SAME NATURE OF SERVICE The third qualification has received


considerably less attention. In one reported decision, the Court of Appeals rejected an individual truck owner’s claim on the third qualification of the “ABC test.” The owner had three trucks which she leased to a company that hired drivers to drive her trucks. She received a percentage of the payment for each load. The owner “testified that her contact with the drivers concerned maintenance and repair of the trucks and issuing the drivers a paycheck upon completion of a load based on an indi- vidual pay rate she had negotiated with them.” She further noted that she adver-


tised for drivers and recommended drivers for hire and approval by the company to which she leased her trucks. The drivers testified that they almost exclusively drove the owner’s trucks and obtained most if not all of their routes from the company to which the owner leased her trucks. Under these facts, the Court found that none of the drivers were “customarily and independently engaged in a business of the same nature as that of [the owner].”


NEW LAW Act 945 changes very few words in


the Arkansas “ABC test.” The act added an “and” after the first element and an “or” between the second and third ele- ments. After the Act, the section now reads as follows: Service performed by an individual for wages shall be deemed to be employment subject to this chapter irrespective of whether the com- mon law relationship of master and servant exists, unless and until it is shown to the satisfaction of the director that:


(1) The individual has been and will continue to be free from control and direction in connection with the performance of the service, both under his or her contract for the performance of service and in fact; and


42


(2) (A) The service is performed either outside the usual course of the business for which the service is per- formed or is performed out- side all the places of business of the enterprise for which the service is performed; or


(B) The individual is cus- tomarily engaged in an inde- pendently established trade, occupation, profession, or business of the same nature as that involved in the service performed.


In addition to the statutory edits,


the Act contained an emergency clause, making it immediately effective upon passage.


AS A PRACTICAL MATTER, THIS MEANS


THAT EMPLOYERS WILL HAVE THE OPTION TO AVOID THE SECOND


QUALIFICATION OF THE TEST. ALTHOUGH THERE IS LITTLE CASELAW REGARDING THE


APPLICATION OF THE


THIRD, IT HAS BECOME APPARENT THAT IT


IS NEAR IMPOSSIBLE TO SUCCEED UNDER THE SECOND


QUALIFICATION.


WHAT IS THE BENEFIT? Under the revised statute, employ-


ers presumably need to prove one less qualification to overcome the statu- tory presumption of employee status. Although employers will still need to prove the first “control” qualification, employers can choose to prove either the second or third qualification of the


test. As a practical matter, this means that employers will have the option to avoid the second qualification of the test. Although there is little caselaw regarding the application of the third, it has become apparent that it is near impossible to succeed under the second qualification. Shortly before the introduction of


Act 945 in the Arkansas House, Court of Appeals Judge Brandon Harrison noted that the second, and seemingly insurmountable, element of the “ABC test” had a “long reach, [that] as a practical matter, makes it difficult for a business entity to successfully claim that it associates independent contractors, not hires employees, for Department of Workforce Services purposes.” He concluded “that it is not obvious what real-world business enterprise could escape” the reach of the second element. Under the third qualification, at


least an argument can be made that an owner-operator, who has the option to contract with any number of truck- ing companies, can diligently control his expenses and maintain his truck to advance his own opportunities for potential profit, and could be viewed as engaged in the independent profession of truck driving. Act 945 appears to give truck-


ing companies a chance to overcome the statutory presumption in favor of employee and liability for unemploy- ment insurance taxes by relieving them of the impossible burden of the second qualification of the “ABC test”. Although this makes avoidance of unemployment insurance taxes a possi- bility, the burden to meet the other two elements remains difficult for trucking companies. ATR


R. Scott Zuerker & Joseph K. Luebke are attorneys with Ledbetter, Cogbill, Arnold & Harrison, LLP


Sources available on request.


ARKANSAS TRUCKING REPORT | Issue 3 2015


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