On December 11, 2017 the Commissioner of the New Jersey Department of Labor and Workforce Development (the “Commissioner”) issued a Final Administrative Action Determination in the matter of Big Daddy Drayage, Inc. v. New Jersey Department of Labor, OAL Docket No. LID 17680-16, Agency Docket No. DOL 15-006.  The determination is very favorable to trucking companies which utilize owner operators as the Commissioner found that the trucking company was not liable for unpaid contributions to the unemployment compensation fund and the State disability benefit fund for the audit period from 2006-2009.  The Department of Labor had assessed the petitioner trucking company $258,689.79 in unreported and/or unreported wages for the audit period.  The trucking company appealed this decision and the administrative law judge (“ALJ”) reversed, finding that the trucking company satisfied the ABC test for independent contractor status found at N.J.S.A. 43:21-19(i)(6)(A), (B) and (C).  Because the ALJ found the owner operators were not employees, she determined the trucking company was not liable for the assessment made by the Department of Labor.

The decision by the ALJ was reviewed by the Commissioner.  The Commissioner initially remanded the case back to the administrative law judge to make the threshold determination as to whether the trucking company qualified for the “owner – operator” exemption from the unemployment compensation law found at N.J.S.A. 43:21-19(i)(7)(X), by meeting the  IRS 20 factor test for independence.  On remand, the ALJ once again determined the that the trucking company did not qualify for the owner-operator exemption, but reaffirmed her determination that the trucking company satisfied the ABC test and was therefore not liable for the assessments.

The decision by the ALJ was again reviewed by the Commissioner who agreed that the trucking company was not liable for the unpaid contributions to the unemployment compensation fund and State disability benefits fund assessed by the Department of Labor.  However, the Commissioner reached this determination on a different ground than the ALJ.  The Commissioner found that the trucking company qualified for the owner-operator exemption in N.J.S.A. 43:21-19(i)(7)(x).  The Commissioner found that the compensation paid to the drivers was a percentage of the gross revenue generated by a schedule of payment based on the distance and weight of the transportation necessary to qualify for the owner-operator exemption.  The Commissioner agreed with the ALJ that the petitioner trucking company satisfied the IRS test for independence.  The Commissioner concluded that the petitioner trucking company provided sufficient evidence of the FUTA (Federal Unemployment Tax Act) exemption under N.J.A.C. 12:16-23.2(a)(4) to satisfy the requirement of N.J.S.A. 43:21-19(i)(7)(X).  The Commissioner further concluded that the service provided to the petitioner trucking company by the owner-operator/truck drivers during the audit period were exempt from the UCL (Unemployment Compensation Law) under N.J.S.A. 43:21-19(i)(7)(X) and, accordingly reversed the assessment by the Department.

The bottom line is that after a several year fight the petitioner trucking company was able to convince the Commissioner of the Department of Labor that it had no liability under the Unemployment Compensation Law for compensation paid to its owner-operator.  While each case is fact specific, the determination by the Commissioner will be very helpful to trucking companies who utilize owner-operators in the same manner as the petitioner trucking company in this case.

Catherine J. Bick, Sean E. Regan, Matthew N. Fiorovanti, Christoper J. Marino, Timothy D Haute, and Adam Garcia contributed to this piece.