                          State of New York
                   Supreme Court, Appellate Division
                      Third Judicial Department
Decided and Entered: June 2, 2016                      519947
________________________________

In the Matter of the Claim of
   BRIAN J. BOGART,
                    Respondent.

LaVALLE TRANSPORTATION, INC.,               MEMORANDUM AND ORDER
                    Appellant.

COMMISSIONER OF LABOR,
                    Respondent.
________________________________


Calendar Date:   March 22, 2016

Before:   Lahtinen, J.P., McCarthy, Garry, Rose and Mulvey, JJ.

                             __________


      Barclay Damon LLP, Syracuse (Michael J. Sciotti of
counsel), for appellant.

     Kelly Egan, Rensselaer, for Brian J. Bogart, respondent.

      Eric T. Schneiderman, Attorney General, New York City (Mary
Hughes of counsel), for Commissioner of Labor, respondent.

                             __________


Lahtinen, J.P.

      Appeals from two decisions of the Unemployment Insurance
Appeal Board, filed January 2, 2014, which ruled, among other
things, that LaValle Transportation, Inc. was liable for
additional unemployment insurance contributions on remuneration
paid to claimant and others similarly situated.

      LaValle Transportation, Inc. is a commercial trucking
company providing freight transportation services nationwide.
Some of the local routes are driven by individuals who are
                               -2-                519947

employees of LaValle, whereas the long-haul trucking is done by
drivers who own or lease their vehicles and work under
transportation service agreements as independent contractors.
When claimant – who had been a long-haul trucker – filed for
unemployment insurance benefits after his work with another
company ended, the Department of Labor indicated to him that his
earlier time with LaValle might be considered as part of his
necessary employment history (see Labor Law § 527 [1], [2])
despite his representation that he had been an independent
contractor and not an employee of LaValle. The Department
audited LaValle's operations from January 1, 2006 to December 31,
2008 and determined that claimant and other similarly situated
truck drivers were, in fact, employees of LaValle. The
Department assessed LaValle $124,000.17 for contributions during
that time frame.1 LaValle objected and, following a hearing, an
Administrative Law Judge overruled the Department. However, upon
administrative appeal, the Unemployment Insurance Appeal Board
reversed the Administrative Law Judge and found that LaValle was
an employer of the truck drivers for purposes of the Labor Law.
LaValle appeals.

      "'An employer-employee relationship exists when the
evidence shows that the employer exercises control over the
results produced or the means used to achieve the results' with
the second factor deemed to be more important" (Matter of Cohen
[Classic Riverdale, Inc.–Commissioner of Labor], 136 AD3d 1179,
1179 [2016], quoting Matter of Empire State Towing & Recovery
Assn., Inc. [Commissioner of Labor], 15 NY3d 433, 437 [2010]).
Although the Board's determination of an employment relationship
"will be upheld if supported by substantial evidence, 'incidental
control over the results produced, alone, will not constitute
substantial evidence that an employment relationship exists'"
(Matter of Richins [Quick Change Artistry, LLC–Commissioner of


     1
        The parties agree that inasmuch as the period in dispute
predates the April 10, 2014 effective date of Labor Law article
25-C (see L 2013, ch 558, § 1; L 2014, ch 7, § 1), such statute
is inapplicable to the current dispute. The holding herein is
limited to the law as it existed prior to the enactment of such
statute.
                              -3-                519947

Labor], 107 AD3d 1342, 1343-1344 [2013] [internal citation
omitted], quoting Matter of Best [Lusignan–Commissioner of
Labor], 95 AD3d 1536, 1537 [2012]). Moreover, where, as here,
some of the indicia of control are mandated by laws or
regulations, such fact, while "considered as part of the overall
calculus of control," by itself is "not sufficient to establish
an employer-employee relationship" (Matter of Harold [Leonard's
Transp.–Commissioner of Labor], 133 AD3d 1069, 1070 [2015]
[internal quotations marks omitted], lv dismissed 26 NY3d 1136
[2016]; accord Matter of Cohen [Just Energy Mktg. Corp.–
Commissioner of Labor], 117 AD3d 1112, 1112-1113 [2014], lv
dismissed 24 NY3d 928 [2014]; see Matter of 12 Cornelia St.
[Ross], 56 NY2d 895, 898 [1982]; Matter of Leazard [TestQuest,
Inc.–Commissioner of Labor], 74 AD3d 1414, 1414-1415 [2010];
Matter of McCabe & Willig Realty [Ross], 80 AD2d 935, 936
[1981]).

      Here, long-haul drivers called a LaValle dispatcher to find
out what loads were available. The drivers were free to accept
or reject any load without penalty from LaValle. Simply stated,
they could work when and if they wanted or not at all.
Significantly, and unlike Matter of Harold (Leonard's Transp.–
Commissioner of Labor) (133 AD3d at 1071) and Matter of Scott (CR
England Inc.–Commissioner of Labor) (133 AD3d 935, 939 [2015]),
the drivers were not required to work exclusively for LaValle and
were free to accept jobs with other companies. Moreover, they
were not required to lease their vehicles from LaValle. In fact,
it is undisputed that about 40% of the drivers owned their
vehicles and, of the remaining 60%, only about half leased from
LaValle. Subject to compliance with insurance and regulatory
requirements, the drivers who agreed to transport loads were
allowed to hire other drivers to make the delivery and, in fact,
some did so. The compensation rate for the drivers was not set
solely by LaValle. Although drivers typically received 70% of
the gross revenue for transporting the load, they were free to
negotiate a higher percentage from LaValle, and the record
reflects that such higher negotiated rates were not rare.

      No one from LaValle supervised the drivers. They were free
to choose whatever routes they desired in transporting loads.
The drivers received no fringe benefits, there was no dress code,
                              -4-                519947

they were not required to attend meetings, they were not trained
by LaValle and they were not reimbursed for their expenses.
Drivers carried their own independent business cards. Claimant
testified that he considered himself an independent contractor.
He was issued an IRS 1099 form, and he reported that he was self-
employed on his state and federal taxes. Many of the factors
cited by the Board were required by federal regulations or
insurance carriers, and the fact that there was a limited
noncompete clause in the transportation service agreement is not
dispositive (see Matter of Clarke [Select Med. Corp., Inc.–
Commissioner of Labor], ___ AD3d ___, ___, 2016 NY Slip Op 03934,
*1 [2016]; Matter of Wright [Mid Is. Therapy Assoc. LLC–
Commissioner of Labor, 134 AD3d 1216, 1218 [2015]). LaValle and
the long-haul drivers met virtually none of the criteria
typically considered for an employer-employee relationship (see
e.g. Matter of Spielberger [Commissioner of Labor], 122 AD3d 998,
999 [2014]; Matter of Local 54 United Paperworkers Intl. Union
[Commissioner of Labor], 301 AD2d 922, 923 [2003]; Matter of
Cromer [Transworld Sys.–Sweeney], 248 AD2d 773, 774 [1998]; see
also Department of Labor Guidelines, Independent Contractors,
http://www.labor.ny.gov/formsdocs/ui/IA318.14.pdf [accessed Apr.
25, 2016]; Jonathan L. Sulds, New York Employment Law § 2.02
[2]). While there was some "incidental control over ancillary
matters . . ., the record as a whole lacks substantial evidence
of the requisite level of control . . . so as to establish the
existence of an employer-employee relationship" (Matter of
Richins [Quick Change Artistry, LLC–Commissioner of Labor], 107
AD3d at 1344; see generally Matter of Hertz Corp. [Commissioner
of Labor], 2 NY3d 733, 735 [2004]; 300 Gramatan Ave. Assoc. v
State Div. of Human Rights, 45 NY2d 176, 179-180 [1978]; Matter
of Choto v Consolidated Lbr. Transp., Inc., 82 AD3d 1369, 1369-
1370 [2011]).

      Briefly addressing the dissent. The dissent looks
initially to the equipment lease agreement between claimant and
LaValle for indicia of control. However, in its detailed
decision, the Board placed no reliance on the lease. The Board's
decision sought to sweep all drivers associated with LaValle (the
majority of whom did not lease from LaValle) into the employee
category, an overreach by the Board that the dissent appears to
acknowledge.   Moreover, the transportation service agreement's
                              -5-                519947

language regarding "exclusive possession, control, and use" found
in paragraph 6 is required by federal regulation when there is a
lease (see 49 CFR 376.12 [c] [1]), and that same regulation
provides that nothing in paragraph (c) (1) is intended to affect
whether a driver is an employee or independent contractor (see 49
CFR 376.12 [c] [4]). Similarly, paragraph 24 of the
transportation service agreement, which is quoted in part by the
dissent, also makes repeatedly clear that the provisions therein
are made to comply with the regulations and requirements of the
Federal Motor Carrier Safety Administration. The portion of
paragraph 24 noted by the dissent that indicates LaValle is
authorized to "bind" the "[c]ontractor" is followed by a sentence
in the agreement stating that the "[c]ontractor has the final
right of refusal on all loads." As for the noncompetition
clause, there is no indication that it was ever enforced, the
proof regarding the drivers' autonomy reflects that it was not,
and the Board made only a very brief mention of it with no
apparent weight given thereto.

     Garry and Mulvey, JJ., concur.


Rose, J. (dissenting).

      We respectfully dissent. Given the restrictions that
LaValle Transportation, Inc. placed upon claimant in this case
and this Court's recent affirmances in two cases involving
similar restrictions (see Matter of Harold [Leonard's Transp.–
Commissioner of Labor], 133 AD3d 1069 [2015], lv dismissed 26
NY3d 1136 [2016]; Matter of Wilder [RB Humphreys Inc.–
Commissioner of Labor], 133 AD3d 1073 [2015]), we disagree with
the majority's reversal of the Unemployment Insurance Appeal
Board's decisions regarding claimant. Here, as to claimant, the
indicia of control retained by LaValle are numerous and
essentially the same as those in Matter of Harold (Leonard's
Transp.–Commissioner of Labor) (supra). The record shows that
claimant was operating a truck that he leased from LaValle, and
its lease imposed significant restrictions on his use of that
vehicle. He was not permitted to sublease or to allow any other
party to use or operate the truck without LaValle's express
consent, and he could use it with another trucking company only
                              -6-                519947

if that company complied with LaValle's requirements and had its
written approval (see id. at 1070). The lease also granted
LaValle the right to collect all proceeds from the operation of
his truck, to deduct a weekly amount of $200 to fund a repair
reserve and to assign the lease and the truck to a third party
while claimant had no right to assign any of his rights under the
lease.

      In addition to the lease, there was a transportation
service agreement between claimant and LaValle that further
restricted his work. That agreement stated that LaValle had
"exclusive possession, control, and use of" the truck, prohibited
claimant from adding lettering or advertising on the truck
without LaValle's written authorization and again limited all
operation of the truck to claimant or a qualified employee of
claimant previously approved in writing by LaValle. Most
significantly, and contrary to the majority's view that "the
drivers were not required to work exclusively for LaValle and
were free to accept jobs with other companies," claimant's
service agreement stated: "Equipment covered by this [a]greement
shall be used to provide transportation services to LaValle and
other parties provided LaValle dispatches all loads" (emphasis
added). In the same subparagraph, the agreement also granted
LaValle the right to make the truck with a driver available to
any other authorized motor carrier and authorized LaValle to "act
on behalf of and bind [claimant] in the . . . execution of any
further transportation service agreement entered into by Lavalle
and any other authorized carrier." Claimant's compensation for
his work was to be paid weekly by Lavalle in accordance with an
attached schedule specifying his rate at 70% of gross revenue
received by LaValle. The transportation service agreement
further authorized LaValle to take physical possession of the
truck if claimant "in Lavalle's opinion . . . fail[ed] to
complete transportation of commodities in transit," and claimant
waived any recourse against LaValle for such action.

      Claimant also was bound by a two-year noncompetition
restriction. This restriction forbad claimant from divulging to
anyone the identity of LaValle's customers "for any purpose
whatsoever" during the agreement and for two years thereafter.
Further, the clause broadly forbad claimant from "compet[ing]
                              -7-                519947

with Lavalle" or "injur[ing] Lavalle's business" for two years
after the termination of the agreement. In addition, the
geographical reach of the noncompete restriction was expansive,
applying to "any state in which [claimant] has performed services
pursuant to [the a]greement." When read as a whole, the clause
could be construed to forbid claimant, a long-haul trucker, from
driving any route that he had ever driven as a part of his work
for LaValle. Accordingly, the record here presents us with a
noncompetition restriction placed upon claimant that is more
restrictive as to scope of activities, time and geographical
reach than the noncompetition restriction examined in Matter of
Harold (Leonard's Transp.–Commissioner of Labor) (133 AD3d at
1070). Moreover, although claimant had no set schedule and could
decline work proposed by LaValle, he was expected to inform
LaValle daily of his activities while hauling freight, to contact
LaValle if he anticipated a delay of delivery and to file
paperwork weekly concerning many aspects of his work (see id. at
1070-1071). Inasmuch as these indicia are so similar to those
considered and found to support the Board's determination of an
employer-employee relationship in Matter of Harold, a similar
result should occur here (see id. at 1069; Matter of Wilder [RB
Humphreys Inc.–Commissioner of Labor], 133 AD3d at 1074; see also
Matter of Mitchum [Medifleet, Inc.–Commissioner of Labor], 133
AD3d 1156, 1157 [2015]; Matter of Youngman [RB Humphreys Inc.—
Commissioner of Labor], 126 AD3d 1225, 1226 [2015], lv dismissed
25 NY3d 1192 [2015]; Matter of Duffy [North Am. Van Lines—
Hartnett], 172 AD2d 914, 914 [1991]; Matter of Davis [RTC
Transp.—Roberts], 111 AD2d 1030, 1031 [1985]).

      Finally, while it was within the Board's power to extend
its conclusions to all those "similarly situated" (see Labor Law
§ 620 [1] [b]; Matter of Mitchum [Medifleet, Inc.–Commissioner of
Labor], 133 AD3d at 1157-1158), the majority considers the
circumstances of other LaValle drivers regardless of how
dissimilar their circumstances are to those of claimant.1 In our


    1
        Stating, for example, that "about 40% of the drivers
owned their vehicles and, of the remaining 60%, only about half
leased from LaValle." The record is clear that claimant leased
his vehicle from LaValle.
                              -8-                   519947

view, the issue of whether drivers other than claimant are or are
not employees of LaValle depends upon whether similar
restrictions were actually imposed upon them. As the majority
points out, the record shows that some of LaValle's drivers do
not have the same restrictions. Thus, it is unlikely that they
would be "similarly situated," and we would agree with the
majority as to them.

      Accordingly, we would affirm the Board's decisions but only
as they determine claimant's relationship with LaValle and those
who are actually similarly situated.

     McCarthy, J., concurs.



      ORDERED that the decisions are reversed, without costs, and
matter remitted to the Unemployment Insurance Appeal Board for
further proceedings not inconsistent with this Court's decision.




                              ENTER:




                              Robert D. Mayberger
                              Clerk of the Court
