WESTERN PORTS v. EMPLOYMENT SEC. DEPT., 48294-7-I.
| Decision Date | 04 March 2002 |
| Docket Number | No. 48294-7-I.,48294-7-I. |
| Citation | 41 P.3d 510,110 Wash.App. 440 |
| Court | Washington Court of Appeals |
| Parties | WESTERN PORTS TRANSPORTATION, INC., Respondent, v. EMPLOYMENT SECURITY DEPARTMENT OF the STATE OF WASHINGTON, Appellant. |
Laura Watson, Atty. Generals Office, Olympia, for Appellant.
J. Markham Marshall, Seattle, for Respondent.
After Western Ports Transportation, Inc., terminated Rick Marshall's "Independent Contractor Agreement," the Commissioner of the Employment Security Department granted unemployment compensation to Mr. Marshall. Western Ports appealed the Commissioner's ruling, and the King County Superior Court reversed. We reverse the Superior Court and reinstate the Commissioner's ruling. The personal services that Mr. Marshall performed for Western Ports constituted "employment" as defined by RCW 50.04.140, and did not fall within the exemption provided by RCW 50.04.140. Federal statutes and underlying federal regulations that permit authorized carriers to engage in interstate commerce utilizing leased trucks-with-drivers are designed to place complete responsibility for possession, use, operation and control of leased equipment on the authorized carrier, regardless of whether, under common-law principles, the lessor or driver provided by the lessor of the equipment might be an independent contractor or an employee of the authorized carrier. This federal statutory and regulatory scheme does not preempt state employment security law by which a person who might be an independent contractor under federal transportation or common-law principles may nevertheless be entitled to compensation.
Western Ports Transportation, Inc., is a trucking firm with operating authority issued by the U.S. Department of Transportation and the Washington Utilities and Transportation Commission. It operates terminals in Washington and California. In order to serve its customers, Western Ports contracts for the exclusive use of approximately 170 trucks-with-drivers. The truck owners either provide and drive their own trucks or hire others to drive them exclusively for Western Ports. While working for Western Ports, Mr. Marshall moved its customers' containers between rail yards and piers in the Seattle area.
Mr. Marshall had previously worked as a driver for a lessor who leased trucks-with-drivers to Western Ports. Through this contact, Mr. Marshall purchased a truck of his own, and contracted directly with Western Ports. Western Ports' insignia, which was on the truck when Mr. Marshall purchased it, remained on the truck throughout Mr. Marshall's tenure with Western Ports, enabling him to drive under Western Ports' federal and state certifications.
Mr. Marshall signed an Independent Contractor Agreement (ICA) on January 21, 1998. The ICA, which identified Mr. Marshall as the "Contractor" and Western Ports as the "Carrier," is a standard agreement used by Western Ports. The ICA contains various requirements that are dictated by federal regulations governing motor carriers that utilize leased vehicles-with-drivers in interstate commerce; it also contains Western Ports' own rules.
Pursuant to the ICA, Mr. Marshall was required to operate his truck exclusively for Western Ports, have Western Ports' insignia on his truck, purchase his insurance through Western Ports' fleet insurance coverage, participate in all the company's drug and alcohol testing programs, obtain Western Ports' permission before carrying passengers, notify Western Ports of accidents, roadside inspections and citations, keep his truck clean and in good repair and operating condition in accordance with all governmental regulations, and submit monthly vehicle maintenance reports to Western Ports. Western Ports determined Mr. Marshall's pickup and delivery points and required him to call or come in to its dispatch center to obtain assignments not previously scheduled, and to file daily logs of his activities.
Mr. Marshall received "flat-rate" payments for each container he moved. Western Ports' customers made their payments for Mr. Marshall's services directly to Western Ports, and those funds belonged to Western Ports until disbursed. By the terms of the ICA, Mr. Marshall was paid twice per month. Mr. Marshall did not attempt to negotiate the terms of his ICA, although he may have been able to negotiate some of them. The record indicates that other contractors have, in the past, obtained alteration of the exclusivity and insurance provisions in the standard ICA.
Western Ports had broad rights of discharge under the ICA, and could terminate the contract or discipline Mr. Marshall for tardiness, failure to regularly contact the dispatch unit, failure to perform contractual undertakings, theft, dishonesty, unsafe operation of his truck, failure of equipment to comply with federal or state licensing requirements, and failure to abide by "any written company policy."
Mr. Marshall did have some autonomy. For example, he decided which truck to buy; it was not necessary for a Western Ports representative to be present when he picked up freight from a customer; and he decided the route to take in making deliveries. He also could have hired another driver to operate his truck in providing services under terms of the ICA, although he chose not to. He paid all of his truck operating expenses and deducted the expenses on his federal income tax returns.
Mr. Marshall has a Washington State Uniform Business Identification (UBI) number to do business as "RAM Enterprises." The UBI number was obtained in 1992 for a business enterprise not involving trucking or leasing a truck-with-driver. Nevertheless, Mr. Marshall contracted with Western Ports under the designation "Rick A. Marshall dba RAM Enterprises," and he used Ram Enterprises letterhead in corresponding with Western Ports. Under the terms of the ICA, Mr. Marshall was required to be "an employing unit subject as an employer to all applicable local, state, and federal statutes, including but not limited to, unemployment compensation taxes[.]" Clerk's Papers at 107.
The ICA describes the relationship of the parties as follows:
17. Relationship of Parties. Contractor is an independent contractor for Carrier. Nothing in this Agreement shall be construed as creating an employer-employee relationship or a guarantee of future employment. The Carrier is interested only in the result obtained under this Agreement; the manner and means of conducting the work are under the sole control of the Contractor. None of the benefits provided by the Carrier to its employees, including, but not limited to retirement benefits, compensation insurance and employment insurance, are available from the Carrier. The Contractor will be solely and entirely responsible for its acts and for the acts of its agents, employees, servants and subcontractors during the performance of this Agreement. Contractor further agrees to be responsible for payment of all of Contractor's federal, state and local taxes.
Certified Appeal Board Record at 106.
In the summer of 1999, Mr. Marshall chose not to accept assignments transporting goods from Seattle to Tacoma, feeling that his truck was not reliable or comfortable enough. On August 2, 1999, Western Ports terminated Mr. Marshall's ICA. Mr. Marshall feels that he was terminated because of his refusal to do pickups in Tacoma, although his supervisor told him it was because his truck did not meet federal safety standards.
After his discharge, Mr. Marshall applied for unemployment benefits. On September 15, 1999, in an administrative determination, the Employment Security Department (Department) denied Mr. Marshall's application, based upon Western Ports' contention that Mr. Marshall was not an employee but, rather, was an independent contractor exempt from coverage under RCW 50.04.140.
Mr. Marshall requested a hearing to contest the Department's initial determination. An administrative law judge (ALJ) reversed the Department's decision, ruling that Mr. Marshall was entitled to unemployment benefits; thus Western Ports was required to pay the necessary payroll taxes.
Western Ports appealed the ALJ's decision to the Commissioner of the Department. The Commissioner affirmed the ALJ, with some modifications to the ALJ's Findings of Fact & Conclusions of Law.
Western Ports appealed the Commissioner's decision to King County Superior Court. The Superior Court reversed the Commissioner's final order. The Employment Security Department appealed to this court.
Judicial review of the Commissioner's final order is governed by the Administrative Procedure Act (APA), Ch. 34.05 RCW. This court sits in the same position as the superior court, applying the standards of the APA directly to the record before the agency. Tapper v. State, Employment Sec. Dep't., 122 Wash.2d 397, 402, 858 P.2d 494 (1993). The burden of demonstrating the invalidity of agency action is on the party asserting invalidity, here, Western Ports. RCW 34.05.570(1)(a). Similarly, under the Employment Security Act, "the decision of the commissioner shall be prima facie correct, and the burden of proof shall be upon the party attacking the same." RCW 50.32.150.
The standards of review of an agency order are set out in RCW 34.05.570(3).
Administrative findings of fact will be upheld on review when supported by substantial evidence. RCW 34.05.570(3)(e). "Substantial evidence is evidence in sufficient quantum to persuade a fair-minded person of the truth of the declared premises." Heinmiller v. Department of Health, 127 Wash.2d 595, 607, 903 P.2d 433 (1995), 909 P.2d 1294 (1996). The court will not substitute its judgment on witnesses' credibility or the weight to be given conflicting evidence. Freeburg v. City of Seattle, 71 Wash.App. 367, 371-72, 859 P.2d 610 (1993).
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