Transportation Brief: My Driver Filed an Unemployment Claim Where? Jurisdiction as a Defense to State Unemployment Claims and Worker Misclassification Challenges
May 22, 2018
Dealing with tax jurisdictional issues is an ongoing struggle for motor carriers with multi-state operations. For example, several states may be appropriate for unemployment tax reporting for an interstate driver. Determining where to report is not only important for employee fleets, but it can be a potential tool for defending against state unemployment tax worker misclassification challenges.
If a motor carrier is notified of an owner-operator’s unemployment claim, or an audit including owner-operators in a state where it can be challenging to defend independent contractor (IC) status, the motor carrier should consider whether the unemployment agency has jurisdiction over the interstate work performed by the owner-operator(s). A state does not automatically have jurisdiction to adjudicate a claim and/or conduct an audit based on a claimant’s (or group of workers’) state of residence.
Most states have adopted uniform statutory provisions clarifying which state is entitled to a putative interstate employer’s unemployment tax contributions based on “localization of the work.” If a worker’s services are not localized in one state, as is typical in interstate trucking, proper jurisdiction lies in the state where (1) some of the service is performed (e.g. pick-ups, deliveries, miles traveled, fuel purchased), and (2) the worker’s base of operations, or, if there is no base of operations, the state from which direction and control emanates (generally thought of in trucking as dispatch). Of course, owner-operators are not subject to direction or control, but dispatch may resemble a form of “direction.”
A fact-sensitive analysis is required to determine whether a jurisdictional defense exists, but the proper analysis is important, particularly when dealing with states where the defense of IC classification can be difficult. Motor carriers should consider where they are reporting and determine if they may be able to establish unemployment tax jurisdiction in a more IC favorable state, such as one of the 22 states with a statute exempting owner-operators from coverage.
Scopelitis’ Transportation Brief® is intended as a report to our clients and friends on developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.
Transportation Brief: Eleventh Circuit Upholds Downstream Carrier’s Limitation of Liability
by Kathleen C. JeffriesThe Eleventh Circuit, in Essex Insurance v. Barrett Moving & Storage, reversed summary judgment against Landstar by upholding standing law that shippers are bound by liability limitations established between an intermediary and a carrier, notwithstanding the shipper’s claim that it was not aware that Barrett brokered the load. Read more here.
Transportation Brief: Buyers Be Diligent
by Gregory M. Feary , Kathryne S. Feary-Gardner , Jay D. Robinson,When considering the acquisition of a motor carrier operation, a number of due diligence matters specific to transportation should be analyzed. Read more here.
Transportation Brief: Full Enforcement of the ELD Mandate Commences
Previously, ELD violations, though listed on roadside inspection reports and sometimes prompting fines, did not result in out-of-service orders or negatively impact a motor carrier’s Safety Measurement System (SMS) scores. Now, drivers who are subject to the ELD mandate and found to be operating without a device will be placed out of service for 10 hours. Read more here.
Transportation Brief: Warehouse Chargebacks
by Caroline D. Milner , Kevin M. PhillipsChargebacks are most common in the retail industry, but they have application in other industries as well. Read more here.
Transportation Brief: Spotlight on Unemployment Tax Practice
by Steven A. Pletcher , Rebecca S. TrennerState unemployment tax remains one of many misclassification battlefronts for motor carriers and other transportation companies utilizing equipment or services provided by independent contractors (IC). Members of Scopelitis' Unemployment Tax team offers a unique set of experiences and thought leadership regarding these matters. Read more here.
Transportation Brief: For the Record Spring 2018
We are pleased to announce that Michael Reed has joined the Firm’s Chicago office. Michael joins the Personal Injury, Property Damage, and Cargo Claims practice group.
- On the Road
Scopelitis attorneys are often invited to participate in meetings with transportation industry leaders. Learn more about their trips this quarter.
Transportation Industry News & Trends