A California logistics company must pay more than $2.2 million in back pay to seven short-haul truck drivers it had illegally misclassified as independent contractors, a state labor board ruled on Wednesday, continuing a streak of victories for drivers who are asserting their labor rights in the state.
By labeling the drivers independent contractors rather than employees, Pacer Cartage, Inc. was able to avoid paying the workers for things like time spent waiting at the port to pick up a load and reimbursements for job expenses. Labor laws protect full-time employees from such wage theft, but independent contractors aren’t covered by the Fair Labor Standards Act, minimum wage laws, and other worker protections. The California Labor Commissioner’s Division of Labor Standards Enforcement (DLSE) ruled that the company “knew or should have known” that the drivers were employees rather than contractors and instructed Pacer to pay $2,214,496.39 in restitution, attorney’s fees, and interest.
Workers’ advocates stressed that Wednesday’s decision is especially significant because Pacer and its parent company XPO Logistics are one of the two largest companies in the industry. Gomez Law Group head Alvin Gomez called it “a tremendous victory” that “will force the drayage industry to make long overdue changes in their business practices.” Another member of the workers’ team told ThinkProgress that less than 20 percent of the total judgment is expected to go to legal bills.
Pacer’s parent company said it intends to appeal the ruling, according to Southern California Public Radio. But its chances of success seem low. The DLSE is working through around 500 separate complaints like this one, and as of two weeks ago it had ruled in favor of the drivers in all 30 of the cases on which it had reached a ruling.
As state labor authorities work through that litany of misclassification complaints from drivers, their cause is getting a boost from the feds as well. The regional arm of the National Labor Relations Board recently found that another company’s drivers should be considered employees rather than contractors, giving a federal stamp of approval to the drivers’ argument.
Labor groups say there are 49,000 port truck drivers misclassified nationwide, meaning that two-thirds of the profession is being robbed of due compensation. “The drivers say that a profession that was once a bulwark of the middle class has been transformed into a low-wage backwater,” the Los Angeles Times reported last month. The network of logistics companies that fight these cases say that’s not true and that the majority of drivers would rather be treated like contractors than employees.
Port truck drivers form a key link in the supply chain for the American economy. Moving retail and business goods from ports to shipping warehouses — known as “drayage” in logistics industry terms — for as little as possible helps major companies maximize profits. But the aggressive cost-cutting measures that drayage contractors use may be starting to backfire. Frustrations over misclassification and other company abuses led one group of drivers to go on strike last August. Another walked out for 36 hours in November. Now the companies are facing multi-million-dollar judgments because those cost-saving schemes are often illegal.
Misclassifying drivers in order to chisel them out of pay is functionally equivalent to the fast food wage theft conducted by altering timecards or requiring off-the-clock work. Nine out of ten fast food workers has been victimized by wage theft. Fast food chains have settled multiple wage theft lawsuits already this year, and several more large class-action suits are pending around the country. Warehouse employees at one of Walmart’s subcontractors won a wage theft settlement late last year over similar practices.