May Trucking Co. v. Emp't Dep't
Jurisdiction | Oregon |
Parties | May Trucking Company, an Idaho corporation, Petitioner, v. Employment Department, Respondent. |
Citation | 279 Or.App. 530,379 P.3d 602 |
Docket Number | A151597 |
Court | Oregon Court of Appeals |
Decision Date | 20 July 2016 |
Gordon T. Carey, Jr., argued the cause and filed the briefs for petitioner.
Judy C. Lucas, Assistant Attorney General, argued the cause for respondent. With her on the brief were Ellen F. Rosenblum, Attorney General, and Anna M. Joyce, Solicitor General.
Before Ortega, Presiding Judge, and DeVore, Judge, and Garrett, Judge.
This petition for judicial review by May Trucking Company challenges an order of an administrative law judge (ALJ) for the Office of Administrative Hearings upholding an Employment Department notice of assessment showing that May is entitled to a tax credit of $45,101.16 for an overpayment of unemployment compensation taxes for the calendar years 2007 and 2008 (the audit period). May contends that it is entitled to a larger tax credit, for two reasons. First, May argues that the ALJ erred in determining that the “base of operations” for May's employee drivers, for purposes of determining the location of employment, was the location where the drivers parked their vehicles during extended down time. Second, May argues that the ALJ erred in concluding that the services of “owner-operator” drivers constitute “employment” that is not exempt under ORS 657.047.
The department's tax assessments are prima facie correct, ORS 657.683(4), and an entity challenging an assessment has the burden to establish that it was not the employer of the person performing the services or that the payments subject to the assessment are excluded from taxation for some other reason. Mitchell Bros. v. Emp. Div. , 284 Or. 449, 451, 587 P.2d 475 (1978). On judicial review, we review the ALJ's order upholding an assessment for substantial evidence and errors of law. ORS 183.482(8)(a), (c). For the reasons explained in this opinion, we reverse the assessment in part and remand for reconsideration.
We summarize first those facts that bear on the ALJ's determination of the employee drivers' “base of operations.” May is a trucking company licensed and authorized by the United States Department of Transportation to provide interstate transportation services. May pays remuneration to approximately 1,000 drivers to haul freight in the 48 contiguous states. May considers approximately 800 of those drivers to be employees and reports their earnings accordingly, on Internal Revenue Service (IRS) Form W–2. May considers approximately 200 of its drivers to be independent contractors, and reports their earnings on IRS Form 1099.
At the relevant time, May had six operating centers throughout the United States. Drivers were assigned to a particular operating center. Drivers were dispatched out of their assigned operating center via a QualComm mobile communication and tracking system that drivers were required to purchase or rent from May and have installed on their trucks. During the audit period, May reported the employee drivers' wages for purposes of unemployment insurance to the state from which the drivers received their dispatch orders.
By federal regulation, drivers are not allowed to drive more than 70 hours in an eight-day period, after which they must take a 34–hour break, which May refers to as “down time.” During periods of down time, drivers were required to park the trucks at a secure location, such as a May “drop yard,” a truck stop, or a Walmart parking lot. With approval from May, a driver could also park a truck at his or her home. The department determined that a driver's wages should be reported to the state in which the driver regularly parked the truck during extended down times—i.e. , periods longer than 34 hours.
Oregon's unemployment compensation program is a joint federal-state program. Charles C. Steward Mach. Co. v. Davis , 301 U.S. 548, 574–78, 57 S.Ct. 883, 81 L.Ed. 1279 (1937) ; Puget Sound B. & D. v. S.U.C.C. , 168 Or. 614, 620, 126 P.2d 37 (1942). If Oregon complies with minimum federal standards, employers receive a credit against their federal tax liability for money paid to the state's unemployment insurance fund. 26 USC § 3302.
The location of a worker's employment determines an employer's reporting obligation for purposes of unemployment insurance tax. The first issue on judicial review concerns the “base of operations” for May's employee drivers, and whether a given driver's services are “employment” in Oregon, such that the driver's wages should be reported in Oregon.
“Employment,” for purposes of unemployment insurance, is defined in ORS 657.035, which provides, as relevant:
(Emphasis added.) It is undisputed that the services provided by May's drivers are not “localized” in Oregon or in any other state, and that the drivers' services are not covered by the unemployment compensation law of any other state. ORS 657.035(1)(b). The dispute on judicial review focuses on the italicized text, which provides that an employee's services constitute employment reportable in Oregon if the employee's “base of operations” is in this state or, if there is no base of operations, the services are “directed and controlled in this state.” ORS 657.035(1)(b)(A).
The term “base of operations” is not defined in ORS 657.035. But, the parties agree that long-established and well-settled criteria exist for determining a worker's base of operations and that the term should be interpreted in this case consistently with those criteria. With the exception of a brief period from 1973 to 1977, the term “base of operations” has been a part of Oregon law since the Unemployment Compensation Act first was enacted, OCLA § 126–702(f)(A) (1935). The term was removed from the statute in 1973, at the request of the department (then the Oregon Employment Division), but readopted in 1977, again at the request of the department, for consistency with the laws of other states. Or. Laws 1977, ch. 295, § 2.
Program Letter 291 had been published when the Oregon legislature readopted “base of operations” in 1977 for purposes of determining the place of employment for employees who work in multiple states. We assume that the legislature was aware of the federal interpretation of “base of operations” when it readopted the term in 1977, and the parties agree that the criteria described in Program Letter 291 guide the determination here.2 See Zimmerman v. Allstate Property and Casualty Ins. , 354 Or. 271, 280, 311 P.3d 497 (2013) ( ).
In determining that May's drivers had a base of operations in Oregon, the ALJ did not refer to the criteria described in Program Letter 291. Rather, citing Springfield Education Assn. v. School Dist. , 290 Or. 217, 227–28, 621 P.2d 547 (1980) ( ), the ALJ reasoned that “base of operations” is an “inexact term” and that, if the department's interpretation is consistent with the policy expressed in ORS 657.035, then it is entitled to “an appropriate degree of assumptive validity,” Springfield , 290 Or. at 227–28, 621 P.2d 547 ( ), because the department was involved in the legislative process and had expertise relating to the application of the statute to varying facts. The ALJ explained that the department's determination was based on its observation of a “pattern” among May's drivers:
“For extended down time, drivers usually dropped off and picked up their tractors at a May facility, or other approved, secure location, near their homes; i.e. , in the same state where the driver resided, regardless of the state from which they were dispatched.”
Without further explanation, the ALJ determined that the department's interpretation of “base of operations” as “the state in which drivers drop off their tractors at the start of extended down time and pick up their tractors after extended down time” is consistent with the policy expressed in the statutory text and is entitled to deference. The ALJ therefore upheld the department's determination that the earnings of drivers who park their trucks in Oregon...
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