day, according to The New York Times.

Although not all roadways would have charges, the plan would call for some of the busiest roads, via a number of proposed tolling systems, to charge motorists.

“Is there an opportunity to create a congestion-relief zone that would help this global city?” Ernest Tollerson, senior vice president for the Partnership, told The Times. “This is a city that wants to add tens of thousands of jobs, but we can’t continue to build streets and roads. For the long-term growth of the city, we need demand-management tools.”

However, New York Mayor Michael Bloomberg said on Friday, Nov. 11, that the city is not pursuing any plans to toll motorists for driving in congested areas. “It’s not on our agenda to look at it,” Bloomberg told The Times. “The city is always trying to solve traffic problems, and we’ll continue to do that, but congestion pricing is not something that we’re talking about.”

ALASKA BRIDGE EARMARK REMOVED, FUNDING STILL THERE
Alaska’s infamous “bridge to nowhere” may be living up to its name. The Fairbanks Daily News-Miner reported that a congressional appropriations committee has removed earmarks in federal highway funding legislation for controversial bridges near Anchorage and Ketchikan, AK. However, the $452.5 million set aside from the bridges will still go to Alaska. Sen. Ted Stevens, R-AK, said the money wouldn’t be directed toward the Ketchikan Bridge, though there is no directive for what the money must now be used for. We think that the bridge will soon rise above troubled waters.

The money generated controversy when it was earmarked in the Highway Bill earlier this year. The $223 million would have gone to a bridge that would connect the mainland to an island that is home to 50 people, an airport, and a ferry service. The so-called “bridge to nowhere” generated much controversy, forcing the congressional committee to remove earmarks for its funding from the Department of Transportation’s annual spending bill.

Courtney Schikora Boone, a spokeswoman for Sen. Stevens, told the Daily News-Miner the fight for the bridge funding might not be done yet, because the conference committee’s work on the transportation bill isn’t finished. “Nothing is final,” she said. Congress is expected to present a final version of the appropriations bill by Friday, Nov. 18.

SHIPPING TERMS ARE IMPORTANT
The term 'F.O.B. origin or place of shipment or the term "F.O.B. destination" or "place of destination", is often misused by shippers and receivers alike. These terms are to be differentiated from the terms “prepaid” and “collect” which refer only to the party responsible for the payment of freight charges.

F.O.B. place of shipment (or "origin") U.C.C. 2 319 provides that where "F.O.B. place of shipment" is specified, the seller is bound to ship the goods at that place and bears the risk and expense of putting the goods in possession of the carrier. Thereafter, the risk of loss is on the buyer.

F.O.B. place of destination When the term is "F.O.B. place of destination", the seller must transport the goods to that place at his own risk and expense and tender proper delivery. Thus, the risk of loss is on the seller during transit.

The term used determines who has the risk of loss during transit and the correct usage of the term is very important when the consignor or consignee wants to be free from cargo loss and damage during transit.

The first step in any claims case is to ascertain who has risk of loss in transit; this concept is significant because it determines who has the legal right or obligation to file the claim, and who is the proper "party in interest" in the event of litigation.

In practice, claims are very often not filed by the party who has risk of loss. For example, a large shipper which has an experienced traffic department may file claims for its customers as a courtesy or service. However, if the shipper does not bear risk of loss for the shipment, it has no legal obligation to do so.

Under common law and the old Uniform Sales Act, which has been replaced in all states by the Uniform Commercial Code, risk of loss generally followed "title" to the goods. Under the Uniform Commercial Code, risk of loss is related to "delivery" of the goods. While the parties may specify otherwise in the contract of sale. There are certain presumptions, based on the "terms of sale" used.

Caution is in order where the contract is silent, or there is no written purchase order, invoice, etc. The general rule is that risk of loss passes to the buyer upon delivery to the carrier at the place of shipment. The custom and usage of the particular trade or business are also relevant in determining risk of loss in such situations.

A common misconception is that the party who pays the freight is the one who has risk of loss in transit. This is not true; always refer to the "term of sale" in the contract to determine who has risk of loss.

A shipper, therefore, who wishes to insulate itself from risk of loss while the goods are in transit, should ship all goods "F.O.B. origin". It does not matter who pays the freight charges, however, a shipment designated as "F.O.B. origin" with prepaid freight charges should be evidenced with underlying documents with the actual "terms of sale" set forth in a sales contact or purchase order or some other similar document between the consignor (shipper or seller) and the consignee (receiver or buyer) that set forth the terms of the sale and the fact that the shipment was intended to be "F.O.B. origin".

Certainly, the term of sale should indicate that the shipment is "F.O.B. origin" which means that the consignee (receiver or buyer) has the risk of loss in transit.

Should there be any further questions concerning this Transportation Law Advisory, please do not hesitate to contact this office for further discussion.


WHAT IS AN “EMPLOYEE”
There seems to be much concern lately regarding the IRS's classification of employees, as a result of the IRS performing audits on companies to determine whether they have, unlawfully, not withheld FICA and unemployment insurance from their employees' pays.

Some of the companies being audited by the IRS are finding the results to be disastrous, because many of the people working for them that they have been calling independent contractors are, according to the IRS, employees. Thus, these companies are faced with debts for taxes they should have withheld. The purpose of this memorandum is to help explain and clarify the difference between an employee and an independent contractor according to the IRS, in order that you may classify your employees accordingly.

A general definition from Black's Law Dictionary will help set the stage for this discussion on independent contractors. "An independent contractor is a person who contracts with another to do something for him, but who is not controlled by the other nor subject to the other's right to control with respect to his physical conduct in the performance of the undertaking. He may or may not be an agent." Black's Law Dictionary (5th Edition)

Chapter 26 of the United States Code, Employment Taxes, defines an employee in section 3121 (d)(2) as, "Any individual who, under the usual common law rules applicable in determining the employer/employee relationship, has the status of an employee"

But what are the common law rules regarding an employer/employee relationship? In general, this regards the relationship that exists between the employer and the employee, and that the employer has the overall control of the work.

The difference between being an employee or an independent contractor depends on who has the right to direct and control the method and manner in which work shall be done by the person doing the work. If the person doing the work has the right to control the work, then he is an independent contractor. If the person for whom the work is being done has the right to direct and control the work, then the person performing the work is an employee of the other.

The mere description of the relationship by the parties themselves as anything other than employer/employee is immaterial. Treas. Reg. Sec. 31.3401(c) l. The status of the worker is determined by the whole picture, the total situation of the working relations, and it is up to the court to consider the whole picture to make its determination of the status of the worker as either an independent contractor or an employee. Automated Typesetting, Inc. V. United States, 527 F. Supp. 515, 519 (E.D. WISC. 1981). Automated Typesetting describes an employee as an individual who performs, on a continuing basis, full time personal service for another and is an integral part of business operations of the employer. Id. at 520.

Another definition for independent contractor is one who contracts to perform certain work for another according to his own means and methods, free from the control of an employer and all the details connected with the performance of the work, except as to the product or the result. Kelly V. Eclipse Motor Line, 305 F. Supp. 191, 196 (D.C. Md. 1969). Therefore, if the worker has an understanding that a certain result will come about from performance, and yet he has total control of how he is going to get to that result, then he is an independent contractor. The key phrase is "the right to direct and control the method and manner" in which the work is done.

Some of the issues that are examined in determining status of the worker include the following: 1) The investment by the person rendering the service in his own tools and equipment; 2) Cost incurred by the person rendering the service; 3) ability of the person to profit from his awn managerial skills; 4) Whether the service requires specialized skills; 5) permanence of the relationship between the parties; 6) Whether the person works in the course of the recipient's business, rather than in an ancillary capacity. Avis Rent A Car System, Inc. V. United States, 503 F.2d 423,429 (2d Cir. 1974).

The example of a case will help to illustrate what the court looks at in determining the status of the worker. In Air Terminal Cab, Inc. V. U.S., taxicab company employers were suing for a refund of taxes that they paid the Federal Insurance Contribution Act (FICA) and Federal Unemployment Tax Act (FUTA) Air Terminal Cab, Inc. V. United States, 478 F.2d 575 (8th Cir 1973). The court held in this case that the taxicab drivers were employees of the taxicab companies because they were under the control of the companies. Id. The court's decision is based on several factors. The drivers were determined to have regular working hours set by the company, rather than by the individual driver. They also had a limit as to where they could pick up customers. The drivers could not use the cabs for personal use. And, finally, the drivers were required to account for the fares by submitting "trip sheets", and they were required to split their fares evenly with the taxicab companies. Based on these factors

The court held that the taxicab drivers were common law employees for the purposes of paying FICA and FUTA tax, and, therefore, the employer taxicab companies were required to withhold and pay these taxes on their employee drivers. Furthermore, the companies owned and insured each taxicab, the companies equipped the cabs with their meters, and the company names were imprinted on the doors of each cab. Id. at 577.

The court reasoned that the employer/employee relationship exists where the person for whom the service is performed has the right to control and direct the individual who performs as to the details and means by which the result is accomplished and the end result. Id. at 579. The employee is subject to the will and control of the employer, not only what shall be done but how it shall be done. It is not that the employer needs to exercise this right; just that he has the right to control and the right to discharge the employee.

Another factor to support the employer/employee relationship is that the employer furnishes tools for the job and the place where it will be performed. Also, the employer may provide fringe benefits, such as paid vacation, holiday and sick leave, pension plans.

Unless the employer/employee relationship exists employer is under no duty to withhold federal income tax or to pay federal unemployment tax. Automated Typesetting, 527F. Supp. at 519.

Other examples of where the IRS may consider the worker an employee where he/she had been previously considered an independent contractor as far as the worker and the employer concerned include truck drivers, salesmen at car dealerships, and insurance salesmen.

CONCLUSION
Those positions previously considered independent contractors will have to be scrutinized. It is highly likely these people should be considered employees for tax purposes. It is important for the company employing these workers to possibly change their status to employees in the company books, rather than independent contractors, so that the company does not consequently owe extraordinary amounts of back taxes.

An alternative to reclassifying the workers may be to establish a completely separate company. For example, a household goods motor carrier may have considered household goods packers independent contractors in the past, but they will be considered employees by the IRS. In order to make them independent contractors, a new company may be set up that employs only the packers, under its own separate name, its own entity, not a part of the company hiring them. Then, the hiring company will not need to pay those workers as its employees but consider the company of packers as an independent contractor. The hiring company would not need to pay FICA or FUTA and withhold the taxes, but the new company, as its own entity, would have its own employees and would need to withhold the taxes and pay FICA and FUTA.

If the company is unsure whether to classify the worker as an independent contractor or an employee, chances are the worker is an employee in the eyes of the IRS. To be safe, it would be best to classify such a person as an employee. Those workers that completely control their own operations, including everything up to but excluding the end result of the project, are the only ones who are truly independent contractors.

TRANSTRENDS is published monthly for friends and clients of the Translaw Group, Inc. The information provided in this newsletter is not intended as specific advice on a particular subject. Rather, the information is for general edification. Further, this information is time sensitive and may need to be revised and updated from time to time. Please feel free to call this office with your specific questions at 413 781 8205, or you may e-mail the office at jburnransregs.com