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My Driver Filed an Unemployment Claim Where?

Dealing with tax jurisdictional issues is an ongoing struggle for motor carriers with multi-state operations. For example, several states may be appropriate for unemployment tax reporting for an interstate driver. Determining where to report is not only important for employee fleets, but it can be a potential tool for defending against state unemployment tax worker misclassification challenges.

If a motor carrier is notified of an owner-operator’s unemployment claim, or an audit including owner-operators in a state where it can be challenging to defend independent contractor (IC) status, the motor carrier should consider whether the unemployment agency has jurisdiction over the interstate work performed by the owner-operator(s). A state does not automatically have jurisdiction to adjudicate a claim and/or conduct an audit based on a claimant’s (or group of workers’) state of residence.

Most states have adopted uniform statutory provisions clarifying which state is entitled to a putative interstate employer’s unemployment tax contributions based on “localization of the work.” If a worker’s services are not localized in one state, as is typical in interstate trucking, proper jurisdiction lies in the state where (1) some of the service is performed (e.g. pick-ups, deliveries, miles traveled, fuel purchased), and (2) the worker’s base of operations, or, if there is no base of operations, the state from which direction and control emanates (generally thought of in trucking as dispatch). Of course, owner-operators are not subject to direction or control, but dispatch may resemble a form of “direction.”

A fact-sensitive analysis is required to determine whether a jurisdictional defense exists, but the proper analysis is important, particularly when dealing with states where the defense of IC classification can be difficult. Motor carriers should consider where they are reporting and determine if they may be able to establish unemployment tax jurisdiction in a more IC favorable state, such as one of the 22 states with a statute exempting owner-operators from coverage.

The Transportation Brief®

A quarterly newsletter of legal news for the clients and friends of Scopelitis, Garvin, Light, Hanson & Feary

News from Scopelitis is intended as a report to our clients and friends on developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.

My Driver Filed an Unemployment Claim Where?

Dealing with tax jurisdictional issues is an ongoing struggle for motor carriers with multi-state operations. For example, several states may be appropriate for unemployment tax reporting for an interstate driver. Determining where to report is not only important for employee fleets, but it can be a potential tool for defending against state unemployment tax worker misclassification challenges.

If a motor carrier is notified of an owner-operator’s unemployment claim, or an audit including owner-operators in a state where it can be challenging to defend independent contractor (IC) status, the motor carrier should consider whether the unemployment agency has jurisdiction over the interstate work performed by the owner-operator(s). A state does not automatically have jurisdiction to adjudicate a claim and/or conduct an audit based on a claimant’s (or group of workers’) state of residence.

Most states have adopted uniform statutory provisions clarifying which state is entitled to a putative interstate employer’s unemployment tax contributions based on “localization of the work.” If a worker’s services are not localized in one state, as is typical in interstate trucking, proper jurisdiction lies in the state where (1) some of the service is performed (e.g. pick-ups, deliveries, miles traveled, fuel purchased), and (2) the worker’s base of operations, or, if there is no base of operations, the state from which direction and control emanates (generally thought of in trucking as dispatch). Of course, owner-operators are not subject to direction or control, but dispatch may resemble a form of “direction.”

A fact-sensitive analysis is required to determine whether a jurisdictional defense exists, but the proper analysis is important, particularly when dealing with states where the defense of IC classification can be difficult. Motor carriers should consider where they are reporting and determine if they may be able to establish unemployment tax jurisdiction in a more IC favorable state, such as one of the 22 states with a statute exempting owner-operators from coverage.

News from Scopelitis is intended as a report to our clients and friends on developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.