Does NC's Workers' Compensation statute making motor carriers liable for trucker compensation violate federal motor-carrier preemption under 49 U.S.C. § 14501(c)?

Plain-English summary

The AG was asked whether N.C.G.S. § 97-19.1 (the section of the NC Workers' Compensation Act that pushes liability for trucker workers' comp up the contracting chain to motor carriers) violates federal preemption under 49 U.S.C. § 14501(c).

The AG said no, on the strength of the federal statute's own express exception.

§ 97-19.1 makes any principal contractor, intermediate contractor, or subcontractor who contracts with an independent trucker (a person operating a DOT-licensed truck, tractor, or truck trailer) liable for workers' compensation if the trucker has not secured the payment of compensation under § 97-93 for himself, his employees, and his subcontractors. The intent: make sure independent truckers and their employees end up under workers' comp coverage either by buying their own or by riding the chain.

49 U.S.C. § 14501(c)(1) is the basic federal preemption rule. States cannot enact laws "related to a price, route, or service of any motor carrier" with respect to transportation of property. That preemption is broad, and an American Trucking Association "white paper" argued § 97-19.1 fell within it.

But § 14501(c)(2)(A) carves out an exception. The federal preemption "shall not restrict the safety regulatory authority of a State with respect to motor vehicles, the authority of a State to impose highway route controls or limitations based on the size or weight of the motor vehicle or the hazardous nature of the cargo, or the authority of the State to regulate motor carriers with regard to minimum amounts of financial responsibility relating to insurance requirements and self-insurance authorization."

The AG read § 97-19.1 as a workers' compensation insurance requirement applicable to the trucking industry. That puts it squarely within the "insurance requirements" exception. Two federal court cases reinforced the reading:

• New Hampshire Motor Transport Assoc. v. Rowe, 448 F.3d 66 (1st Cir. 2006). The First Circuit struck down a Maine tobacco-delivery statute as preempted, but expressly described the insurance-requirements exception as a permitted area of state regulation.
• Worldwide Moving & Storage v. District of Columbia, 445 F.3d 422 (D.C. Cir. 2006). The DC Circuit refused to enjoin a DC surety-bond ordinance because it fell within the § 14501(c)(2)(A) insurance-requirements exception.

The AG also explained the policy rationale. The NC Workers' Compensation Act's philosophy is that the wear and tear of human beings in modern industry should be charged to the industry, just as the wear and tear of machinery has always been charged (Vause v. Vause Farm Equipment Co., 233 N.C. 88, 63 S.E.2d 173 (1951)). The Act's twin purposes are swift, certain compensation to injured workers and limited liability for employers (Hendrix v. Linn-Corriher Corp., 317 N.C. 179, 345 S.E.2d 374 (1986)). "Occupational accident insurance" (the trucking industry's preferred substitute) does not deliver the same protections, has caps and triggers, and does not satisfy § 97-98.

Bottom line: § 97-19.1 sits inside the federal exception, not outside the federal preemption. The federal statute does not require NC to displace its workers' comp protection for truckers.

Currency note

This opinion was issued circa 2007. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The Supreme Court decided Rowe v. New Hampshire Motor Transport Ass'n, 552 U.S. 364 (2008), shortly after this opinion, affirming the First Circuit's preemption analysis on Maine's tobacco-delivery statute but keeping the insurance-requirements exception intact. The federal preemption doctrine on motor carriers has continued to develop, and NC § 97-19.1 has been amended. Anyone with a current preemption question should pull current Supreme Court and Fourth Circuit case law and the current text of § 97-19.1.

Common questions

Q: At the time of the opinion, did the principal contractor have to pay workers' comp for an injured independent trucker?
A: Yes, if the trucker had not secured workers' compensation coverage himself under § 97-93. § 97-19.1 makes the chain liable upward to ensure coverage exists somewhere.

Q: Why did the trucking industry oppose this?
A: Because the carriers up the chain wanted to use a cheaper alternative ("occupational accident insurance") with caps and triggers, instead of full workers' comp. The AG concluded the alternative did not satisfy NC law or its protective purposes.

Q: Could a federal court strike down § 97-19.1 as preempted?
A: Per the AG, no. § 14501(c)(2)(A) expressly permits state regulation of motor carriers on insurance requirements and financial responsibility minimums. § 97-19.1 fits that exception, so the broad preemption in § 14501(c)(1) does not reach it.

Q: Does the insurance-requirements exception cover any kind of state regulation?
A: No. The First Circuit in Rowe read the exception narrowly, ruling it does not cover broad "health and safety" regulation. It does cover laws related to minimum insurance amounts and financial responsibility, which is exactly what § 97-19.1 is.

Background and statutory framework

The federal layer:

• 49 U.S.C. § 14501(c)(1). Broad preemption of state laws "related to a price, route, or service of any motor carrier."
• 49 U.S.C. § 14501(c)(2)(A). Carve-outs for state safety regulation of motor vehicles, route/weight controls, hazardous cargo controls, and insurance/financial-responsibility regulation.

The NC layer:

• N.C.G.S. § 97-19.1. Pushes workers' compensation liability up the contracting chain when an independent trucker has not secured coverage.
• N.C.G.S. § 97-93. Sets the methods by which an employer secures the payment of compensation.
• N.C.G.S. § 97-98. Insurance requirements under the Workers' Compensation Act.

The supporting case law:

• New Hampshire Motor Transport Assoc. v. Rowe, 448 F.3d 66 (1st Cir. 2006), cert. granted, 127 S.Ct. 342 (2006). Insurance exception read narrowly but maintained.
• Worldwide Moving & Storage v. District of Columbia, 445 F.3d 422 (D.C. Cir. 2006). Surety bond ordinance fell within insurance exception.
• Jenkins v. American Enka Corp., 95 F.2d 755 (4th Cir. 1938). NC Workers' Compensation Act is constitutional.
• Vause v. Vause Farm Equipment Co., 233 N.C. 88, 63 S.E.2d 173 (1951). Industry bears wear and tear of human workers.
• Hendrix v. Linn-Corriher Corp., 317 N.C. 179, 345 S.E.2d 374 (1986). Twin purposes of the Act.

The AG's opinion has the structure: federal preemption is broad, the exception is specific, our statute fits the exception, the cases agree, the policy supports our statute, the alternative does not. Tight argument.

The opinion was signed by Senior Deputy Attorney General Ann Reed, Deputy Attorney General Robert Hargett, and Assistant Attorney General Gary A. Scarzafava.

Citations

• 49 U.S.C. § 14501(c) (motor carrier preemption)
• 49 U.S.C. § 14501(c)(1) (general preemption rule)
• 49 U.S.C. § 14501(c)(2)(A) (insurance-requirements exception)
• 49 U.S.C. § 41713(b)(4)
• N.C.G.S. § 97-19.1 (motor carrier workers' comp liability)
• N.C.G.S. § 97-93 (securing payment of compensation)
• N.C.G.S. § 97-98 (insurance requirements)
• New Hampshire Motor Transport Assoc. v. Rowe, 448 F.3d 66 (1st Cir. 2006), cert. granted, 127 S.Ct. 342 (2006)
• Worldwide Moving & Storage v. District of Columbia, 445 F.3d 422 (D.C. Cir. 2006)
• Jenkins v. American Enka Corp., 95 F.2d 755 (4th Cir. 1938)
• Vause v. Vause Farm Equipment Co., 233 N.C. 88, 63 S.E.2d 173 (1951)
• Hendrix v. Linn-Corriher Corp., 317 N.C. 179, 345 S.E.2d 374 (1986)

Source

• Landing page: https://ncdoj.gov/opinions/workers-compensation-act-n-c-g-s-%ef%bf%bd97-19-1-regulation-of-motor-carriers/

Original opinion text

Does N.C.G.S. § 97-19.1 violate 49 U.S.C. § 14501(c)? No. N.C.G.S. § 97-19.1, which provides that a motor carrier may be liable for workers' compensation benefits, does not violate 49 U.S.C. § 14501(c).

Section 97-19.1 of the North Carolina Workers' Compensation Act states in pertinent part:

Any principal contractor, intermediate contractor, or subcontractor, irrespective of whether such contractor regularly employs three or more employees, who contracts with an individual in the interstate or intrastate carrier industry who operates a truck, tractor, or truck trailer licensed by the United States Department of Transportation and who has not secured the payment of compensation in the manner provided for employers set forth in G.S. 97-93 for himself personally and for his employees and subcontractors, if any, shall be liable as an employer under this Article for the payment of compensation and other benefits ...

The intent of this provision is to make it more likely that the independent trucker, his employees and subcontractors are afforded the protection of the Workers' Compensation Act through the purchase of workers' compensation insurance or other financial safeguards established in Section 97-93 of the Act. Section 97-19.1 allows the independent driver to purchase insurance or for the motor carriers up the chain of command to have secured coverage for the truckers below them in the chain. Thus, Section 97-19.1 establishes a requirement for workers' compensation insurance applicable to the trucking industry.

The United States Congress has specifically limited state and local government regulation of motor carriers. Section 14501(c) provides, in pertinent part:

Motor carriers of property (1) General rule. Except as provided in paragraphs (2) and (3), a State, political subdivision of a State, or political authority of 2 or more States may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier (other than a carrier affiliated with a direct air carrier covered by section 41713(b)(4) [49 USC § 41713(b)(4)]) or any motor private carrier, broker, or freight forwarder with respect to the transportation of property.

(2) Matters not covered. Paragraph (1)(A) shall not restrict the safety regulatory authority of a State with respect to motor vehicles, the authority of a State to impose highway route controls or limitations based on the size or weight of the motor vehicle or the hazardous nature of the cargo, or the authority of the State to regulate motor carriers with regard to minimum amounts of financial responsibility relating to insurance requirements and self-insurance authorization.

49 U.S.C. § 14501(c) (emphasis added). Under this Federal regulation, "insurance requirements" is a specific exception. New Hampshire Motor Transport Assoc., 448 F.3d at 76; Worldwide Moving & Storage, 445 F.3d at 426.

The effect of the "insurance requirements" exception has only been addressed in a few cases. In New Hampshire Motor Transport Assoc. v. Rowe, 448 F.3d 66 (1st Cir. 2006), cert. granted, 127 S.Ct. 342 (2006), one of the cases cited in the American Trucking Association "white paper," the First Circuit Court of Appeals ruled that a statute enacted by the State of Maine to regulate the sale and delivery of tobacco products violated 49 U.S.C. § 14501(c). The First Circuit concluded that the statutory exceptions are to be interpreted narrowly and do not include the ability to broadly regulate "health and safety," but specifically allow States to pass laws relating to insurance requirements.

The insurance exclusion from the Federal Motor Carrier regulation was also discussed by the United States Court of Appeals for the District of Columbia in Worldwide Moving & Storage v. District of Columbia, 445 F.3d 422 (D.C. Cir. 2006). The Court of Appeals refused to enjoin the enforcement of a District of Columbia surety bond ordinance, holding that § 14501(c)(2)(A) "appears to exempt from the prohibition the surety bond requirement imposed on Worldwide."

The "white paper" presents numerous decisions, which address the broad reach of the federal regulations prohibiting local laws that relate "to a price, route, or service of any motor carrier." These cases, however, do not address the specific exception presented by Section 97-19.1 of the North Carolina Workers' Compensation Act; to wit, Section 14501(c)(2)(A)'s specific permission for the State "to regulate motor carriers with regard to minimum amounts of financial responsibility relating to insurance requirements and self-insurance authorization." Because Section 97-19.1 appears to fall clearly within the exception to the Federal legislation, Section 97-19.1 should not be precluded by the Federal legislation.

North Carolina has an interest in protecting the health and financial security of employees who are subject to its jurisdiction. See Jenkins v. American Enka Corp., 95 F.2d 755 (4th Cir. 1938) (N.C. Workers' Compensation Act is constitutional). The philosophy of the Workers' Compensation Act is that the wear and tear of human beings in modern industry should be charged to the industry, just as the wear and tear of machinery has always been charged. Vause v. Vause Farm Equipment Co., 233 N.C. 88, 92, 63 S.E.2d 173, 176 (1951). The social policy behind the North Carolina Workers' Compensation Act is two-fold: First, the Act provides employees with a swift and certain compensation for the loss of earning capacity and Second, the Act provides limited liability for employers. Hendrix v. Linn-Corriher Corp., 317 N.C. 179, 190, 345 S.E.2d 374, 381 (1986).

North Carolina, consistent with other States, has chosen to protect employees through workers' compensation insurance. On Page h of the "white paper," the American Trucking Association suggests that its preferred coverage is "occupational accident insurance." This coverage provides some of the benefits available through the Workers' Compensation Act; however, occupational accident insurance is not a replacement for workers' compensation insurance. Occupational accident insurance policies often have limitations on triggering events (such as disability within 10 days of injury) and limitations on the benefits provided (i.e., $100,000 cap). Further, the occupational accident insurance policies are not administered by an administrative body and thereby do not assure the injured employee a swift and certain compensation for injuries received on the job. See Hendrix, 317 N.C. at 190, 345 S.E.2d at 381. Moreover, occupational accident insurance policies do not comply with the insurance requirements of the Workers' Compensation Act, and thereby do not necessarily afford the employer the protections of the Act. See N.C.G.S. § 97-98.

The current requirements expressed in Section 97-19.1 do not appear to violate 49 U.S.C. § 14501(c). See New Hampshire Motor Transport Assoc., 448 F.3d at 76; Worldwide Moving & Storage, 445 F.3d at 426; 49 U.S.C. § 14501(c)(A)(2) (States permitted to regulate insurance).

Respectfully yours,

Ann Reed
Senior Deputy Attorney General

Robert Hargett
Deputy Attorney General

Gary A. Scarzafava
Assistant Attorney General