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plained that TLC was able to obtain workers’ compensation insur-
ance in the private market at comparatively low premium rates
because of the large number of driver-employees on whom it
obtained such insurance.
After initial contacts between a sales representative of TLC
and a prospective trucking company client, TLC provided the
prospective client with a projection of the cost savings that it
could realize from leasing driver-employees from TLC. TLC also
quoted that prospective client the lease fee that TLC intended to
charge if that trucking company agreed to become a client of TLC.
When TLC was successful in attracting a trucking company as
a client, TLC and that trucking company entered into a contract
entitled “TLC Exclusive Lease Agreement” (exclusive lease agree-
ment), which set forth the agreement between them with respect to
the leasing by such company of driver-employees from TLC.9 When
each trucking company entered into an exclusive lease agreement
with TLC, such trucking company terminated the employment ar-
rangement that it previously had with all of its truck drivers.
Each exclusive lease agreement provided in pertinent part:
9Each exclusive lease agreement was a standard TLC form
contract. There were no agreements between TLC and any trucking
company client regarding TLC’s leasing driver-employees to such
trucking company client other than the agreement set forth in the
exclusive lease agreement. The material provisions of each
exclusive lease agreement remained unchanged throughout the
taxable years at issue except for the factor (discussed below)
used to compute the lease fee that each trucking company client
owed TLC.
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Last modified: May 25, 2011