Los Angeles, CAThe California Labor Commissioner awarded 24 truck port drivers a total of $6 million for unpaid wages and benefits. The underpayment arose from NFI/California Cartage Express’s practice of intentionally misclassifying the drivers as independent contractors, rather than as employees. Since the 2018 California Supreme Court decision in Dynamex Operations West, Inc. v. Superior Court, many California unpaid wage lawsuits that deal with misclassification problem have gone for workers. Dynamex is under legal assault, however, particularly in the trucking industry.
Does Alvarez v. XPO Logistics Cartage, LLC, a recent California district court decision. spell the end of the road for trucker wage claims? Maybe not, but the question bears watching.
A history of wage claim success
Since 2011, port truck drivers have filed at least 1,000 1,000 claims with the California Labor Commissioners office. Some have settled; other cases await hearings, but almost half have gone for the drivers. Drivers also brought private law suits including class action lawsuits for misclassification and wage theft. All of the cases seek redress for violations of the California Labor Code, including wage theft, unlawful deductions, unreimbursed expenses and failure to provide meal and rest breaks.
Unlike employees, independent workers generally have no access to unemployment benefits, disability pay or workers’ compensation. In many cases, trucking companies pass costs on to drivers, including expenses for fuel, maintenance, repairs, insurance, permits and truck leases. In 2008, the Coalition for Clean and Safe Ports estimated that the average port driver was making $28,000 per year after expenses.
Drivers also complain about lease-purchase agreements, under which motor carriers lease a truck to a driver with the promise of fair compensation, future ownership of the truck, and independence from traditional employer-employee requirements. The drivers are reportedly paid only pennies on the dollar, will likely never own the truck, and have zero independence.
According to industry analysts, California has consistently ruled against trucking companies that misclassify drivers. This is particularly important for port drivers, who face additional financial pressure from the cost of environmental compliance at the Port of Long Beach and The Port of Los Angeles. The unintended consequences of clean air regulation make economic life harder for truckers. So labor law enforcement is all the more important to balance the equities out.
The Dynamex decision of April 2018, seemed only to strengthen the litigation position of workers who believed that they were wrongly classified as independent contractors and thus denied the statutory wage and benefit protections of California labor law.
In brief, Dynamex presumes that all workers are employees unless there is convincing evidence to the contrary. For a business to show that a worker is not an employee, the business must demonstrate all of the following:
(A) the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and
(B) the worker performs work that is outside the usual course of the hiring entity’s business; and
(C) the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
Failing any one of these three measures means that a worker is an employee. Under what is shorthanded as the “ABC” test, almost all workers are employees.
The fly in the ointment is that Dynamex has precedential value only when it comes to interpreting California law. It does not apply to federal labor statutes.
Alvarez v. XPO Logistics Cartage
Dynamex was so devastating for California businesses that depend on independent contractors that there had to be blowback. It has come over the transom, up the sewer and around the corner, nibbling at every edge.
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On November 15, 2018, in Alvarez v. XPO Logistics Cartage the United States District Court for the Central District of California held that the Federal Aviation Administration Authorization Act preempts the application of the “Dynamex” ABC Test to motor carriers for purposes of determining whether owner-operators are considered employees under California’s Wage Orders. Judge James Otero wrote that, “there is a distinction to be made between a statutory cause of action and the test for interpreting the statute in question. Thus, the court would emphasize that it is the application of the Dynamex ABC test that is preempted by the FAAAA, not the underlying California Labor Code claims.” The decision by the California Central District Court does not set precedent.
What does this mean? We will see, but truckers and other vulnerable employees protected under Dynamex must remain watchful.