Lawyers’ Corner: Economic Reality Test in Van Lieu v Farm Bureau Gen Ins Co of MI

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When motor vehicle accidents happen on the job, one of the first questions for auto accident attorneys is whether the injured party was an employee or an independent contractor. A recent Court of Appeals decision applies the economic reality test to make that decision.

Is a pig transportation semi-truck driver an employee or an independent contractor? The unpublished Court of Appeals opinion in Van Lieu v Farm Bureau Gen Ins Co of MI says that depends on the circumstances of the case, and how they fit into the economic reality test.

Farmer Turned Trucker Injured in Semi-truck Crash

Roger C. Van Lieu was an experienced farmer and commercial truck driver. He had maintained a commercial driver’s license (CDL) since the late 1990s, and drove a truck for over 9 years. At the same time, he and his daughter maintained a dairy farm. In 2009, Van Lieu turned the operations of the farm over to his daughter and went to work full time as a semi-truck driver.

Three years later he signed on to work with Douglas Carpenter, the owner of Crooked Creek Farm, a grain and pig farm. He drove a Crooked Creek truck, delivering hogs to the slaughter plant and grain and corn to mills, all in Indiana. In between deliveries, he worked on the farm repairing equipment and farming the land.

Then, on August 12, 2013, Van Lieu was transporting hog manure on the Crooked Creek farm when strong winds blew the truck sideways, where it rolled into a ditch. He suffered a broken neck and broken back, head laceration, ear laceration, or a chipped bone in his right elbow.

Individual No-Fault V. Employee Insurance Benefits

Van Lieu filed a claim with Farm Bureau, his individual no-fault provider. Then Farm Bureau brought in AMCO Insurance Company, which insured Crooked Creek Farms, as a third-party defendant. The question, both for the trial court and on appeal, was whether Van Lieu qualified for employee benefits under AMCO Insurance Company. The Michigan No-Fault Act, MCL 500.3114(3) says:

“An employee . . . who suffers accidental bodily injury while an occupant of a motor vehicle owned or registered by the employer, shall receive personal protection insurance benefits . . . from the insurer of the furnished vehicle.”

But independent contractors are not considered employees for the Michigan No-Fault Act based on existing case law. Which auto insurance provider would be paying benefits depended on whether Van Lieu was an employee or an independent contractor based on the economic reality test.

The Economic Reality Test

The Court of Appeals explained that the economic realities test required the court to consider several factors:

  1. Who controlled the worker’s duties
  2. The payment of wages
  3. The right to hire, fire, and discipline the worker
  4. Whether the work done was integral to the employer’s business

In addition, courts may also consider:

  1. Whether the employee furnishes his own equipment and materials
  2. Whether the employee holds himself out for hire to others for the same work
  3. Whether the type of work is customarily done by an independent contractor

When it came to Van Lieu and Crooked Creek, Van Lieu was paid $750 per week and worked 40-50 hours per week for the farm. He was awarded two weeks paid vacation after working for the farm for a year. Carpenter assigned deliveries and task lists for Van Lieu. Crooked Creek provided the semi-truck cab and trailer, and paid for gas, maintenance, and insurance on the vehicle. While Van Lieu set his own work schedule, he traditionally worked 8:30 to 5:00 at the farm between deliveries and communicated his schedule to Carpenter on a regular basis. Van Lieu didn’t do transportation for anyone else, and only farmed his own property in addition to Crooked Creek. Carpenter identified Van Lieu as an independent contractor, did not withdraw taxes from his pay, and issued him a 1099 each year, but he reserved the right to fire Van Lieu, rather than setting a firm end date.

The Michigan Court of Appeals thought the answer to the economic reality test was clear in Van Lieu’s case: He was an employee of Crooked Creek. It found that the first, third, and fourth mandatory factors and the first and second optional factors all favored employee status. It noted:

“While evidence showed that plaintiff’s pay-structure was more akin to an independent contractor–i.e. plaintiff received a 1099 form and Crooked Creek  did not withhold income or payroll taxes–considering all of the other evidence, this alone did not leave open an issue on which reasonable minds could differ.”

Representing Employees Facing Economic Reality Challenges

The court’s decision that the economic reality outweighed an employer’s characterization puts an emphasis on the details of an employee’s work, not how they get paid. For plaintiffs’ attorneys, it is important not to take a worker’s employment characterization on face value. Auto accident attorneys should dig in to the details of the work done, the compensation received, and the degree of control an employer has over the work.

Don’t get caught having filed a claim with the wrong auto insurance company. Make sure your clients are covered by filing notices of claim with the individual no-fault provider and the employer’s insurance company.

David Christensen is an auto accident attorney at Christensen Law in Southfield, Michigan with over 25 years’ experience. If your client is facing a challenging no-fault claim, contact Christensen Law for a referral today.