Misclassification of Truck Drivers as Independent Contractors continues to be a hot button issue for California Trucking Companies.
Since 2011, port truckers have filed over 800 claims with the California Division of Labor Standards Enforcement, with about 300 resulting in determinations by the Labor Commissioner that the drivers were employees and not ICs. Approximately 200 are still awaiting hearings and 300 were either settled or transferred to the courts. To date, approximately $36 million has been awarded as a result of employee misclassification.
The California Labor Commissioner issued Orders, Decisions, and Awards (ODA’s) on April 14, 2017 in the amount of $855,285.62 to four (4) port and rail drivers working for XPO Logistics, a subsidiary of XPO Cartage, for their misclassification as ICs. XPO moves goods to and from the ports of Los Angeles and Long Beach. In a highly detailed 32 page ruling, the Labor Commissioner ruled that each of the four drivers was an employee and not an IC because XPO retained pervasive control over the drayage operation as a whole: XPO obtained clients, clients paid XPO directly, XPO determined rates to be paid to the workers with no rights for negotiation, XPO controlled work assignments and workers’ schedules, GPS was used by XPO to monitor the workers’ locations, workers were required to follow XPO guidelines and rules, and workers could not use their trucks to perform services for other companies. The Labor Commissioner also noted that the workers did not hold themselves out as having a separate and distinct business or have their own customers; XPO supplied the trucks by arranging for the truck leases; the workers made no investment in the equipment or materials needed to transport goods; the workers had no opportunity for profit or loss; and permanency of the relationship existed. Clearly, based on California Law, this was not even a close case: the facts in this case made it easy for the Labor Commissioner to hold that XPO was misclassifying employee drivers as ICs.
XPO driver Jose Herrera, who has driven for XPO (or its predecessor Pacer Cartage) for eight (8) years, was awarded $279,415.83 for illegal deductions. Herrera made a damning statement about work conditions at XPO:
“XPO controls every aspect of my work. XPO has the customer relationships, not me. The company tells me where to go and when to go there. The truck I drive has XPO clearly marked on the outside and I’m not allowed to take that truck to any other company if work is slow at XPO. Even though they are clearly in control of my work, XPO refuses to give me the same rights as their employee drivers in other divisions. That means that I have no worker’s compensation if I get injured on the job or disability insurance if something happens to me. And that’s not all – XPO deducts their business expenses from our paychecks, like truck maintenance, repairs, and fuel. They charge us for everything and the government has confirmed what I’ve always known: It is illegal. That’s why my co-workers and I have been fighting, suing, and striking.”
The awards included compensation for “non-productive time,” such as time spent inspecting the truck, waiting for dispatch and scanning in paperwork at days’ end. The awards for “nonproductive time” were pursuant to California Assembly Bill 1513 passed in 2016, which requires employers to pay employees paid piece rate for nonproductive time. They also received compensation for unpaid hours, liquidated damages, expenses, deductions, and meal and rest breaks.
Furthermore, the award amounts are high because in California it is illegal to deduct business expenses such as the cost of fuel, insurance, lease payments etc. from employees’ wages, as companies who misclassify drivers often do. Gaitan v. XPO Cartage, Inc., Nos. 05-66467 KR, 05-66468 KR, 05-66595 KR, 05-66694 KR (Cal. Labor Comm’r Apr. 14, 2017). The entire decision can be found here. I encourage all trucking company owners and executives to read the decision.
The California Labor Commissioner Is Aggressively Penalizing Trucking Companies Who Misclassify Drivers.
Since 2011, port truck drivers serving America’s largest port complex have filed more than 800 claims with the California Division of Labor Standards Enforcement (DLSE), which adjudicates wage claims and is an enforcement branch under the California Labor Commissioner’s Office. The DLSE has issued determinations in about 300 cases, finding that drivers were, in fact, employees. There are about another 200 pending claims that are still awaiting hearings. Port drivers continue to regularly file new claims.
California is a hostile place for trucking companies that choose to classify drivers as Independent Contractors. Anyone who does work for compensation in California is presumed to be an employee. Therefore, the burden of proof falls upon the Trucking Company to prove that their drivers are Independent Contractors. State agencies such as EDD, Labor Board, Workers Compensation Appeals Board and privtae Civil lawsuits alleging misclassification are all sources for disaster to a trucking company that misclassifies drivers as ICs.
As with any determination of whether someone is an Independent Contractor or Employee, the matter is not black or white, but shades of gray. When I represent a company where it is critical to convince those who sit in judgment that my client’s drivers are truly Independent Contractors, I make sure we gather every bit of evidence we can to tilt the scales toward “independence” and away from “employment”. Of course, it is better to be proactive in these situations so if you are confronted by a State Agency or faced with a lawsuit alleging misclassification, you will be prepared with all the evidence you need to convince those who sit in judgment of your company that your drivers are true Independent Contractors.