Court Opinion

ID: 9422326
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:02:07.576455+00
Date Added: 2024-06-11T17:22:36.039960
License: Public Domain

Mr. Justice Harlan,
whom Mr. Justice Whittaker joins,
dissenting.
Were this an instance of a District Court substituting its judgment for that of the Interstate Commerce Commission on a matter which Congress had reserved for agency determination, I would be among the first to maintain that the Commission’s action should be respected. Cf. I. C. C. v. J-T Transport Co., 368 U. S. 81, 126-130 *387(dissenting opinion). But the order entered by the Commission in the cases now before us is so utterly lacking in evidentiary support, so inconsistent with the uniform course of agency and court decisions, and so contrary to the regulatory plan embodied in the Motor Carrier Act of 1935 and its later amendments, that I cannot join in the judgment which reinstates that order. As I view this record what the Commission has done here amounts in effect to an exercise of power which it does not possess.
Under the Motor Carrier Act two things are indisputably clear: (1) Congress, in subjecting “private” motor carriage only to safety regulation, did not mean otherwise to regulate interstate transportation by persons of “their own goods in their own vehicles for commercial purposes” (79 Cong. Rec. 5651 (1935), remarks of Senator Wheeler, Chairman of the Senate Committee on Interstate Commerce) ;1 (2) one engaged in the business of leasing motor vehicles for commercial carriage is not by that fact alone made a “contract carrier,” subject to full Commission regulation; in other words, equipment rentals as such are not reached by the statute.2 Under the plain terms of the Act and Commission rulings, economic regulation of such rentals comes into play only where “for-hire” motor carriage has been shown.3
*388This then is not a case like Labor Board v. Hearst Publications, Inc., 322 U. S. 111, where the construction of an inexplicitly defined term in a statute which was broadly remedial was left to the agency enforcing the law. Despite strong suggestions to the contrary,4 Congress saw fit to exempt private carriers from economic regulation under the Motor Carrier Act. If we were to permit the Commission to exercise its discretion to sweep in a variety of arrangements which legitimately constitute private carriage, we would be authorizing disobedience of the legislative mandate as surely as if we allowed the agency to remove from regulation what clearly amounts to “for-hire” carriage.
Until late 1952, Oklahoma Furniture Company, a manufacturer of low-priced furniture, shipped its product to retail purchasers throughout the United States in company-owned tractors and trailers, driven by its own full-time salaried employees. Discovering that some of its drivers were misusing company credit cards, given them to enable their charging against the Company operating and living expenses while on the road, Oklahoma revamped its long-haul transportation system in such a way as to remove these temptations.5 In essence the new *389arrangement involved, on the one hand, leasing from each of 11 of the Company’s employee-drivers one of the tractors used in long-haul service,6 and shifting to the driver the economic incidents of its maintenance and operation; and, on the other hand, preserving to the Company the exclusive use of the tractor in the conduct of its business, and keeping, in every practical sense, the employee relationship between the driver and the Company. The details of the arrangement and its operation are accurately summarized in the District Court’s opinion.7
*390The process of reasoning by which the Commission reached the conclusion that this rearrangement changed to fully regulatable activity that which had theretofore been subject to Commission jurisdiction only from the standpoint of safety, is at best obscure. However, the true measure of what the Court now sanctions is revealed *391by laying bare the extent to which the agency’s conclusion involved a departure from the common-sense criteria that have heretofore entered into Commission determinations as to whether particular arrangements reflected “private” or “for-hire” motor carriage.8
*392The Court holds that the shifting of three economic burdens from the Company to the drivers justified the Commission’s determination: (1) the substantial capital investments in the tractors, along with the risk of premature loss, were borne by the drivers;9 (2) they undertook the costs of maintaining the vehicles and their own living expenses on the road; and (3) they bore the risk, as the Court envisages it, of “non-utilization of high-priced equipment” and of their own unemployment. These factors, either singly or in combination, do not, in my view, suffice to warrant the Commission’s ruling. The first of them is the normal concomitant of any equipment rental; its presence cannot serve to change the character of a relationship which is not of itself subject to Commission regulation, except from the standpoint of safety (supra, p. 387, note 1). The costs of gas, repairs, and garaging are commonly also assumed by those leasing out motor vehicles for private use.10 See, e. g., R. N. G. Commercial Auto Renters, Inc., 73 M. C. C. 665; Scott Bros., Inc., 32 M. C. C. 253; U-Drive-It Co. of Pennsylvania, 23 M. C. C. 799. The third factor, whatever may be its weight when supported by actuality, is, in the circumstances depicted in this record, no more than a pure abstraction (pp. 394-395, infra).
As the Court appears to recognize, the other provisions of the arrangement, relating to the cost of maintaining the leased equipment, all point to “private” carriage. Past *393cases in the Commission where “for-hire” carriage has been found, in the face of similar provisions, all involved other factors not present here. Under this arrangement, the Company was entitled to exclusive use of the tractors during the rental period (cf. Joseph A. Bisceglia, 34 M. C. C. 233); it loaded, dispatched, and routed the trucks (cf. William A. Shields, 41 M. C. C. 100);11 it instructed the drivers as to details of service (cf. McKeown Transportation Co., 42 M. C. C. 792); it assumed the risk of loss or damage to the cargo (cf. Edward Allen Carroll, 1 M. C. C. 788); it paid for liability and property damage insurance (cf. Centre Trucking Co., 32 M. C. C. 313);12 it undertook to inspect the tractors to insure compliance with safety regulations (cf. Driver Service, Inc., 77 M. C. C. 243); and it shipped the goods without bills of lading (cf. Jacobs Transfer Co., 46 M. C. C. 265).
Nor is the Commission’s case strengthened by the circumstance that the appellees, in addition to supplying the vehicles, provided their own services as drivers. That factor would be significant only if the appellees furnished these services as independent contractors, for it is only then that the arrangement differs from an equipment rental in which the lessee mans the leased vehicle with his own employees. It would be strange indeed to attribute to Congress a purpose to classify as a “for-hire” carrier any employee who, as a condition of employment, is required to purchase a vehicle in which his employer’s goods are to be transported.
All the standards by which the Commission has previously tested a purported “employment” relationship *394prove the existence of such a relationship here. The Company paid the drivers’ wages (cf. Columbia Terminals Co., 18 M. C. C. 662);13 deducted social security and federal income taxes (cf. Motor Haulage Co., 46 M. C. C. 107); retained drivers’ trip logs and medical certificates (cf. Watson Mfg. Co., 51 M. C. C. 223); bargained with the drivers’ labor union over conditions of employment (cf. R. N. G. Commercial Auto Renters, Inc., 73 M. C. C. 665); and reserved the right to engage and discharge (cf. John J. Casale, Inc., 49 M. C. C. 15). In Teamsters Union v. Oliver, 358 U. S. 283, we held that an agreement setting a minimum rental and other terms for the use of a lessor-driver’s equipment was “within the scope of collective bargaining as defined by federal law.” Id., at 293. In light of the dissenting opinion, id., at 297-298, it seems clear that the Court concluded that the lessor-drivers were employees, not independent contractors, for purposes of the National Labor Relations Act.
Despite the total supervision thus exercised by the Company, if the record revealed that these drivers really risked having no work at all, thus earning no wage, over any period of time, there might be room for argument that they were, in fact, independent contractors. Under the terms of their employment such a theoretical possibility exists, but the facts prove it could not happen.
The appellees were paid rental for their vehicles and wages for their services on a per-mile basis. But the testimony of the Company’s truck superintendent shows that the Company deliberately attempted to distribute the work so as to assure to each driver weekly wages which were within limits acceptable both to the individual concerned and his labor union. Six tractors continued to be *395owned by the Company, and individual employees were assigned to these tractors, one to a vehicle, just as the appellees were in effect assigned by the Company to the tractors they owned. Those assigned to company-owned tractors were paid $50 a week plus two cents a mile, and they were dispatched on short hauls. The appellees were sent on long hauls, so that their total mileage would make up for the absence of any fixed wage.14 In addition, if one of the appellees was sick, a driver usually assigned to a company-owned vehicle would be directed to operate the tractor belonging to the incapacitated man in order to assure him of at least the rental payment for his equipment. In short, there is nothing in the record which warrants a finding that the status of the appellees was anything other than that of bona fide employees, or that they in fact shouldered, or anticipated that they might have to bear, any of the economic burdens undertaken by independent contractors.
I am not unmindful that the Interstate Commerce Commission has, of late, been much concerned with the problem of drawing the line between legitimate equipment rentals, which it concedes to be “private carriage,” and what it has come to call “pseudo-private carriage,” i. e., contract carriage disguised as lease of equipment.15 *396Obviously the Commission must have the power to deal with schemes that have been devised to avoid regulation. No one would suppose that the Commission was acting beyond its authority if it pierced through the form assumed by a business enterprise purportedly engaged in providing equipment for “private” carriage and disclosed that it was really supplying “for-hire” carriage. Decisions of District Courts and Courts of Appeals have uniformly approved the application of the test of “substance” in such circumstances. E. g., Lamb v. I. C. C., 259 F. 2d 358; I. C. C. v. Isner, 92 F. Supp. 582; I. C. C. v. Gannoe, 100 F. Supp. 790. I disagree with the result reached here by the Court, not because the Commission has supplemented its earlier test of “control” with one of “substance,” 16 but because the application of the very test that is now urged persuades me that this was in reality an employment relationship with an employer engaged in private carriage, and not a “for-hire” carriage arrangement.
In sum, this is a case in which there is no allegation of subterfuge and no basis in the record for attributing a devious motive to the lessee; in which the economic risks transferred by the arrangement to the lessor are no more, *397and possibly even less, substantial17 than those in the ordinary rental of equipment; and in which the actual conditions of hire disclose that the drivers are bona fide employees of the lessor and are protected by their union representatives against overreaching by the employer. The Commission’s order is not saved by the “totality” test which the Court now brings to its aid. For however viewed, this record adds up to nothing more than a mere rearrangement of Oklahoma’s private carriage activities in such a way as, and for no other purpose than, to protect the Company against being cheated by its long-haul driver-employees.
If it is within the range of the Commission’s permissible discretion to classify these appellees as contract carriers— and thus subject them to the rigorous standards of financial fitness and suitability that the Commission’s regulations require of such carriers — what has been thought of as the “gray” area becomes black, and, in truth, much of what has heretofore been taken for white is now gray. What, for example, would have been the result had title to these tractors remained with the Company under an arrangement whereby they were leased to the drivers and then subleased back to the Company, with the Company assuming the risk of catastrophic loss or destruction? Or what if the drivers had been guaranteed $50 a week in *398total rental and wages? Would either of these changed circumstances have ousted the Commission of authority to hold the contracts to be “for-hire” carriage?
Indeed, the Court’s decision goes far to encourage the Commission to obliterate entirely the congressionally drawn distinction between private and contract carriage. It will be interesting to see as time goes on whether there will be an aftermath to this decision similar to that which followed the blurring of the line between common and contract motor carriers effected by the Court’s decision in United States v. Contract Steel Carriers, 350 U. S. 409. See I. C. C. v. J-T Transport Co., supra, at 107-109 (dissenting opinion).
I would affirm.

 See also S. Doc. No. 152, 73d Cong., 2d Sess. 33 (1934); H. R. Doc. No. 89, 74th Cong., 1st Sess. 17 (1935); S. Rep. No. 482, 74th Cong., 1st Sess. 1 (1935); H. R. Rep. No. 1645, 74th Cong., 1st Sess. 4 (1935).

 There has been some equipment rental regulation by the States; whether it is also desirable as a matter of federal policy has yet to be determined by Congress. See Nutting and Kuhn, Motor Carrier Regulation — The Third Phase, 10 U. of Pitt. L. Rev. 477, 487-491 (1949); Note, 39 Ky. L. J. 338 (1951).

 The relevant statutory provisions are set forth in footnotes 1, 2, 3 and 5 of the Court’s opinion. See also U-Drive-It Co. of Pennsylvania, 23 M. C. C. 799; Scott Bros., Inc., 32 M. C. C. 253. In Lease and Interchange of Vehicles by Motor Carriers, 51 M. C. C. 461, 521, *388the Commission did not premise its authority to regulate lease and interchange practices among common and contract carriers on any authority generally to control vehicles engaged in interstate commerce. The Commission rather inferred from its authority to regulate the transportation offered by common and contract carriers the power to regulate, as well, "the procurement of transportation.” This conclusion in no way suggests its authority to regulate the rental of vehicles by noncarriers from companies engaged solely in rental activities.

 See S. Doc. No. 152, 73d Cong., 2d Sess. 26 (1934); Hearings before Senate Committee on Interstate Commerce on the Motor Carrier Act of 1935, 74th Cong., 1st Sess. 333, 345, 347-350 (1935).

 Short hauls of company products in company-owned and driven equipment remained unaffected by the new arrangement, presumably because there was less opportunity for the misuse of company credit cards in connection with such hauls.

 The record does not show the terms on which the drivers acquired the tractors, whether they were bought from the Company or others, and if from the Company, what, if any, consideration was paid. The trailers drawn by' these tractors continued to be owned by the Company.

 “The leases provide in substance as follows: (1) the Company shall pay the owner-operator 100 a mile for hauling single-axle trailers and 110 a mile for hauling tandem-axle trailers, plus an additional 30 a mile for back-haul of the Company’s raw materials, (2) payments under the agreement shall be made weekly, (3) motor vehicles covered by the agreement shall be operated by an employee of the Company who shall be properly qualified and physically fit in accordance with state and federal regulations, (4) the owner-operator shall pay all operating costs arising from operation of said equipment (gasoline, oil, grease and parts) and shall pay cost of license plates, (5) the Company shall keep and maintain said equipment in first-class operating condition and in compliance with all safety rules and regulations of state and federal regulatory bodies, (6) if owner-operator fails to pay operating cost of equipment, the Company may cancel the agreement or at its option pay the necessary operating costs and charge same to owner-operator’s account with the Company, (7) the Company shall have sole control, right of direction, and use of the leased equipment, all property transported by the leased vehicles shall belong to the Company and the Company will not sublease the equipment to any other person, firm or corporation, (8) the Company shall not be liable for wear, tear and depreciation nor for any damage caused to the leased equipment by accident, theft, fire or any other hazard or casualty, (9) the owner-operator shall not be responsible for loss to company equipment, property and cargo, (10) the Company will have the name of the owner-operator endorsed as an additional assured upon its policies of property damage and *390public liability insurance covering the operation of motor vehicles, (11) either party may cancel the lease upon giving 30 days’ written notice to the other party, (12) the agreement shall remain in full force and effect for one year from date of execution and shall be automatically renewed for further periods of one year unless cancelled in accordance with provisions of the agreement, or terminated by operation of law.
“The Company also entered into a union contract as employer of its drivers. The contract covers both drivers of company-owned vehicles and the owner-operators who usually drive their own tractors and who are also treated by the Company as employees. Although all the drivers do not belong to the union, the terms of the contract apply equally to non-union employees. This contract provides, in pertinent part, as follows: (1) the Company may discharge any employee for cause, (2) the owner-operators shall be paid at the rate of 4.5 cents a mile for driving, 0.25 cents a mile for living expenses, and 0.25 cents a mile for labor in the maintenance of the truck, or a total of 5 cents a mile, and shall be paid 6 cents a mile for back-hauls of raw materials, (3) drivers of company-owned tractors shall receive a basic salary of $50 a week plus 2 cents a mile for driving, (4) owner-operators having driven 75,000 miles during a year in which the contract is in effect shall be entitled to vacation pay computed upon the rate of pay for driving and the average weekly mileage in the preceding year, (5) owner-operators shall maintain their trucks in good running condition at all times, (6) owner-operators shall pay their own living expenses while on the road, (7) the provision of the union contract which guarantees employees 6 hours work or pay if they report for work at their usual or regular time shall not apply to owner-operators.
“The record made before the Commission shows that the operations of the Company and the owner-operators are in substance carried on in accordance with the provisions of the lease agreements and the union contract, with one exception. The lease agreements provide that the Company shall maintain the tractors of the owner-operators and the union contract provides that the owner-operators shall main*391tain them. The testimony in the record supports the Commission’s finding that the owner-operators in fact maintain their vehicles.
“The record also reveals the following: The owner-operators are not authorized by the Interstate Commerce Commission to engage in the transportation of property either as contract carriers or common carriers by motor vehicle in interstate commerce. The Company uses the 6 tractors which it owns chiefly for short hauls and these are usually driven by the salaried company drivers. The tractors leased by the Company are utilized chiefly for long hauls and are usually operated by the owner-operators, each driving his own tractor. It is the practice of the Company to assign the same driver to the same equipment, regardless of whether it is company-owned or leased. However, when necessity or convenience make it more feasible to do so, drivers who usually drive company-owned tractors are assigned to leased tractors and owner-operators to company-owned tractors. All trailers used in the Company’s operations are owned by it. A supervisor employed by the Company oversees all drivers, assigns trips and checks to see that all equipment is properly maintained and repaired. Detailed routing instructions are issued to all drivers and compliance therewith is insured by manner of loading, e. g., last goods to come off are loaded first and'the first to come off are loaded last. Prior to departure drivers are handed a truck bill manifest which differs from a bill of lading in that the drivers are not required to sign a receipt for the freight they transport. Each owner-operator receives two weekly paychecks, one for rental of his tractor and the other for his service as a driver. The Company deducts from the paychecks of the owner-operators social security and withholding taxes, pays the employer’s share of social security and provides workmen’s compensation benefits for them. The Company maintains on file drivers’ logs, physicians’ certificates and vehicle inspection reports. Both company-owned tractors and leased tractors are garaged at the homes of their respective drivers. The Company has the right to hire and fire drivers independently of the lease agreement.” 193 F. Supp., at 277-278.

 See generally O’Brien, Twenty-Five Years of Federal Motor Carrier Licensing — The Private Versus For-Hire Carrier Problem, 35 *392N. Y. U. L. Rev. 1150 (1960); Matthews, Truck Leasing By Shippers and the Problem of the Dangling Instrumentalities, 27 I. C. C. Prac. J. 370 (1960); Porter, Federal Regulation of Private Carriers, 64 Harv. L. Rev. 896 (1951).

 But see note 6, supra.

 To the extent that this second “risk” concerns personal living expenses on the road, it would be unrealistic to consider it a “risk” at all, since the cost of it was assumed, albeit at a flat rate of one-fourth cent per mile, by the Company under the terms of a collective-bargaining agreement with the labor union representing the drivers.

 Compare Consolidated, Trucking, Inc., 41 M. C. C. 737; Jacobs Transfer Co., 46 M. C. C. 265 (shippers’ control over routing and dispatching held insufficient to constitute private carriage).

 Since some equipment rental firms pay for liability insurance, the financial burden assumed by the appellees here may even have been less than that assumed by equipment rental firms.

 The Commission does not consider itself bound by the form in which wage payments are made and occasionally considers who it is who actually bears the wage burden. See Roy Rittenhouse, 78 M. C. C. 389. But even this factor is not always determinative. Pacific Diesel Rental Co., 78 M. C. C. 161.

 The reasons for differentiating between long and short hauls, as respects the ownership of the tractors used in each type of service, have already been given. Supra, note 5.

 E. g., 69 I. C. C. Ann. Rep. 99; 72 I. C. C. Ann. Rep. 43; 73 I. C. C. Ann. Rep. 51; 74 I. C. C. Ann. Rep. 57-58. A thorough study of the “gray area” — defined as “transport operations which lie between legitimate private carriage and the transportation authorized by Government regulatory bodies” — was recently submitted to the Senate Committee on Interstate and Foreign Commerce by the Commission’s Bureau of Transport Economics and Statistics. It recognized that one major type of operation conducted in order to avoid regulation was the “shipper lease of vehicle with driver.” I. C. C., Bureau of Transport Economics and Statistics, Gray Area of Transportation Operations (1960), 27-37.

 In a leading decision the Commission set down a rule whereby “in cases in which the question of the status created by a lease of equipment with drivers by a carrier to a shipper is presented, in the absence of a showing to the contrary, the presumption arises that the transportation is performed by the carrier for compensation, in other words is for-hire transportation and as such is subject to regulation.” H. B. Church Truck Service, 27 M. C. C. 191, 196. I do not quarrel with the general validity of this presumption, although, until the present case, even the Commission thought it applicable only to leases by those who were otherwise “for-hire” carriers. John J. Casale, Inc., 44 M. C. C. 45, 52-53. It is only because the “showing to the contrary” in this instance is so overwhelming that I think it was impermissible for the Commission to apply that rule here.

 The Company here assumed the full cost of an unproductive back-haul, since it paid its drivers for their tractors and their services whether the trailer returned empty or full. If the backhaul was productive, four cents per mile was added to the total payment, possibly as compensation for increased wear-and-tear and more rigorous duties. Although a lease of equipment may, under certain circumstances, require a lessee to return the vehicle to the location where it was first taken, large rental firms do provide for one-way leases at slightly increased rates. The Company might, therefore, well have been able to reduce its loss on an unproductive backhaul by leasing equipment on terms which would have permitted it to return the equipment at the destination.