January 31, 2019 BY Paul Wildes
Statutory Employment in the Trucking Industry and Preventative Measures to Prevent Liability
Large motor carriers and their workers’ compensation insurers are not strangers to claims brought by contractor truck drivers claiming to be employees of the carrier. A type of contractor commonly seen in these cases is the “owner-operator”, who Georgia law defines as “an equipment lessor who leases his vehicular equipment with a driver to a carrier.” O.C.G.A. § 40-2-87(19). Under Georgia Workers’ Compensation Act, an owner-operator is deemed to be an independent contractor, and not an employee. O.C.G.A. § 34–9–1(2). Normally, an independent contractor is not entitled to workers’ compensation benefits from his principle.
In some situations, the owner-operator has acquired its own independent contractors and/or employees to drive the leased vehicles, or otherwise assist the former in carrying out its contractual obligations. Perhaps more frequently, owner-operators are individual, self-owned operations where the owner of the vehicle and the driver (or “operator”) of the vehicle are one in the same.
In the event that an individual, owner-operator suffers an on-the-job injury and files a workers’ compensation claim against the carrier, the independent contractor/employee distinction will obviously be a very important element of the motor carrier and its insurer’s defense. As a preemptive measure, motor carriers should, and usually do, draft their contracts with subcontractors to explicitly define subcontractor-drivers as independent contractors/owner-operators, rather than employees. If an owner-operator is injured while carrying out the terms of the contract with the motor carrier, the latter usually is not responsible for workers’ compensation benefits unless the owner-operator can successfully dispute the contract and otherwise establish an employee-employer relationship.
The carrier and its insurer’s task become difficult, however, if the suit is brought against the motor carrier by an alleged employee of an owner-operator, rather than the owner-operator himself. Unlike the relationship between the motor carrier and the owner-operator, the relationship between the owner-operator and its drivers/laborers may not be defined by contract, and whether an injured driver/laborer is an employee or an independent contractor may be unclear. Even if the carrier and/or owner-operator consider the injured worker to be an independent contractor, a court may nevertheless find that the latter is in employee of the owner-operator depending on the facts of the case.
Commonly, this type of suit is brought under Georgia’s statutory employment statute, O.C.G.A. § 34-9-8, which states that an injured employee of an uninsured subcontractor may recover workers’ compensation benefits from a principal contractor, even where there is not an actual employment relationship between the injured employee and the contractor. Thus, in the event that an employee of an uninsured owner-operator is injured on the job, a question arises as to whether the employee can recover workers’ compensation benefits directly from the motor carrier as a statutory employee.
This question was first addressed by the Court of Appeals of Georgia in C. Brown Trucking, Inc. v. Rushing, 265 Ga. App. 676 (2004). In that case, the appellant motor carrier argued that an employee of an owner-operator “stands on the same footing” as his employer, and thus is excluded from the Act under O.C.G.A. § 34–9–1(2). The Court of Appeals disagreed, reasoning that the General Assembly specifically omitted the words “and their employees” from the Act’s exclusion for owner-operators, thus the employee of an uninsured owner-operator could recover benefits from the carrier if all the other elements of statutory employment were met.
In Carr v. FedEx Ground Package System, Inc., 317 Ga. App. 733 (2012), the Court of Appeals reached a similar conclusion, but focused on the contract between the subcontractor carrier and the principal carrier. In that case, the wife of an employee argued that the principal contractor (FedEx) was not her husband’s statutory employer, and thus was not immune to the wife’s personal injury suit on behalf of her husband. To support her argument, she pointed to the language of the contract between the subcontractor and the general contractor which defined the subcontractor as an “independent contractor, and not as an employee of Fedex  for any purpose,” and the contract’s requirement that the subcontractor carry its own workers’ compensation insurance for its employees. The Court disagreed, holding that a subcontractor’s status as an independent subcontractor does not affect whether an injured employee of a subcontractor is a statutory employee of principal contractor. Furthermore, the court held that the contractual obligation for an independent subcontractor to carry its own workers’ compensation insurance does not preclude a principle contractor from being a statutory employer.
The Court’s decisions in Rushing and Carr establish that neither an owner-operator’s status as independent contractor nor its contractual obligation to provide workers’ compensation insurance for its employees will prevent an injured employee of an uninsured owner-operator from recovering workers’ compensation benefits directly from the motor carrier. As a preventative measure, it is still important that motor carriers require owner-operators to furnish workers’ compensation insurance for their employees if they are otherwise subject to the Workers’ Compensation Act. In some circumstances, however, an owner-operator may be unclear whether he is subject to the Act. As discussed above, the relationship between the owner-operator and its drivers/laborer is usually not defined by contract, and may contain characteristics of both an independent contractor relationship and an employee-employer relationship. For a large motor carrier with several hundred “owner-operators”, assessing whether each owner-operator falls under the Workers’ Compensation Act and has acquired workers’ compensation insurance can be extremely difficult.
In other situations, the owner-operator might provide insurance to cover its drivers and laborers for on-the-job injuries, but just not workers’ compensation insurance. For example, occupational accident (or “Occ Acc”) insurance offers benefits (e.g., medical benefits and lost wages) to workers who incur an on-the-job accident and injury, but who are not covered under the Georgia Workers’ Compensation Act. Because occupational accident policies are not controlled by the Act, they can be tailored to offer benefits at levels below those mandated by the Act, and will typically be less expensive than workers’ compensation insurance. An owner-operator who is pinched by expenses may opt to offer its workers occupational accident coverage in lieu of workers’ compensation. Importantly, occupational accident insurance is not intended to be a substitute of workers’ compensation insurance, and most (if not all) occupational accident policies specifically exclude coverage for employees, and only provide coverage to independent contractors. Thus, if an injured worker is actually an employee of the owner-operator, rather than an independent contractor, the occupational accident carrier may deny coverage. The denial of coverage may create further incentive for an injured employee to seek workers’ compensation benefits directly from the carrier.
To insulate carriers from workers’ compensation liability, one option commonly utilized is contingent liability insurance. Generally speaking, contingent liability insurance is insurance protection against potential perils or obligations that may or not come to be, depending on how a particular event turns out. In the context of workers’ compensation claims brought by an employee of a subcontractor-driver, contingent liability insurance can provide a legal defense (if the workers’ compensation insurance is not already providing one) and, should the claim be successful, can compensate a motor carrier for workers’ compensation benefits it owes to the injured employee. Like occupational accident insurance, however, contingent liability insurance is not a substitute for workers’ compensation insurance, and will not satisfy compliance requirements for an employer to purchase a workers’ compensation policy.
Whatever the case may be, an open line of communication should be established between the carrier and the owner-operator when either is put on notice of an on-the-job injury. If an occupational accident policy is in place, measures should be taken to see that the injured worker makes a claim against that policy before a workers’ compensation suit is filed. If a workers’ compensation suit has been filed, the contingent liability carrier should be notified so defense counsel can be appointed. These measures will 1) decrease the chances that the injured worker files a workers’ compensation claim against the carrier, and 2) shift liability away from the carriers’ workers’ compensation insurer should the carrier be liable for workers’ compensation benefits as a statutory employer or otherwise.
The Journal is a publication for the clients of Drew Eckl & Farnham, LLP. It is written in a general format and is not intended to be legal advice to any specific circumstance. Legal Opinions may vary when based upon subtle factual differences. All rights reserved.
H. Michael Bagley