Justices: Drive-away driver properly classified as contractor

A “middleman” business that matches drivers with customers needing drive-away services properly classified one of its drivers as an independent contractor instead of an employee, the Indiana Supreme Court ruled in an opinion meant to resolve a conflict between two lower court rulings.

Wednesday’s decision in Q.D.-A., Inc. v. Indiana Department of Workforce Development, 19S-EX-43, involves Q.D.-A., a business that provides drivers to customers who need too-large-to-tow vehicles driven to them. Q.D.-A. contracted with one driver in particular who was allowed to choose his own hours and routes, negotiate pay and contract with competitors, among other privileges.

Further, the driver’s contract defined him as an independent contractor, so Q.D.-A. did not pay unemployment taxes for him. However, when the driver left Q.D.-A. and filed for unemployment, the Department of Workforce Development used the “ABC Test” to determine that the driver should have been classified as an employee. Specifically, the department found Q.D.-A. failed to prove the driver was free from the company’s control and direction, performed work outside of the company’s usual course of business and was customarily engaged in an independently established trade or business of the work performed.

 A liability administrative law judge agreed, finding Q.D.-A. proved only that the driver ran an independently established business. Further, the ALJ noted Q.D.-A provided an orientation to its independent contractors and “is a provider of one-way transportation of commodities,” evidence the judge said proved the driver was under the company’s control and operated within the company’s usual course of business.

A divided Indiana Court of Appeals reversed in March, finding Q.D.-A satisfied the ABC Test. But Judge Melissa May dissented, finding the majority’s decision to be in conflict with Company v. Indiana Department of Workforce Development, 86 N.E. 3d 2014 (Ind. Ct. Ap. 2017).

The Indiana Supreme Court justices agreed with the dissent that the two Court of Appeals decisions conflicted with each other and, thus, granted transfer. However, the justices also agreed with the majority of the Court of Appeals that the driver was not an employee and, thus, reversed the LALJ’s decision.

Justice Mark Massa, writing for the court, first said the driver was not under Q.D.-A.’s control either under contract or in fact. Under contract, Massa noted the driver had “ultimate control” over how to complete his work and was allowed to work for Q.D.-A. competitors. Further, the driver was not controlled in fact because Q.D.-A.’s orientation simply reiterated existing federal regulations.  

“In sum, Driver had total control over how – and even if – he completed his work,” Massa wrote. “No evidence shows Q.D.-A., in fact, controlled Driver in a way that would make him an employee. Instead, as the Department’s investigator herself contemplated, all these facts show the ‘opposite’ of control.”

The court likewise found that that driver performed a service outside of the company’s usual course of business, adopting New Hampshire and Connecticut definitions of “course of business.”  Q.D.-A. did not regularly or continually provide drive-away services as the driver did, the court held, but instead was a middleman between drivers and customers.

Finally, the court assumed the driver was engaged in an independently established business because neither party disputed the LALJ’s finding on that issue.

The LALJ’s ruling was thus reversed as unreasonable. Justice Geoffrey Slaughter concurred in result without separate opinion.