Trucking companies have become the targets of lawsuits alleging that they misclassified their drivers as independent contractors. Such cases include Robles v. Comtrak Logistics, Inc., Case No. 2:13-CV-00161 (putative class action currently pending in the federal court in Sacramento) and Seacon Logix Inc. v. Labor Commissioner (Seacon ordered to pay $105,000 for violations against four of its drivers).
Truck drivers often own or lease their own trucks, and sign independent contractor agreements with the trucking companies. Those two factors alone are not sufficient evidence of independence to make the drivers independent contractors. As the California Court of Appeal explained in a 2007 case involving FedEx drivers: “The parties’ label is not dispositive and will be ignored if their actual conduct establishes a different relationship.” Estrada v. FedEx Ground Package System, 64 Cal. Rptr. 3d 327 (Ct.App. 2007). FedEx wound up paying $27 million for that misclassification case.
The factors to be evaluated in determining whether a driver is an independent contractor are: (1) whether the worker is engaged in a distinct occupation or business, (2) whether, considering the kind of occupation and locality, the work is usually done under the principal’s direction or by a specialist without supervision, (3) the skill required, (4) whether the principal or worker supplies the instrumentalities, tools, and place of work, (5) the length of time for which the services are to be performed, (6) the method of payment, whether by time or by job, (7) whether the work is part of the principal’s regular business, and (8) whether the parties believe they are creating an employer-employee relationship.
Under a California statute that became effective in January 2012, companies that “willfully” misclassify employees as independent contractors face increased penalties of up to $15,000 per violation (increased to $25,000 if there was a “pattern or practice” of misclassification. See California Labor Code sections 226.8 and 2753.
Before classifying workers as independent contractors businesses should make sure that they have carefully analyzed the nature of their relationships with those workers so that they do not incur the substantial liability that would be imposed if the workers have been misclassified.