Agency Relationships in Tennessee Taxicab Companies: Who Carries Liability?

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Agency Relationships in Tennessee Taxicab Companies: Who Carries Liability?

Agency Relationships in Tennessee Taxicab Companies: Who Carries Liability?

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  • 1. Agency Relationships in Tennessee Taxicab Companies: Who Carries Liability? Christina Choe, Jerry Lu, Daniel McCoy, Erica Swallow Professor Calderon Law, Business and Society April 24, 2009
  • 2. Introduction In Gleaves v. Checker Cab Transit Corp., Inc., Robert J. Mosley, a driver for Checker Cab, began work at about 5:30 a.m. and reported “off-duty” by radio at approximately 9:20 p.m. Shortly after reporting “off-duty,” while en route home, Mosley’s high speed attracted the attention of City of Lakewood police officers and a high speed chase ensued. The chase ended at about 10:05 p.m. when Mosley collided with a vehicle operated by Michael C. Gleaves. Gleaves sustained serious injuries.1 Shortly thereafter, Gleaves brought action against Checker Cab on the grounds that Checker Cab was liable for Mosley’s actions under the doctrine of respondeat superior (Latin: “Let the master answer.”), which states that the employer is responsible for the actions of his employees, when performed within the scope of employment. Gleaves sought to prove that Checker was negligent in its hiring, supervision and licensing of Mosley, a manic-depressive with a history of violent behavior. The above-mentioned case was litigated in trial court, appealed to the Court of Appeals, and appealed, yet again, to the Supreme Court of Tennessee. The main issue of the proceedings was whether vicarious liability should be held applicable to Checker Cab for the tortious act committed by driver, Robert Mosley. Under the doctrine of respondeat superior, an agent’s employer can be vicariously liable for the tortious actions of the agent that occur within the scope of employment. This doctrine stems from the reasoning that since an agent acts in the place of his or her principal, the principal should therefore be held responsible for those actions. Essentially, vicarious liability can be viewed as an application of the common law principle, qui facit per alium facit per se, “one who acts through another, acts in his or her own interests” 1 Gleaves v. Checker Cab Transit Corp., Inc., 15 S.W.3d 799 (Tenn. Supr. 2000). In this 2000 case, the Supreme Court of Tennessee reversed the decision of the Court of Appeals and reinstated the trial court’s decision that Checker was vicariously liable for Mosley’s negligent actions under the Nashville Metro Code. 1
  • 3. (Legal). Since an employer can control and dictate what its employee does, the employer- employee relationship is comparable to a master-servant relationship. Applying the doctrine of respondeat superior, since the employer (master) acts through its employees (servants), any wrongs that the employee commits is reflected upon the employer, as if the employer had committed the wrong himself, for which he must accept responsibility (Vicarious). Thus, in order to impose vicarious liability upon a principal, an employer-employee relationship must first exist between the principal and the agent. If that relationship fails to exist, vicarious liability cannot be considered applicable. Employers of independent contractors are usually not held vicariously liable for the tortious actions of the contractors because they do not possess the same degree of control over the contractors as employers do over employees. The fact that the independent contractor has full control over his work means he has sole responsibility for his actions and consequently, must bear complete liability. In order to understand vicarious liability, one must first determine whether an agency relationship is either an employer-employee relationship or an employer-independent contractor relationship. Numerous factors are considered when distinguishing between an employer- employee relationship versus an employer-independent contractor relationship. Such factors include examining the nature of the work, the degree of skill required for performance, which party provides the necessary tools, whether payment is by time or by job, and whether one party has the right to terminate the contract at anytime (Bagley). The main factor, however, that determines whether an employee or independent-contractor relationship exists is the extent of control the employer has over the agent. The main trait of an employee-employer relationship is that the employer can not only control the results of the work, but also the details of how the results are to be obtained. The employer can dictate how he wants the job done, by what means, using what resources. On the other hand, the hallmark of the employer-independent contractor 2
  • 4. relationship is that the contractor has exclusive control over how he performs his work, and is only responsible for producing the end result (Vicarious). Determining in the court of law, whether a worker is under an employer-employee relationship or an employer-independent contractor relationship, is quite difficult. The fact that Gleaves v. Checker was litigated three times reveals the difficulties legal experts face when attempting to deliberate on this issue. In the end, litigations are resolved based on each party’s interpretation of material facts. In the case of Gleaves v. Checker, the main material facts considered when determining whether Mosley was an employee or independent contractor included: (1) all Checker taxicabs operate under a single “Certificate of Public Convenience and Necessity” as mandated by the Nashville Metro Code2, (2) Checker does not have any control over hiring and firing of drivers3, (3) Checker provides each operator with Checker insignia, lights, radio, and fare meters for a flat weekly fee, and that (4) all Tennessee taxicab companies are required to file The Liability Insurance Agreement for each taxicab operated under their franchise, which places them under “complete liability”4. These same material facts can have multiple interpretations, supporting either side of the argument, thus creating the need for litigation. After thorough analysis of similar cases, one arrives at the question: Within the state of Tennessee, can taxicab drivers be universally classified as independent contractors or 2 No person shall operate or permit a taxicab or motor vehicle owned or controlled by him, and as defined in Section 6.72.010 as amended, upon the streets and roads of the metropolitan government area without having first obtained a Certificate of Public Convenience and Necessity from the taxicab licensing board. 3 Checker is a dispatching service. All hiring occurs through a board of independent owner-operators that hire and fire employees. Each owner-operator is free to hire relief drivers, subject to board approval. Furthermore, the board acts on all complaints against drivers and applies discipline. 4 “These [Liability Insurance Agreements] shall place all vehicles operated under their franchise in the taxicab company’s complete possession and control, and the taxicab company shall assume complete liability for each and every vehicle for which it enters into this agreement”. Furthermore, the agreement also provides “that the above- named taxicab company, partnership or sole proprietorship shall assume complete liability for each vehicle being operated under its name, color, emblem, design and insignia and shall be liable for any personal injuries or property damage to third parties as the result of the negligent use of this (these) vehicle(s).” 3
  • 5. employees? If possible, litigation concerning vicarious liability on taxicab companies would be greatly simplified and courts could be spared from time-consuming deliberations. Drivers as Independent Contractors To support the claim that Checkers Cab used independent contractors, a recent federal court decision on FedEx deliverymen should be applied. On November 7 th 2008, the National Labor Relations Board brought suit against FedEx, arguing that the labor union Teamsters had a right to organize a FedEx deliverymen union. The case depended on the court classifying the deliverymen as employees or contractors. FedEx claimed their drivers were independent contractors who lacked the right to unionize. The NLRB argued they were employees, freely able to partner with the Teamsters. FedEx deliverymen work in a similar capacity and under a similar principal-agent relationship as taxi drivers for Checker Cab. FedEx deliverymen must meet certain requirements such as wearing FedEx uniforms, using certain delivery trucks, and displaying FedEx logos. The taxi drivers employed by Checkers Cab must also meet these requirements for their employer in order to work. Given these similarities, the resulting decision of this case could be applied to whether Checkers Cab taxi drivers function as employees or independent contractors. On April 21, 2009, The United States Court of Appeals ruled in the case FedEx v. NLRB5, FedEx deliverymen were correctly classified as independent contractors. Furthermore, the court cited that FedEx’s level of control was not strong enough for deliverymen to be considered employees. Since both FedEx drivers and Checker Cab taxi drivers operate under similar circumstances, Checker Cab drivers should also be considered independent contractors. Under this line of reasoning, vicarious liability is inapplicable as it can only be applied in employer- 5 FedEx Home Delivery v. National Labor Relations Board, International Brotherhood of Teamsters. No. 07-1391. 21 April 2009. 4
  • 6. employee relationships. This federal case sets an important precedent for dealing with employer- employee and employer-independent contractor relationships, especially in regards to deliverymen and other similar jobs, including taxi drivers and truck drivers. Even in the case that Mosley could be classified as an employee, one can argue that he was acting out of scope of employment and that vicarious liability does not apply. In the case of Cheatwood v. Curle6, a car dealership employee used a dealership car outside the scope of their employment and caused a car accident. The court issued a summary decision and ruled that torts committed by workers while beyond the scope of employment cannot make the employer vicariously liable for resulting damages. The case highly parallels the circumstances found within Gleaves v. Checker, as there is ample evidence to provide for the argument that Mosley also committed his tort outside the scope of employment. That is, it is plausible to argue that a high speed chase is far beyond the scope of employment of taxi drivers. This along with the fact that Mosley had clocked out could classify him as off-duty and thus out of the scope of employment. Along this reasoning, Checkers Cab’s argument that Mosley was operating outside the scope of employment can be based on this past precedent. Once again, even if Mosley is identified by the court as being an employee, there are ways to prove that his employer is still not vicariously liable. The “traveling man” exception also comes in play in the case of Gleaves v. Checker. Ordinarily, an employer is not vicariously liable for an employee’s negligence while the employee is traveling to and from work 7. However, the “traveling man” exception8 only applies in certain circumstances. The exception states that “ if the 6 Cheatwood v. Curle, Davis, Lincoln Mercury, LLC. No. W2007-02204-COA-R3-CV. (2008 Tenn. App.) 7 Sharp v. Northwestern Nat. Ins. Co., 654 S.W.2d 391, 392 (Tenn. 1983) 8 Under certain circumstances an employer may be held vicariously liable under the “traveling man” exception, put forth in Smith v. Royal Globe Ins. Co., 551 S.W.2d 679, 681 (Tenn. App. 1990) and discussed in Craig v. Gentry, 792 S.W.2d 77 (Tenn. 1977): “if the work of the employee creates the necessity for travel, he is in the course of his employment, though he is serving at the same time some purpose of his own.” 5
  • 7. work of the employee creates the necessity for travel, he is in the course of his employment, though he is serving at the same time some purpose of his own.” Note that the employee must be acting under scope of employment. It is reasonable to argue that a taxi driver’s duties may fall under the “traveling man” exception, as the very nature of the occupation involves constant traveling. However, categorizing an off- duty high speed police chase to be within the scope of employment is a stretch. In such a case, if Mosley was found to be acting outside the scope of employment, the “traveling man” exception is inapplicable. One could argue, given the circumstances, that Mosley is best classified as an independent contractor of Checker Cab. He was hired and supervised by an independent board of owner-operators like himself, had complete control over his schedule and the methods of work he performed, and kept all fare proceeds. Checker Cab acted only as a dispatcher, loaning out insignia. Furthermore, based on past precedences set by multiple courts on the state and federal levels in regards to agency relationships, the argument Checker Cab taxi drivers are best classified as independent contractors is well-justified. Drivers as Employees The issue can also be examined from a “pro-employee” perspective. In the case of Arledge v. Omega Meats, Inc., plaintiffs Charles Dayne and Julie E. Arledge, husband and wife, brought action against Omega Meats, Inc. Corporation, seeking to recover compensatory damages for injuries suffered due to the negligent behavior of company truck driver, Willis Collins. Although no official judgment was directly offered that explicitly determined whether Collins was an employee or independent truck driver of Omega Meats, the case highlights the key factor that Tennessee courts consider most important when differentiating between the two classifications. There are a variety of factors recognized by Tennessee law in determining whether an alleged tort-feasor should be classified as an employee or independent contractor, many of which are mentioned above. However, Arledge v. Omega Meats emphasizes the fact that 6
  • 8. the key factor when distinguishing between the relationships is control, not, for example, superficial classifications within contract provisions. Specifically, Tennessee courts examine the degree of control an employer has over the agent, such as the ability to dictate the details of the job: time, place, method, and means. More importantly, “the test is not whether the right to control was actually exercised, but only whether the right to control existed9.” The NLRB v. Friendly Cab Company case clearly exemplifies the application of the “control test” in classifying one as an employee. In 2004, the National Labor Relations Board (NLRB) brought suit against Friendly Cab Company, seeking a relabeling of the Friendly Cab taxi drivers as employees rather than independent contractors. They argued that Friendly Cab Company classified their cab drivers as independent contractors in order to circumvent the National Labor Relations Act, which exists to “protect the right of employees to participate in collective bargaining for the purpose of negotiating the terms and conditions of their employment10.” There were several factors supporting the NLRB’s claim that the taxi drivers were effectively employees, not independent contractors, though they were contractually labeled as so. A key point was the fact that Friendly Cab Company had a Standard Operating Procedures Manual that detailed specifically the manner in which the cabs should be driven, such as how to appropriately accelerate and stop. Evidently, Friendly Cab had more than substantial control over the cab drivers’ actions. In addition, Friendly Cab Company imposes strict requirements on their cab drivers, which if not followed, could result in a loss of employment. For example, drivers must carry advertisements on their cabs even if it is against their will, as failure to do so could jeopardize their job11. Further considerations included the existence of strict dress codes, and the 9 Julie E. Arledge and Charles Dayne Arledge v. Omega Meats, Inc. and Willis Collins, III, U.S. Dist. LEXIS 22100, 22103 (T.N. Cir. 2003). 7 10 National Labor Relations Board v. Friendly Cab Company, Inc., 512 F.3d 1090, 1093 (C.A. Cir. 2008). 11 NATIONAL LABOR RELATIONS BOARD, 512 F. 3d at 1097 7
  • 9. fact that cab drivers were barred from subleasing their vehicles to others. Therefore, it was obvious that Friendly Cab Company exerted significant control over the cab drivers, inhibiting their freedom to choose how to conduct work. The fact that Friendly Cab Company was so highly involved in dictating the details of the job effectively cemented its employer-employee relationship with the drivers. In the case of Gleaves v. Checker, the Supreme Court of Tennessee ruled that Checker Cab Transit Corp. was indeed liable for the damages caused by defendant Robert Mosley. The key consideration of this case was whether the Checker Cab should be held directly liable under Nashville Metro Code 6.72.210: Liability Insurance Agreement12. The Supreme Court of Tennessee found that the ordinance and the liability agreement imposed liability on Checker Cab Transit, regardless of the status of the driver, whether on-duty or off-duty, and reversed the decision of the Court of Appeals. Thus, the fact that Mosley committed the tort when he was “off-duty” no longer pertains to the case, as described under the ordinance and agreement; Checker Cab Transit assumes “complete liability” over all vehicles that operate under its name13. Though the decision of the Supreme Court was based solely on the details of the Nashville Metro Code and liability agreement, it can be argued that even in the absence of the ordinance and agreement, Checker Cab Transit Corporation would still be held vicariously liable for the torts committed by driver, Robert Mosley. To apply vicarious liability, under the doctrine of respondeat superior, an employer-employee relationship must be proven to exist and the tort committed must be within the scope of employment. As mentioned before, the key determinant of such a relationship is the degree of control. In employer-employee relationships, the employer enjoys the power to dictate where, when, and how the job is completed. When applied to 12 Refer to page 4, footnote 4 8 13 Gleaves v. Checker Cab, 15 S.W.3d at 801 (Tenn. Supr. 2000)
  • 10. Gleaves v. Checker Cab Transit Corporation, it is evident that the relationship between Mosley and Checker Cab is characteristic of an employer-employee relationship. Since the Checker Cab is essentially a dispatching company, its business entails receiving telephone requests for taxi cabs from customers, consequently relaying the requests to the taxi drivers. Therefore, Checker Cab can effectively control the time the drivers work and the location. The manner in which the jobs were completed is also under Checker Cab’s power. Drivers take customers from location to location, in cabs under the company’s insignia, using meters provided by the company. Aside from the route to take that is left to the driver’s discretion, all other aspects of the job seem to be controlled by Checker Cab Corp, reflecting the existence of an employer-employee relationship. Looking towards other factors, evidently, taxi cab driving is not a skill-intensive job; drivers are required to pay weekly fees to Checker Cab, and most of the tools required for work are provided by Checker Cab (i.e. meter, top light, radio, insignia, paint scheme, etc). Such characteristics portray the low degree of bargaining power the cab drivers possess, again typical of employee- employer relationships. Having determined the existence of an employee relationship, the scope of employment must be considered. Although the tortious act occurred when Mosley was “off- duty,” it is arguable that due to the nature of the occupation, the “traveling man” exception could be applied. Since the very nature of cab driving requires constant traveling, his scope of employment has an “indefinable boundary” that essentially negates the status of “off-duty,” making the employer liable at all times the employee is in the vehicle14. Conclusion It is evident through extensive research that the majority of vicarious liability cases involving taxicab drivers in Tennessee are resolved based on the existence of the municipal 14 Gleaves v. Checker Cab, 15 S.W.3d at 802 (Tenn. Supr. 2000) 9
  • 11. ordinance, requiring taxicab companies to sign Liability Insurance Agreements with all taxi cabs operating under their name. As the insurance agreement directly imposes complete liability on the cab company for each and every cab under their control, the issue of vicarious liability becomes irrelevant. However, it can be argued that even without this ordinance, Tennessee cab drivers can still be classified as employees. Because almost all taxi companies act as dispatchers, they effectively control when and where their drivers meet passengers. Parallel to other employer regulations, this level of control strongly suggests the existence of an employer-employee relationship between taxi companies and taxi drivers. If the taxi drivers are classified as employees, vicariously liability becomes applicable to the cab companies for the tortious acts committed by the drivers. On the other hand, any proposal to strictly classify Tennessee taxi drivers as employees is weakened in light of the recent federal case FedEx v. NLRB. The fact that the United States Court of Appeals ruled that FedEx deliverymen were classified as independent contractors is particularly compelling as FedEx deliverymen work in very similar situations as Tennessee taxi drivers. Considering that this case was litigated on the Federal level, it holds greater legal weight and can thus be used as a precedent against finding the taxi drivers as employees. The arguments for classifying Tennessee taxicab drivers as strictly employees or independent contractors are both credible in their own respects. However, in light of the recent FedEx v. NLRB case decision, it becomes more difficult to apply a strict classification to taxi drivers. Thus, it is more plausible to address the issue on a case-by-case basis. In addition, the level of control over taxi drivers can fluctuate between the different municipalities within Tennessee, possibly changing the classification of the drivers in each case. To apply a single classification over all taxi drivers would fail to take into account the diverse agency relationships present at taxi services across varying municipalities. 10
  • 12. References Bagley, Constance E. and Diane W. Savage. Managers and the Legal Environment: Strategies for the 21st Century, Fifth Edition. Mason, Ohio: Thomson West, 2006. 166. Cheatwood v. Curle, Davis, Lincoln Mercury, LLC. No. W2007-02204-COA-R3-CV. (2008 Tenn. App.) LEXIS 391. <http://www.tba2.org/tba_files/TCA/2008/cheatwoodc_070908.pdf>. <http://pacer.cadc.uscourts.gov/common/opinions/200904/07-1391-1176680.pdf>. “Independent Contractor (Self-Employed) or Employee?” Businesses. April 17, 2009. Internal Revenue Service. United States Department of the Treasury. <http://www.irs.gov/businesses/small/article/0,,id=99921,00.html>. "Legal definition of qui facit per alium facit per se." Duhaime.org - Bringing Legal Information To The World. 20 Apr. 2009 <http://www.duhaime.org/LegalDictionary/Q/Quifacitperaliumfacitperse.aspx>. " Vicarious Liability – Employers’ Liability for Wrongdoings of Employees." Wolf, Baldwin & Associates, P.C. - Lawyers / Attorneys at Law in Southeastern PA. 2007. 20 Apr. 2009 <http://www.wolfbaldwin.com/lawyers_attorneys/articles.asp?ArticleID=31&Page=vicar ious_liability_employer_PA_tort_employee_Pennsylvania.asp>. 11