The cases, involve courier and taxi companies that allegedly underpaid workers for their service, are the latest to challenge the traditional owner-operator driver model.
Two recent court cases are the latest examples of a regulatory landscape that is putting pressure on motor carriers and other companies that rely on outsourced labor to conduct business.
At question is whether employers should be paying wages and benefits requisite for full-time employees instead of keeping them off the books as independent contractors when the personnel work exclusively for one company that dictates how they do their job every day.
The owner-operator model dominates in the port trucking sector and is also prevalent in long-haul and intermodal operations.
Social justice organizations and regulators contend that companies are ducking their obligation to pay at least minimum wage and overtime pay, and legally required contributions to unemployment insurance and workers compensation funds, while also shifting many operating expenses – such as owning and operating trucks – onto the backs of workers with limited means. The outsourcing model also enables employers to avoid remitting payroll taxes to states and the federal Social Security and Medicare programs. The state of California and the U.S. Department of Labor have been aggressively enforcing misclassification practices over the past five years.
Federal courts recently ruled against two San Francisco Bay-area companies for deliberately misclassifying workers as independent contractors.
National Consolidated Couriers Inc., based in San Leandro, has agreed to a court judgment requiring it to pay $5 million in back wages and damages to more than 600 drivers that did not receive minimum wage and overtime pay. According to the judgment, the company tried to destroy records showing an employment relationship with its drivers, and had been misclassifying the workers for at least five years.
A federal judge also ruled that drivers for Mountain View-based Stanford Yellow Taxi Cab were misclassified. The Labor Department filed suit to stop Stanford Cab from threatening and intimidating its drivers, who were cooperating with investigators, including firing at least one worker. The court’s decision allows the department to continue with litigation forcing the company to pay nearly $3 million back wages and damages to dozens of drivers.
Stanford Cab requires drivers to be on the job six days per week for 12-hour shifts, but did not compensate them for all those hours, according to the Labor Department. Stanford also did not allow drivers to change their schedules, or operate independently by reaching out directly to passengers. Drivers also had to abide by a dress code.
Last month, the Labor Department issued guidance to employers regarding how to determine if a worker is really an employee. A key test in the department’s standards is how much control the company exerts over the worker’s daily activity and worker’s freedom to make decisions.
In addition, the department last week signed an agreement with Alaska to coordinate enforcement of misclassification cases. There are now 24 such state partnerships in place.
According to the Labor Department, Federal laws do not explicitly prohibit misclassification, but the practice tends to lead to violations of the minimum wage and overtime provisions of the Fair Labor Standards Act, which it does enforce.
“As these court rulings indicate, the tide is turning against those employers who misuse independent contractor status to take advantage of workers,” Regional Solicitor Janet Herold of the department’s Western Region, who litigated both cases, said in a statement. “The courts recognize the nature of this problem and stand ready to ensure that justice is served. America’s workforce deserves no less.”
Courts side with drivers in California misclassification cases
