While two California-based trucking companies have accepted an amnesty deal for trucking companies that have allegedly misclassified employees, a U.S. agency has ruled that another transportation firm improperly classified its drivers as independent contractors.
The amnesty program has languished for months with no takers. But recently, Shippers Transport Inc. and Gonzalo Trucking Inc. both applied for amnesty under the Motor Carrier Amnesty Program, Paola Laverde, spokeswoman for California’s Department of Industrial Relations, told Trucks.com.
The program allows carriers to pay back wages, benefits and taxes owed to misclassified drivers and change their work status from independent contractor to employee. In return, the trucking companies would be relieved of any liability that could result in fines and other penalties.
The California agency did not provide details about how many drivers are affected and how much the trucking companies will have to pay in back wages and benefits.
The amnesty deal ends Jan. 1, 2017.
The misclassification issue has turned into a bitter legal battle, pitting drivers against trucking companies in courtrooms and on picket lines in California and at ports across the U.S.
In a ruling made months ago, but only disclosed last week, the National Labor Relations Board found that Pacific 9 Transportation, headquartered in Carson, Calif., engaged in an unfair labor practice by misclassifying its drivers as independent contractors.
The Aug. 26 memorandum, issued by Barry Kearney, associate general counsel of the NLRB’s Associate Council Division of Advice, ruled that the drivers were actually employees of the company. Kearney found that Pac 9 interfered with and “restrained the drivers in their exercise of Section 7 rights which allow employees to unionize.” He said employers are not allowed to “interfere with, restrain, or coerce employees in the exercise of the rights.”
Since late 2012, the Teamsters union has waged an organizing campaign among Pac 9 drivers, filing more than 60 wage and hour claims with the California State Labor Commission on behalf of drivers.
In late 2013, the Teamsters filed a charge against Pac 9, alleging the company threatened to shut its doors if drivers unionized. In March 2014, Pac 9 entered into an informal settlement agreeing that it would post a “Notice to Employees.” A month later, however, Pac 9 allegedly distributed a memo to its drivers that said it only “has owner-operators and IC drivers under contract.”
Michael Manley, counsel for the Teamsters Port Division, said this is the first time that the unfair labor practice theory involving worker misclassification – which he now calls the Pac 9 theory – has been tested by the NLRB.
“This theory could have a large impact on the port industry in California and nationwide,” Manley told Trucks.com. “We’ve already applied the Pac 9 theory in four other cases being litigated. I think this is in the early stages for this theory. But say that NLRB adopts this theory, and it becomes kind of the law of the land. There will be a lot of consequences for employers who misclassify their workers.”
Ronald W. Novotny, attorney for Pac 9, called the NLBR decision a “typical overreach by this government agency,” and said the theory of liability is “unprecedented in its 80-year history.”
“There is good reason for that because deciding how to classify employees is one of the most difficult decisions an employer can make, and it should not be subjected to liability for making good faith determinations that someone is an independent contractor,” Novotny told Trucks.com.
“Unlike other unfair labor practices, it is also not something that can be known in advance of NLRB hearing, as the board’s determination as to whether employees were misclassified will only come at the end of a long trial,” he said.
The Teamsters continue to work with Pac 9 and have entered into a settlement agreement with the company, according to Manley. Pac 9 filed for Chapter 11 bankruptcy protection in late April after the California Labor Commission ordered it to pay nearly $7 million in back pay to drivers in December 2015.
“It provides a path for drivers to become employees and a path for us to resolve questions about whether those drivers want to be represented,” Manley said of the Pac 9 settlement.
The Teamsters also entered into a settlement agreement with Laca Express, which is no longer in business for unrelated reasons, Manley said. Other cases he is involved in include Intermodal Bridge Transport, as well as XPO Cartage and XPO Port Services Inc. XPO drivers have now filed for Teamsters representation at four terminals in four states, including California.
Trucking industry executives are alarmed by the mounting number of misclassification cases being waged by port drivers. In May, Gary Schubert, president of Intermodal Bridge Transport, said a number of trucking companies “will go out of business rather than repay the money they owe.”
But Manley said the notion that having employee drivers instead of independent contractors is “going to bring the port industry crashing down” is simply untrue. Prior to deregulation, the port drayage industry depended on employee drivers for its daily operations.
“We obviously are interested in drivers having jobs and representing those drivers,” Manley said. “We are not interested in putting companies into bankruptcy, and in fact, Pac 9 is a perfect example where we are perfectly willing to work with a company in bankruptcy and go forward.”
Since 2011, California truckers have filed roughly 800 wage claims alleging that they have been misclassified as independent contractors and denied benefits including wages, overtime pay, unemployment insurance and workers’ compensation.
Drivers have won more than $35 million in over 300 cases, and there are still 196 wage claims pending, Laverde said.