SPECIAL REPORT: Appeals Court upholds OOIDA position on workers’ comp issue in case against New Prime Inc.

| 4/9/2004

On March 29, 2004, the Missouri Court of Appeals (Southern District) held that New Prime Inc. would have to defend itself against a civil class-action lawsuit brought by the Owner-Operator Independent Drivers Association (OOIDA) charging that it wrongfully required certain drivers to purchase workers' compensation insurance from it. The Court of Appeals rejected arguments by New Prime Inc. that certain owner-operator drivers fell outside the statutory definition of employee and that an individual's exclusive remedy was before Missouri's Division of Workers' Compensation, not the courts.

OOIDA, along with member Jeffrey Warta, had filed a class-action suit in Missouri Circuit Court against the Springfield, MO, motor carrier in January 2003 on behalf of individual owner-operators. It charges New Prime Inc. with unjust enrichment, fraudulent misrepresentation and negligent misrepresentation. The suit also alleges that Robert and Lawana Lowe and Vera Lowe, the owners of New Prime Inc., exercised a level of control over New Prime Inc. to make them personally liable for the wrongful acts of the corporation.

Prime is alleged to have engaged in a scheme by which it deducted workers' compensation premiums from Warta and other similarly situated drivers in violation of Missouri law and, at the same time, considered itself the employer of Warta and other drivers when a workers' compensation claim was made.

The central issue of the appeal dealt with whether Warta fell within the statutory definition of employee. That definition specifically exempts drivers who own and operate a truck from the definition of employee.

Plaintiff Warta, however, leased a truck from Success Leasing Inc. (also owned by members of the Lowe family) under a contract that specifically provided that Warta acquired no ownership interest in the truck during the term of the lease. Under Missouri law, an employee for purposes of workers' compensation includes owner-operators who lease their vehicles under a lease-purchase agreement but who have no ownership interest in the equipment. At the same time, Missouri's workers' compensation law prohibits an employer from charging an employee for workers' compensation coverage.

The Appeals Court reasoned that since Warta was not the owner of the truck leased to New Prime Inc., he did not fall within the exception to the statutory definition of employee.

Paul D. Cullen Sr., attorney for the plaintiffs, commented that, "The decision of the Court of Appeals is firmly grounded on the plain meaning of the words used in Missouri's workers' compensation statute as interpreted in prior court rulings. The plaintiff, Jeffrey Warta, did not hold legal title to the truck he leased from Success Leasing Inc. Therefore, he did not fall within the exemption to Missouri's workers' compensation statute, which requires truck drivers to be treated as employees unless they own their own trucks."

Commenting on this current court action against Prime, OOIDA President Jim Johnston said, "Carriers simply cannot expect to get all of the protections of limited liability available to employers under the law and then turn around and charge employees for premiums."