Spartan Truck Lines, Essay Example

Facts: Spartan Truck Lines is a corporation located in Florida, acquired contracts for dispatching live tropical fish and fresh produce to customers throughout the country. As a result of not owning any trucks or trailers, the corporation decided to get assistance from individual truckers on a load-by-load basis through an application. Truck drivers could bid for any job they desire using the app tool. Spartan Truck Lines considered the drivers of the company as independent contractors. Furthermore, each driver signed a contract, which is a binding document accepting to be classified as such. Although the Florida Bureau of Workers Compensation initially agreed with this assessment, the IRS reclassified the drivers as employees.

Issue: Whether the truck drivers are considered to be employees of Spartan Truck Lines and whether it is subject to employment taxes.

Answer: No, the truck drivers are independent contractors because they owned their trucks, maintained control over their work concerning assignments and routes, and worked on a load-by-load basis.

Rationale: Peno Trucking v. Commissioner provides precedent and a comparative standard for whether a driver is a worker or an independent contractor. Courts typically determine whether an employer-employee relationship exists by considering the following factors: The level of control the principal has over the work, which the party is financially investing in the facilities (trucks in this case) used to get the job undertaken; whether the person may benefit or encounter a loss; whether or not the individual can be discharged by the principal; whether the work constitutes regular business for the principle; how permanent working relationship is between the individual and the principle; and finally, what relationship both parties believe they have created.

Publication 15 (A) provides guidance on defining an employee. This publication cites common law rules as one of the main determining factors, specifically whether the company controls or has the right to control what the employee does and how he or she does the job. It is a control test that suggests that the drivers are not employees if the company does not set routes or schedules, own the trucks, or prevent the drivers from taking loads for other companies. Since PenoTrucking states in the case that this is the master test to be considered, it suggests that the drivers are contractors because there is no indication of Spartan Truck line’s control.

Furthermore, the drivers are the ones who select which jobs they wanted to pick up. It suggests that they had control over the work as opposed to the corporation. In addition to that, the Peno court cited the rule in Ewens& Miller v. Commissioner that an employee who provided her/his instruments are considered an independent contractor. Applying this test to the Spartan Truck Lines’ case would suggest that the drivers were independent contractors since they owned their trucks and paid insurance on them.

Concerning employment relationship, the facts given suggest that there is an at-will employment because the employees can be terminated for any reason. The final issue, cited by the Peno case, is whether the drivers may accrue a profit or loss. If drivers can suffer a loss, then they are more likely to be independent contractors.

Authorities

Ewens& Miller, Inc. v. Comm’r, 117 T.C. 263, 271 (T.C. 2001)

I.R.C (26 USC §3401)

IRS Publications,IRS Publication 15-A: Employer’s Supplemental Tax Guide [2015], Internal Revenue Service

Peno Trucking, Inc. v. C.I.R., 296 F. App’x 449 (6th Cir. 2008)