Delta Logistics, Inc. v. Employment Dept. Tax Section

Under O.R.S. 657.047(1)(b), “lease" requires transfer of legal possession and use of the vehicle to the for-hire carrier, but retention of physical possession, control, and use to the lessor for the purpose of operation and maintenance of the vehicle.

Delta Logistics, a for-hire interstate motor carrier, challenged an order of an administrative law judge (ALJ) upholding the Employment Department’s assessments of unemployment insurance taxes based on payments that Delta made to owner-operator truck drivers. Delta did not own any transport vehicles. They used the vehicles and services of approximately forty contract drivers to make deliveries for customers; the drivers, in turn, either owned or leased their vehicles (owner-operators). The ALJ determined that Delta was not entitled to the employment exception under ORS 657.047, which exempts from employment for-hire carriers that lease their vehicles to the hiring company (Delta). On judicial review, Delta challenged the ALJ’s interpretation of ORS 657.047. The Court determined that the conflicting requirements of ORS 657.047 could be reconciled by interpreting “lease” to require transfer of legal possession and use of the vehicle to the for-hire carrier (Delta), but retention of physical possession, control, and use to the lessor (drivers) for the purpose of operation and maintenance of the vehicle. The Court held that Delta’s agreements with the owner-operators were properly construed to include a transfer of legal possession and use in return for consideration. No particular words were necessary to create a lease. The Court reversed and remanded the assessments based on remuneration paid to drivers; case otherwise affirmed.