Aug. 8. 2006 !0:28AM No.4602 P. 14/1~ .. ' v

STATE OF MICHIGAN

IN THE CIRCUIT COURT FOR THE COUNTY OF WAYNE

ROADWAY PACKAGE SYSTEMS, INC.,

Plaintiffi'Appellant,

-v-

CRAIG STOREY and STATE OF.MICHIGAN DEPARTMENT OF LABOR & ECONOMlC GROWTH, UNEMPLOYMENT INSURANCE AGENCY,

Defendant/ Appellees.

ORDER

Case No. 05-535515-AE

Hon. Daphne Means Curtis

At a session of said Court held in the Coleman A. Young Municipal Center, Detroit, Wayne County, Michigan, on this: .

rJUL 2 7 2006

PRESENT: HONORABLE DAPHNE f~EANS CURTIS Circuit Judge

The Court being advised in the premises and for the reasons stated in the foregoing

Opinion,

IT IS ORDERED that the decision of the Michigan Employment Security Board of

Review is AFFIRMED.

Circuit Judge

::: Ill •• ' .• -.-. :::

Au g. 8. 200 6 !0: 26AM No. 460 2 P. l/14

STATE OF MlCHIGAN

IN THE CIRCUIT COURT FOR THE COUNTY OF WAYNE

ROADWAY PACKAGE SYSTEMS, INC.,

Plaintiff/Appellant, .

RECEIVED AUG 0 7 2006

LEGAL DEPT.

-v- Case No. 05-535515-AE

CRAIG STOREY and STATE OF MICIUGAN DEPARTMENT OF LABOR & ECONOMIC GROWTH, UNEMPLOYMENT INSURANCE AGENCY,

HoJi. Daphne Means Curtis

Defendant/ Appellees.

OPINION

I. Introduction

Roadway Package Systems, Inc. ("RPS") appeals from a decision of the Michigan

Employment Security Board ofReview (''Board") that claimant, Craig Storey, was an employee of

RPS, and that his services constituted covered employment as defined inMCL421.42(5)1 andMCL

MCL 421.42(5) provides:

Services performed by an individual for remuneration shall not be deemed to be employment subject to this act, unless th~ individual is under the employer's control or direction as to the performance of the services both under a contract for hire and in fact. Service performed by an individual for remuneration under an exclusive contract which provides for the individual's control and direction by a person, fmn, or corporation possessing a public service permit or by a certificated motor carrier transporting goods or property for hire shall be deemed employment subject to this act. Service performed by an individual who by lease, contract, or arrangement places at the disposal of a person, finn, or coi1Joration a piece of motor vehicle equipment and under a contract of hire, which provides for the individual's control and djrection, is engaged by the person, firm, or corporation to

(continued. __ )

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• I

421.44.2 For the reasons more fully explained below, this Court will affirm the decision of the Board.

II. Facts and Procedural History

RPS operates a package delivery service throughout the United States. Claimant, a truck

driver, provided pick-up and delivery services for RPS pursuant to a written contract entered into

bet-ween the parties in August 1994 which classified claimant as a "pick-up and delivery contractor."

On May 17, 1995, RPS filed an Application for Determination ofEmployment Status with

the Michigan Unemployment Insurance Agency ("Agency"), requesting a determination whether the

services render~d by claimant were covered employment under the provisions of the Michigan

Employment Security Act CAct'), MCL 421.1 et seq.3

In a determination issued on June 8, 1995, a Liability Examiner found as follows:4

According to the tenus of the agreement, Craig Storey had to make available to RPS at the start of every business day a clean and properly maintained van which meets the specifications ofRPS, and pick-up and deliver small packages as required by RPS. He had to

1 ( •• • continued)

2

operate the motor vehicle equipment shall be deemed to be employrrient subject to this act

MCL 421.44(1) states in pertinent part:

."Remuneration" means all compensation paid for personal services, including commissions and bonuses, ·and except for agricultural and domestic services, the cash value of all compensation payable in a medium other than cash.

Under MCL 421.42(1 ), the term employment is defined to mean "service, including service in interstate commerce, performed for remuneration or under any contract of hire, written or oral, express or implied."

Tne fmdings were made after the Liability Examiner noted MCL 421.31 , which provides in relevant pa.."'t "[n]o agreement by an individual to wave [sic], release, or commute his rights to benefits or any other rights under this act from an employer shall be valid."

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meet a set standard and volume of service in a specified primary service area, on a given day. The claimant also had to· cooperate with RPS employees, customers and otherpick~up and delivery drivers, to achieve the goals set by RPS for the efficient pick-up) delivery) handling. loadmg and unloading of packages and equipment, and provide such electronic and or manual data pertaining to package handling as necessary. As part of an agreed standard of service, the claimant has to adhere to vehicle and operator appearance standards prescribed by RPS; whereby the claimant had to wear RPS uniforms an,d his vehicle has to meet the equipment identification standards as to color, logos, number, marks and insignia, so as to identify himself as well as his vehicle, as part of the RPS system. The claimant had to perform these services on a daily basis within his primary service area. The claimant had to prepare and handle daily driver logs, daily inspection reports, along with fuel receipts, shipping docwnents, and other documents as required by RPS or law or regulation, and had to file the originals with RPS upon the conclusion of each business day. To present a consistent image and standard of service, the claimant had to wear [an] RPS unifonn in good condition and had to keep his personal appearance in consistence with the standards set by RPS.

To meet the standards fixed by RPS, RPS provided training to the claimant during the first 30 days· of his service and initiated "customer service rides" to verify that the claimant's service meets the standards set by RPS as well as DOT and insurance carriers.

The claimant's remuneration was based on the packages picked up and delivered and he was paid on a weekly basis. One of the components of his pay was based on the consideration that the ciaimant [was] making available to RPS at the start of each business day a clean and properly maintained vehicle. The remuneration also included compensatory allowances for expenses. The claimant was also eligible for incentive payments for meeting performance standards fixed by RPS.

(R. 71-72).5

The Liability Examiner determined that claimant's services 'w ere an integral part of the

business ofRPS, and his services were essential and beneficial to them and he received implied

5

Tne initial "R" followed by numerals indicates the applicable page numbers of the certified record of proceedings ofthe Board.

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direction and control as [to] how to perform these services by the various standards fixed by RPS."

Consequently, the Liability Examiner concluded that based on MCL 421.42(5) and MCL 421 .44( 1 ),

the services performed by claimant were in covered employment with RPS, and the remuneration

claimant earned was considered wages under the Act.

RPS appealed the determination and requested a redetermination. Since the request was not

received by the Commission within 30 days of the mailing of the determination. RPS was not

entitled to a redetermination as of right Under MCL 421.32a(2), the Commission could have

reconsidered the determination upon a showing of good cause. However, the Commission decided

that RPS had failed to establish the requisite good cause for reconsideration of the determination,

and denied RPS' request for redetermination. RPS appealed.

The Commission affirmed the determination. RPS appealed, requesting a hearing before an

Administrative Law Judge ("AU").

A hearing was subsequently he~ d. The AU made the following findings of fact:

The employer. which is now known as RPS, operates a package pickup and delivery service. The company contracts with individuals to be the delivery drivers. Under the tenns of the contract they signed, they are ''independent contractors," according to RPS.

Craig Storey had signed one of these contracts in August, 1994.

Under the terms of the contr~t, the drivers, called "contractors," are responsible for getting their own trucks. However, RPS has specific sizes that must be used and it also has guidelines for how the truck should be set up, with shelves inside. Furthermore, the trucks must be a specific color and it must have logos and signs on it identifying it as an RPS truck.

While the driver is using.the truck for pickup and delivery for RPS, the driver cannot use it for any other purpose. However, the driver could use the truck at other times, but must cover up the signs.

The driver is aiso expected to wear an approved u...-riform which

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identifies him as a delivery person for RPS. There are also certain standards of appearance and conduct set forth in the contract.

The contractor is required to fill out numerous logs and reports and tum them into RPS. For each pickup and delivery, the driver must get signatures from customers and tum this material into RPS. The contractor is required to be in compliance with numerous Federal laws and regulations and the contractor must submit various reports and fonns to RPS to substantiate it.

The contractor can have a substitute, but the individual must be approved by RPS. The substitute driver must meet all the requirements, such as we~ng an approved uniform and use the approved truck. Under Section 1.9 of the contract, the contractor is required to deposit a $1,000 amount for a "performance escrow account."

The contractor can do the pickup and delivery on his own time schedule and following his own routing. However, the pickups and deliveries must be between 7:00a.m. and 7:00p.m. and on Monday through Friday. The customers are furnished by RPS. If a contractor gets a new prospective customer, the information must be turned into RPS. RPS will then go and contact the customer and determine if they will add the business.

The contractors are given specific territories in which they can operate. RPS reserves the right to change these territories. RPS also can take packages from a certain area and assign them to someone else. However, contractors are paid based on the amount of packages they handle.

The contractors are responsible for their own taxes and things such as worker's compensation, retirement pensions, insura.11ce on the vehicle, and so forth. However, RPS has made arrangements with various companies for various programs in which a contractor can participate. RPS also has a '"business support package" which a contractor can buy and the amount for the service will be deducted from the contractor's weekly settlement. Such things as clean unifonns, scanners, printers, communications equipment, vehicle inspections, washing and cleaning services for the vehicles, parts and equipment for the vehicles and majntenance for the vehicles can be covered through this package.

Under other provisions in the contract, RPS can remove a driver from a particular customer if the customer makes complaints. The company can also terminate the relationship jf they are dissatisfied with a

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contractor.

@.., 129-130).

The AU disagreed with RPS that services performed by the claimant were not in covered

employment, and that the claimant was an independent contractor not under the control of RPS,

detennining:

... the contractor has his or her independence seriously restricted by the qualifications and requirements that RPS imposes. The Administrative Law Judge is of the opinion that applying the ''Economic Reality Test" to the factual situation involved results in a finding that the contractors were or are employees.

The drivers must put their customers through RPS and have certain times to perform their services. There are a myriad of forms to be prepared and turned in to RPS. The trucks used must be clearly identified with the RPS logo and they cannot be used for personal use unless this logo is covered up. The trucks can also not be used for any other purpose while the driver is involved in RPS duties. The driver cannot conduct any other business while doing R.PS pickup and deliveries.

The contractors must also have approved substitutes if they cannot perform the work themselves. RPS maintains the right to change the territories and remove customers. The appearance of the drivers is controlled and also their conduct.

(R, 131).

The ALJ concluded that the claimant was ••an integral part of the employer's business," and

was "sufficiently under the direction and control ofRPS." (R, 132). As a result, the AU affirmed

the redetermination on the basis ofMCL 421.42( 1) and ( 5). RPS appealed.

On appeal, the Board reversed the decision of the AD, reasoning in relevant part:

The seemingly onerous requirements imposed upon the clal.mant relating to vehicle identification, vehicle maintenance reports, medical and other driver qualification requirements and dri ver 's daily log and other hours of service requirements were required by Federal

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and State law, not for the convenience of the trucking company. The Federal Motor Carrier Safety Regulations provide that the trucking company must maintain these records for both employee drivers and owner operators (independent contractors).

However, roost important to this case is the 1996 Wayne County court decision, Storey v Detroit Children's Hospital. Roadway Package System, Robert Gray, Case No. 96-620986-NO (Wayne County Cir Ct November 15, 1996) finding t.l).at this same driver was an independent contractor for this same trucking company, not an employee thereof .... 6

We take this opportunity to observe that the evidence introduced at the Referee hearing clearly established the claimant was in fact an independent contractor under the economic reality test set forth in McKissic v Bodine, 42 Mich App 203 (1972); lv den 388 Mich 780 (1972). While a ·number of factors are set forth in McKissic v Bodine, sugra, it is clear the factor of control is determinative in this matter. RPS did not maintain control over the claimant sufficient to find he acted as an employee. This is evidenced by the fact the claimant owned his own vehicle, set his own hours, was fr~ to hire individuals to assist him, owned his route, and chose jf and when he wanted to take vacation or breaks. Moreover, RPS could take no disciplinarY action. against the claimant and the claimant was compensated based on the number of deliveries he made, not fue number of hours he worked. The only requirement made of the claimant was that he return to work at the end of the day to drop off paperwork that was required by law and business necessity.

Clearly, the evidence in the record supports a finding consistent with that reached by the Wayne County Circuit Court. Moreover, the ruling by the Wayne County Circuit Court is consistent with rulings by other courts in cases jnvolving similarly situated claimants.

(R, 139-140).

Consequently, the Board detennined that the work performed by claimant was as an

independent contractor, and that claimant was not in covered employment within the meaning of

6

In 1996, claimant filed a civillawsuii against RPS, a..-nong otb~s, in Wayne County Circuit Court, alleging wrongful discharge. On November 25, 1996, Judge Pamela Harwood granted RPS' motion for summary disposition on the ground that claimant was not an employee of RPS.

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MCL 421.42 and MCL 421.44. The Agency then filed a motion for reopening and rehearing. The

Board denied the motion and the Agency appealed to this Court.

On March 16, 200~, this Court entered an order reversing and remanding to the Board for

rehearing. On remand, the Board examined the issue of whether claimant was an employee ofRPS

or an independent contractor. In this regard, the Board noted that the contract between the parties

required claimant to provide a certain standard of service delineated therein. The Board then referred

to MCL421.42(1) and (5), as well as the economic reality test; pursuant to which the Board found

that RPS' characterization of claimant as an independent contractor was of no significance. The

Board explained:

However, the degree of control by RPS over the claimant is of cC?nsequence. The degree of that control is set forth in great specificity in the contract. Indeed, while at the same time as RPS was denominating the claimant as an independent contractor, RPS required the claimant to hold himself out as being a part of the RPS system. Specifically, the contract required the claimapt to •'conduct his/her business so that it can be identified as being a part of the RPS system'' .. . Additionally, while the claimant agreed to provide delivery services using his own truck, the contract granted RPS a great deal of control over the claimant's own truck.

Under the contract . . . RPS required the claimant tci:

1) Provide daily delivery service for a period of three years

2) Pick up and deliver packages on ·dates and times compatible with the schedules and requirements of RPS 's customers . . .

3) Provide proof of timely maintenance and inspection of his truck . .-.

4) Use the truck exclusively for the carriage ofRPS goods and no other purpose while the truck is in the service of RPS . . .

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5) Identify hjs truck with RPS's identifying logos, numbers, marks and insignia as required under exultations or to identify the truck as part of the RPS system . . . . to maintain his truck in a clean and presentable fashion free ofbody damage and extraneous markings . ..

6) Wear the RPS approved uniform, maintained jn good condition and keep his personal appearance consistent with reasonable standards of good order ...

7) Permit RPS personnel to ride with claimant _ . .

No. 4602 P. 9/1 4

Certainly RPS had a business interest in providing its customers with on-time package pick up and delivery conducted by personnel neat in appearance and manner and by equipment that was fully maintained and operationally safe. The requirements set forth above are consistent with RPS's goal ofproviding a competitive service to its customers. But at the same time that these requirements assure a competitive product for RPS, they are inconsistent with an independent contractor relationship. The degree of control that RPS imposed upon the claimant, in such core areas as his personal appearance and the timeliness of his deliveries,. demonstrate that the claimant was neither independent of RPS nor a contractor, but worked under its control and direction.

Finally, RPS had the ultimate control over the assignment of delivery work to the claimant and thus control over his workday. Under the contract, RPS established the Primary Service Area to which .the claimant was assigned . . . had the sole discretion to reconfigure the claimant's Service Area to take account of its customers' needs ... and had the sole discretion to assign delivery work from the claimant's Primary Service Area to ariothe.r contractor .. .

In practice, RPS established the claimant's daily delivery assignments. RPS personnel loaded the driver's truck if it bad been left at the terminal .. . At the end of each day, the driver was required to retum to the terminal to drop off the delivery record and a bill for services to RPS. The driver was required to make all stops scheduled for the day ....

RPS defines itself as a package delivery service. The claimant, a delivery driver, was an integral part of the employer' s core mission. Furthermore, under the contract entered into between the claimant a.11d RPS and in daily practice, RPS maintained control over the

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claimant in terms of the clothing on his bac~ the logo on his truck and the duties of his workday. The claimant was not an independent contractor directing his own business. Rather, he was in a covered employment relationship with RPS.

In conclusion, we would note that the very document crafted by RPS requires the claimant to conduct his business «so that it can be identified as being p~ of the RPS system"... Certainly due to the degree of control that RPS has imposed upon the claimant's conduct and daily activities, RPS can have every confidence in the claimant being a representative of this cotporate entity. RPS holds the claimant out as one of its own for business purposes because by the very standards it imposes on the claimant, the claimant helps RPS achieve its business goals. The claimant should be recognized for what he is in reality, «a part of the RPS system." The claimant was not an independent contractor but an employee ofRPS.

The evidence in the record overwhehningly supports a finding of covered employment under Section 42 of theMES Act. Accordingly, the Referee's decision should be affirmed.

In reaching om conclusion in this matter we have noted there are a small nilmber of cases where the courts have found individuals who owned their own vehicles were independent contractors and not employees. Notably, in each of those cases the determi11ative factor was that those persons drove for various entities. In the instant matter, the circwnstances of the claimant' s relationship with RPS precluded the claimant for [sic] driving and carrying product, for others. Rather, the claimant worked exclusively for RPS. Furthermore, unlike the above cases the claimant was required to wear a RPS WJ.iform and mark his truck with RPS insignia designating it as part of fue RPS system. Given the exclusive nature or [ s1c J their relationship and the degree ofRPS's cont.""''l over the claima.11tthe claimant was, under the "economic reality'' test," an employee ofRPS.

For the reasons state above, the claimant was an employee of RPS and thereby satisfied the eiigibilityrequirements of Section 42 ofthe MES Act.

(R, 203~206)(citat1ons omitted).

The Board affirmed the ALJ for the foregoing reasons and for the reasons stated in the AU's

opinion. Tne instant appeal followed.

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Ill. Standard ofReview

Judicial review of a decision of the Board is limited. Saber v Capitol_Reproductions, Inc, 28

Mich App 462, 464; 184 NW2d 518 (1970). Where there is sufficient evidence, a reviewing court

may not substitute its judgment for that of the Board, even if the court might have reached a different

result. Blackv Department of Social Services, 195 Mich App 27, 30; 489 NW2d 493 (1992). Great

deference must be given to the Board's choice between two reasonable differing views as a reflection

of the exercise of administrative expertise. Traverse Oil Co v Chairman, Natural Resources

Commission, 153 Mich App 679, 691; 396 NW2d 498 ( 1986).

The BoarcPs decision may be reversed only when the decision is contrary to law or is not

supported by competent, material and substantial evidence. Becottev Gwinn.Schools, 192 MichApp

682, 685; 481 NW2d 728 (1991). "Substantial evidence" is that which a reasonable mind would

accept as adequate to support a decision. McBride v Pontiac.School District (On Remand), 218 Mich

App 113, 122-123; 543 NW2d 315 (1996). Under this test, it matters opJy whether the position

adopted by the Board is supported by evidence from which legitimate and supportable inferences

were drawn. I d.

Michigan courts apply the economic reality test to detennine whether individuals are

independent contractors or employees. See!ndustro-Motive Corp v Wilke, 6 Mich App 708, 712; 150

NW2d 544 (1967) . Factors considered under that test include: (1) control of the worker's duties; (2)

payment of wages; (3) the right to hire, fire, and discipline; and ( 4) perfonnance ofthe duties toward

the accomplishment of a common goal. Amerisure v Time Auto Trans, Inc, 196 Mich App 569, 575;

493 NW2d 482 (1992).

N. Analysis

On appeal, RPS raises a number of arguments, the first one of which is that the Board's

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decision is contrary to law for various reasons. In particular, RPS insists that the Board's decision

conflicts with Michigan Supreme Court precedent, notably the case of Pazan v Unemployment

Compensation Commission, 343 Mich 587; 73 NW2d 327 (1955), which was neither cited nor

addressed by the Board. It is RPS' position that Pazan is directly on point and thus, the result must

be the same in this case. RPS also contends that the Board improperly distinguished several other

cases in reaching its conclusion, namely Williams v Cleveland Cliffi Iron Co, 190 Mich App 624;

476 NW2d 414 (1991); Amerisure v Time Auto Trans, Inc, 196 Mich App 569; 493 NW2d 482

(1992); Broussard v LH Bossier, Inc, 789 F2d 1158 (CA 5, 1986). In addition, RPS claims that the

Board ignored other cases including Judge Harwood's decision.

RPS concedes. however, that although persuasive, the federal case is not binding. In this

regard, Judge Harwood's unpublished opinion is not precedentially binding under the rule of stare

decisis. SeeMCR 7.215(C)(l). AB forthe otherc_ases referred to byRPS, there. are factors otherwise

demonstrating the employer"employee relationship in this case which are not present in those cases.

For example, in Amerisure, the six drivers in question refused loads and were not required to wear

uniforms as were company drivers. In Williams, the plaintiff was allowed to provide hauling services

for others than the defendant and did so. Similarly, in Pazan, the truck owners hauled loads for

others than the pjaintiff, and refused at times to ma.l(e hauls for the plaintiff which they did not deem

lucrative. Moreover, the plaintiff inPazan paid 75% of the total tariff for a haul to the truck owners.

The factual differences are sufficient in this Court's opinion to make the case at bar readily

distinguishable.

Next, RPS asserts that the decision of the Board is not supported by substantial evidence.

According to .RPS, the Board misconstrued the evidence which it considered and ignored the

majority of the evidence supporting RPS' position .. This Court is unpersuaded by RPS' assertion.

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Although claimant is responsible for owning or leasing his own truck, there are specific guidelines

for truck size and the manner in which the truck is to be outfitted. Additionally, the truck must be

marked with RPS, identifying colors, logo, numbers and insignia, and claimant is required to wear

a uniform approved by RPS. The pick up and delivery service for RPS customers must be provided

by claimant on a daily basis in confonnity with prescribed hours of employment. Claimant cannot

provide services for others while using the truck for pickup and delivery for RPS. While claimant

can hire another driver to pickup and deliver packages for RPS, the replacement driver must meet

the approval ofRPS. In addition to these facts, and those revealed upon a careful review of the entire

record, this Court is satisfied that the Board's decision is adequately supported. Under the

circumstances, this Court will affirm the decision of the Board.

JUL 2 7 2006 CliCuit Judge

DATED:

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