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American Road Lines and Lexington Insurance Company v. Workers' Compensation Appeal Board (Royal

February 23, 2012


The opinion of the court was delivered by: Robert Simpson, Judge

Submitted: November 18, 2011



In this case involving potential joint employers in the trucking industry, we address whether the Workers' Compensation Appeal Board (Board) erred in reversing a Workers' Compensation Judge (WCJ) opinion and order finding an owner-operator and motor carrier jointly liable for the work-related injuries and death of their truck driver, Frederick Royal, (Decedent) under the Workers' Compensation Act (Act).*fn1 The Board found the motor carrier exercised sufficient control over Decedent to qualify as his employer, or, alternatively, qualified as his statutory employer under Section 302(a) of the Act, 77 P.S. §461, and held the motor carrier solely liable. We affirm the result on alternate grounds.*fn2

I. Background

Decedent worked as a truck driver for Ayerplace Enterprises, LLC (Ayerplace), an owner-operator of a tractor, and American Road Lines, Inc. (American), a motor carrier licensed under federal law.

While attempting to repair an air leak in one of the air brake lines on the trailer, owned by American, Decedent was run over by the rear drive wheels of the tractor, suffering serious injuries. At the time of the accident, Ayerplace owned its tractor through a lease-purchase agreement with Patriarch Leasing, a company affiliated with American.*fn3 Decedent was hospitalized from the date of injury until his death three months later. Decedent died as a result of his work injuries. Before his death, Decedent filed claim petitions against both American and Ayerplace. American and Ayerplace are separate companies that do not share common ownership.

A. Procedural History

Decedent's widow, Darlene Royal (Claimant) filed fatal claim petitions against American and Ayerplace for the work-related death of her spouse. Ayerplace filed a joinder petition against American. Since Ayerplace did not have workers' compensation insurance at the time, the Uninsured Employer Guaranty Fund (Fund) was also named, and the WCJ consolidated the claim petition filed against the Fund with the other claims. Hr'g Tr., 9/15/08, at 13. The WCJ held a hearing at which representatives of the putative employers, insurers and Claimant/Decedent's widow presented testimony.

1. WCJ Hearing

Michael DeLuca testified as the sole employee and sole shareholder of Ayerplace about the relationship between Ayerplace and American and their respective functions related to Decedent. DeLuca/Ayerplace is an owner-operator of a single tractor leased exclusively to American for American's customers.

DeLuca testified about his communications with Decedent on the date of the incident. DeLuca assigned the trip to Decedent. Decedent advised DeLuca that he needed to drop the trailer, and seek a mechanic at the Geo Specialty plant. As the on-site Geo Specialty mechanic did not have what he needed, Decedent took the truck to DeLuca's mechanic, M&M Truck Service, as DeLuca directed. DeLuca directed Decedent to his mechanic "on behalf of himself, Ayerplace and American" and was prepared to pay for repairs. WCJ's Op., Finding of Fact (F.F.) No. 9. Decedent was in Geo Specialty's parking area when the accident occurred.

DeLuca testified that he began to operate "an outpost" for American in Allentown to tend to its primary customer, Geo Specialty. F.F. No. 8. DeLuca coordinated service for five or six drivers of five American-owned trucks, in addition to Decedent, who drove Ayerplace's tractor. DeLuca noted that Decedent did not complete any paperwork for Ayerplace. He explained that when a driver did not submit logs, American advised DeLuca, and DeLuca would ask the driver to submit them or "they are shutting you down." Id.

DeLuca testified that Ronald Holmes recommended Decedent as a driver, and Ayerplace required nothing more as far as testing or examination. For trips Decedent made that Ayerplace did not dispatch, DeLuca believed Decedent received payment from American. Otherwise, Ayerplace paid Decedent based upon payments it received from American. DeLuca explained he dispatched drivers, distributing the loads assigned by American. DeLuca testified American could determine whether a driver could drive for American, as American, through Holmes, supplied the driver; Ayerplace only supplied the tractor. DeLuca directed all drivers he dispatched to take their trucks to M&M for repair.

DeLuca also drove for American. As a driver, he needed to complete his own forms to submit to American's company headquarters. DeLuca also had a fuel card issued by American, and American deducted the fuel charges before it issued payment to Ayerplace. DeLuca mailed his drivers' logs to American, and he noted Ayerplace never received Decedent's logs. American made all assignments for deliveries because Ayerplace had no customers of its own.

David Gress, chief operating officer of American Network, which controls American, MIA and Patriarch Leasing, oversaw general operations, contracts and subcontracts with owner-operators like DeLuca. Gress was familiar with the governing contracts, and he confirmed DeLuca was American's agent. DeLuca serviced its account with Geo Specialty and supplied the trucks. Gress testified that in order to drive each driver had to have an independent contractor contract for occupational accident insurance, or workers' compensation insurance. He noted some trip logs were sent directly to American and some directly to Ayerplace, where they were then consolidated and sent over night to American.

Ronald Holmes, American's field supervisor, testified regarding American's relationship to Decedent. Holmes, who was Decedent's first cousin, recruited Decedent as a driver through MIA, discussing the position as a "company driver." F.F. No. 11. Holmes assisted Decedent in completing MIA's driver qualification packet. Holmes had the authority to tell Decedent if he was not performing his duties properly, and the authority to train and to discipline Decedent.

He explained American could disqualify drivers, and "expect[ed] DeLuca to comply accordingly." Id. In 2007, American began converting its locations to "agent operations." Id. Holmes believed Decedent was an employee of Ayerplace, not of American. He also testified Ayerplace assigned drivers a piece of equipment when dispatching them.

The parties submitted three agreements between American and Ayerplace/DeLuca that govern their relationship: (1) the Equipment Lease Agreement (Lease); (2) the Independent Business Associate Contract signed by Ayerplace/DeLuca as contractor; and, (3) the Agency Agreement.

The Lease contains fairly standard language pertaining to motor carrier/owner-operator arrangements and respective responsibilities. As the motor carrier, American was responsible for doing background checks, drug-testing and receiving drivers' logs. American must ensure compliance with motor carrier regulations*fn4 governing leasing equipment to owner-operators, to include inspections, observing speed limits, maximum driving time/hours of service, 49 C.F.R. §§395.1, 395.3, and commercial driver's license standards, 49 C.F.R. §383.37.

The Independent Business Associate Contract, signed on October 1, 2006, states that DeLuca, as contractor, is the employer of drivers and that American shall exercise no control over drivers. The contract also states that it was not intended to create an employer/employee relationship between American and drivers. The contract made DeLuca responsible for hiring, compensating, disciplining and terminating drivers, and obtaining workers' compensation insurance. F.F. No. 17.

The Agency Agreement executed on March 4, 2007, provides that Ayerplace is the contractor-agent that performs dispatch and coordination of transport on behalf of American, the carrier. Ayerplace is responsible for trailer rental, damage and maintenance. Pursuant to the Agency Agreement, Ayerplace cannot operate without American's permission. Ayerplace derives its authority to operate from American. Thus, Ayerplace is not in a position to lease its tractor/truck involved here to other customers or companies. The Agency Agreement provided it supersedes other contracts between the parties.

Claimant testified about the payments to her husband and about the paperwork in his possession when he was injured. She testified that she maintained the financial records for the family and that Decedent received checks from Ayerplace. At the time of injury, Decedent had a driver's history report from American identifying Decedent's trips. Also, Decedent had American pre/post trip inspection forms, with pre-paid envelopes addressed to American. In addition, he possessed American's Policies and Procedures. The truck Decedent drove had an American logo, and the tractor cab involved in the accident stated "American Road Lines." F.F. No. 7. Further, Decedent possessed a credit card that stated "Fleet One over the Road, American Road Lines, Inc." Id.

With regard to the relationship between American and Ayerplace, the WCJ found DeLuca had a contract with American as an owner-operator/driver, and subsequently began to serve as a dispatcher for American at its Allentown site. Ayerplace served American's primary Allentown customer, Geo Specialty. Ayerplace was responsible for repairs to the tractor and American's trailer. Ayerplace did not have its own customers, serving solely American's customers.

With regard to insurance, Decedent purchased occupational insurance through American. In order to drive for American, Decedent signed an agreement indicating his status as an independent contractor. American advised DeLuca to possess occupational accident insurance for anyone who drove on behalf of American. Ayerplace did not purchase insurance on Decedent. American deducted costs of insuring drivers from payments to Ayerplace, which, in turn, deducted those costs from Decedent.

With regard to payment, the WCJ found that Decedent received checks from Ayerplace, from which Ayerplace made payroll deductions and deductions for occupational insurance. American deducted fuel charges and costs of insuring drivers from payments to Ayerplace. American paid Ayerplace a lump sum for Decedent's trips, from which Ayerplace paid Decedent. Decedent negotiated his rate of pay with Ayerplace, not American. Ayerplace paid Decedent by mileage when he was ...

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