In the realm of trucking litigation, practitioners are often confronted with the issue of “statutory employment” or “logo/lease liability.” These terms relate to claims against motor carriers and the interpretation by various federal and state courts of the Federal Motor Carrier Safety Regulations regarding leasing requirements, particularly 49 C.F.R. § 376.12. The relevant regulations address the relationship between motor carriers and the owner-operators of the trucks leased by those carriers. In applying these regulations to tort cases, courts initially took a narrow view of the leasing provisions, creating an irrebuttable presumption of an employer-employee relationship between the motor carrier and the owner-operator irrespective of common law agency principles. The blanket application of these principles led to often wildly unreasonable results and upended traditional state law on the principal-agent relationship.
After some courts began essentially imposing strict liability on motor carriers, the leasing regulations were amended in 1992 to clarify this troubling misapplication of the law. Specifically, a sub-section was added that provided: “Nothing in the provisions required by paragraph (c)(1) of this section is intended to affect whether the lessor or driver provided by the lessor is an independent contractor or an employee of the authorized carrier lessee.” 49 C.F.R. § 376.12(c)(4). Since this amendment to the regulations, many courts have revisited the issue of statutory employment and reasserted the importance of state agency laws to the motor carrier and owner-operator relationship.
Nine years ago, the Court of Appeals of Georgia had an opportunity to do just that. In P.N. Express, Inc. v. Zegel, 304 Ga. App. 672, 697 S.E.2d 226 (2010), the motor carrier challenged the trial court’s approval of a jury charge on the doctrine of statutory employment, arguing instead that Georgia’s laws on agency and respondeat superior should control the analysis. In light of the 1992 amendment cited above, appellants asked the Court to reverse the antiquated doctrine of strict vicarious liability relied upon by previous state court decisions. The Court declined to do so and thus Georgia has remained in the minority of courts to address this issue since the enactment of the 1992 amendment and uphold the doctrine of strict statutory liability.
Compare the result in the P.N. Express case to that in Bays v. Summitt Trucking, LLC, 691 F.Supp.2d 725 (W.D. Ky. 2010). A case from the Western District of Kentucky decided the same year as the Georgia case, the district court rejected an argument to adhere to the older interpretation of the regulation advanced by the tort plaintiff. The Bays court found that the irrebuttable presumption standard had produced “absurd results” amongst various courts by strictly construing the federal motor carrier regulations and improperly broadening the scope of motor carrier liability. See, e.g., Morris v. JTM Materials, Inc., 78 S.W.2d 28 (Tex. App. 2002). Instead, the district court held that the federal leasing regulations created a rebuttable presumption standard, which requires a court to analyze the respective liabilities of the motor carrier and owner-operator according to state agency laws. Relying upon long-standing precedent from the Sixth Circuit, Judge Coffman reasoned that “a carrier-lessee should not have greater liability, and certainly should not be strictly liable, for a negligent act of an owner-driver where such carrier would not be liable for a similar act of negligence by its own employees or when using its own equipment.” Bays, 691 F.Supp.2d at 729 (relying on Wilcox v. Transamerican Freight Lines, Inc., 12 Ohio Misc. 162, 371 F.2d 403 (6th Cir. 1967)).
While strict liability has been largely repudiated since the 1992 amendment, the other trend across the country is to adopt the old Interstate Commerce Commission’s interpretation of its own regulations and look directly to state law to resolve issues of agency without engrafting a federally-based presumption of motor carrier control: “[O]ur leasing rules do not and are not intended either to assign liability based on the existence of placards or to interfere with otherwise applicable State law.” 1 Ex Parte No. MC-43 (SUB-NO 16), Lease and Interchange of Vehicles (Identification Devices), 3 I.C.C.2d 92, 93 (1986). Relying on this interpretation and the addition of section (c)(4), the District Court for the Western District of Oklahoma found that the federal regulations were not intended to supplant “applicable state law concepts of agency” and ruled that a defendant motor carrier was “not vicariously liable based on a ‘statutory employee’ or ‘implied lease’ theory grounded in the federal regulations” as a matter of law. Jett v. Van Eerden Trucking, Inc., 2012 WL 37504, at *4 (W.D. Okla. 2012).
Similarly, the District Court for the Middle District of Alabama determined that state law, not federal regulations, controlled the issue of motor carrier agency and vicarious liability. Lohr v. Zehner, 2014 WL 2504574, at *3 (M.D. Ala. 2014). Notably, the Lohr court found that while “[t]he text of the regulation requires certain language within lease agreements,…it does not impose any liability scheme directly. It is reasonable to interpret the regulation as leaving that question to various States’ common-law courts.” Id. Indeed, a number of state courts have recently agreed with this rationale and analyzed the issue of vicarious liability based on relevant state law precedent without any federal presumption of lease liability. See Jackson v. Wise, 249 So.3d 845, 854, 2017-1062 La.App. 1 Cir. 4/13/18, 15 (La.App. 1 Cir., 2018); White v. Date Trucking, LLC, 2018 WL 2462921, at *7-8 (D. Md., 2018); see also Swanson Hay Company v. State Employment Security Department, 404 P.3d 517, 532, 1 Wash.App.2d 174, 201 (Wash. App. Div. 3, 2017) (“Nothing in the history of the irrebuttable presumption/statutory employee cases suggests that the ICC believed it should-or could-narrow vicarious liability under state law by dictating to states certain evidence of the relationship between the carrier and the owner-operator that they were required to ignore.”)
Given the direction of lease liability analysis and the progression from irrebuttable presumption to direct reliance on state law, Georgia’s strict statutory employment standard remains glaringly out of step with the majority of courts on this issue. Nevertheless, courts often rely on outdated precedent from earlier decisions to confirm the viability of the strict statutory employment doctrine instead of analyzing the federal leasing regulations as they have been applied in more recent decisions, so careful consideration of each state’s interpretation of these regulations is critical. As courts revisit these issues and reinforce the importance of state law principles, it is likely that an increasing number of states (perhaps including Georgia) will revert back to a direct common law agency analysis to decide these issues.
1 The Interstate Commerce Commission (“ICC”) was abolished in 1995 and its regulatory enforcement duties were transferred to the Secretary of Transportation, specifically the Federal Motor Carrier Safety Administration and the United States Department of Transportation for motor carriers. There has been no indication that this transfer would negate the ICC’s previous interpretations. See Jett v. Van Eerden Trucking, Inc., 2012 WL 37504, n. 7 (W.D. Okla. 2012).