New Jersey governor sets up task force; California Supreme Court revises test for determining if a worker is an independent contractor.
Two actions this week — an executive order by the governor of New Jersey on Thursday, and a decision by California’s Supreme Court on Monday — could have important implications for the trucking business, especially the drayage industry in some of the nation’s largest ports, by making it harder for them to use independent contractors.
New Jersey Gov. Phil Murphy’s executive order established a Task Force on Employee Misclassification that his office said “can allow employers to escape their legal responsibilities to their workers, such as ensuring adequate workplace protections and providing employment-related benefits like unemployment insurance and workers’ compensation. Employers often misclassify their employees intentionally in order to reduce labor costs and avoid paying state and federal taxes.”
More employers are misclassifying their workers as independent contractors, said New Jersey Attorney General Gurbir Grewal, who charged the practice is illegal and “makes New Jersey’s communities poorer in the long run by denying workers the wages and benefits to which they are legally entitled, and that are essential to building a fair and prosperous economy.”
Fred Potter, a vice president and director of the Teamsters Port Division, hailed the decision saying, “Tens of thousands of truck drivers hauling cargo on and off the docks at our nation’s seaports — including at the Ports of New York/New Jersey — are illegally classified as independent contractors, robbing our public institutions of much-needed tax revenue and depriving drivers of their employee rights, of their dignity and of fair pay for the important work they perform.”
Potter estimated 85 percent of the port drivers in New Jersey are classified as independent owner-operators.
The Teamsters have been particularly active in California where they have been supporting a drive to have port drayage drivers at the ports of Los Angeles and Long Beach be classified as employees, not independent contractors
In December, the Los Angeles City Council approved a motion that stated that “since 2010, at least 1,150 port truck drivers have filed claims in civil court or with the California Department of Industrial Relations’ enforcement arm, known as the labor commission. Judges have sided with drivers in more than 97 percent of the cases heard.”
Although the California Trucking Association has complained the “DLSE has systematically abused its authority in determinations where it has found drivers misclassified,” a bill introduced in the California State Senate by Sen. Richard Lara last month could impose potential liability on shippers utilizing owner-operators found guilty of breaking the law. Lara’s legislation has the potential to “decimate” the trucking industry, the Western States Trucking Association told a state legislative committee.
Earlier this week, the California Supreme Court handed down a unanimous decision (Dynamex Operations West, Inc. v. Superior Court, Case No. S222732), that analysts say will make it harder to employ independent contractors.
The San Francisco law firm Altshuler Berzon said the “ruling will affect hundreds of thousands of California workers in the gig economy as well as traditional workplaces and will broadly extend the protections of the California Labor Code and wage orders to these workers.”
In a blog entry the law firm explained “an unpredictable, multi-factor test to distinguish between employees and independent contractors” is being replaced with “a greatly simplified, three-pronged ‘ABC’ test.”
Michael Rubin, a partner at Altshuler Berzon, told American Shipper that while he did not want to overgeneralize, “any trucking company that does substantial business in California should carefully reassess the agreements with those drivers to ensure that it’s in compliance with California law as the Supreme Court has now unanimously described it.”
“There is a substantial chance that many drivers who currently perform the core business functions of a company whose business is to deliver goods through drivers will be classified most appropriately as employees rather than independent contractors,” he said.
The Dynamex decision is 82 pages long, and Robin Largent, a partner at Carothers, DiSante & Freudenberger and editor of the California Labor & Employment Law Blog, wrote that it “reads in significant part like new legislation.”
In her blog, she wrote that under the new test adopted by the court, a worker will be presumed to be an employees unless “the hiring entity proves all of the following: (A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity.”
“It will be very interesting to see how quickly the drayage industry changes its business model,” said Barb Maynard, a representative for the Teamster group Justice for Port Truck Drivers in California, saying the Dynamex decision is “pretty clear.”
The Harbor Trucking Association, which represents intermodal trucking companies operating in Long Beach and Los Angeles, is still reviewing the Dynamex decision, said Weston LaBar, the group’s chief executive officer. He also expects it will be appealed to the U.S. Supreme Court.
A bill reauthorizing Federal Aviation Administration Authorization Act, popularly known as F4A could also impact worker classification.
The U.S. House of Representatives passed its version (HR4) of F4A last week. The American Trucking Associations says it clarifies “that truckers can continue to operate efficiently and competitively, under nationally-uniform federal regulations — rather than being forced to adhere to a state-by-state patchwork of rules governing driver hours and pay practices.”
Rubin said this three prong test is similar to what is used in states such as Massachusetts and New Jersey.
That’s why Potter and other Teamster representatives say the action by Murphy is important.
“There are laws and they are not being followed,” said Maynard. “You can have the best law in the land and if nobody is enforcing that law, that law is not worth the paper it is written on.”
Driver misclassification crackdown
