Freight Broker Liable as Statutory Employer and Uninsured Motor Carrier Penalized in Trucking Case
Frances Atiapo worked as a truck driver for Goree Logistics, Inc. Goree contracted with Owen Thomas, a freight broker, to transport goods for another company. While driving a load of goods for Goree, Frances Atiapo was injured in a motor vehicle accident in Colorado. Goree did not have workers’ compensation insurance and denied Mr. Atiapo’s claim, contending he was an independent contractor and that workers’ compensation coverage was not required because Goree employed less than three employees. The Commission ultimately found Owen Thomas liable as a statutory employer and ordered it to pay Atiapo workers’ compensation benefits pursuant to N.C.G.S. § 97-19.1. In its Amended Opinion and Award, the Commission also assessed penalties against Goree and its principal, Mandieme Diouf, for failing to carry workers’ compensation insurance.
In Atiapo v. Goree Logistics, Inc., the Court of Appeals agreed with the Commission’s decision to hold Owen Thomas liable for Atiapo’s workers’ compensation claim as a statutory employer under N.C.G.S. § 97-19.1. Although Owen Thomas contended it was only a freight broker, the court decided Owen Thomas had extended its role beyond a broker to that of a contractor under § 97-19.1. The court noted Owen Thomas used its own judgment in selecting motor carriers for its clients and controlled aspects of the motor carrier’s work, including the delivery of the goods, the frequency with which motor carriers reported to Owen Thomas, and the temperature at which the freight was maintained during transport. Owen Thomas also retained any monies received from its clients above amounts paid to its chosen motor carriers. In addition, the court rejected Owen Thomas’ argument that § 97-19.1 was preempted by federal laws regulating interstate commerce, holding that the federal preemption established in 49 U.S.C. § 14501(c)(1) does not apply in these circumstances.
Although Goree did not employee three or more employees, the court also upheld the assessment of penalties against Goree and Diouf for failing to carry workers’ compensation insurance. The Commission had concluded that the number of employees Goree employed was irrelevant because § 97-19.1 imposes liability on a motor carrier under the Workers’ Compensation Act irrespective of the number of the motor carrier’s employees. Also, N.C.G.S. §§ 97-9 and 97-93 require employers subject to the Act, in this case Goree, to secure compensation for their employees and to maintain workers’ compensation insurance.
Risk Handling Hints: In holding the freight broker liable where its contracted motor carrier was uninsured, and in penalizing the motor carrier, the Atiapo case demonstrates the broad reach of N.C.G.S. § 97-19.1, along with the policy of the Act to ensure compensation for injured employees. Atiapo also leaves open the question of whether a contractor under N.C.G.S. § 97-19 who employees less than three individuals can be penalized for failing to maintain workers’ compensation coverage. Freight brokers would benefit from reviewing their contracts and obtaining valid certificates of insurance from subcontractors who agree to provide coverage. Motor carriers should also carefully assess their insurance coverage to ensure compliance with N.C.G.S. §§ 97-9, 97-19.1 and 97-93.
The Atiapo case was of special interest to our firm, as we serve many commercial transportation clients. Partners Bill Bulfer and Brad Inman have spent much of the past decade working directly with industry associations and our clients to ensure a favorable risk environment. We believe there are alternative defense strategies available and encourage commercial transportation providers and their carriers to discuss with us some of our more coordinated, holistic approaches to defending these claims.