Shipping and logistics companies STG Logistics, Inc., STG Drayage, LLC, and subsidiaries settled with the New Jersey attorney general and the New Jersey Department of Labor and Workforce Development to resolve allegations that hundreds of truck drivers were misclassified as independent contractors instead of as employees.

Misclassifying the drivers resulted in the drivers not receiving the rights and benefits they should have received as employees, including minimum wages, overtime, worker's compensation, unemployment insurance, disability benefits, earned sick leave, job-protected family leave, equal pay protections, and more.

Additionally, an investigation revealed the employer withheld millions of dollars from driver pay for fuel, tolls, parking, liability insurance, fees, and maintenance. In some cases, this allegedly resulted in negative pay as the deduction sum was greater than the driver's gross pay.

The settlement agreement requires the company to pay $2,775,000, with $2,220,000 paid directly to affected drivers and $555,000 to the state of New Jersey.

Source: https://www.njoag.gov/ag-davenport-labor-department-reach-major-settlement-with-trucking-company-in-worker-misclassification-lawsuit/

Commentary

Classification of a worker as an employee or independent contractor is not determined by an agreement between worker and employer. It requires careful evaluation, often with the help of experienced counsel.

In the above matter, the amount of operational control the employer required over the workers was consistent with managing employees, not independent contractors.

This control included:

· Requiring the company name on driver trucks

· Requiring drivers to lease their trucks to the company for the company's exclusive use

· Prohibiting use of trucks for other work

· Requiring drivers to sign non-negotiable "independent contractor agreements"

· Requiring trucks to be equipped with GPS trackers

· Assigning all routes, monitoring deliveries, and setting pay rates

Employers should note that the DOL and the IRS begin with the premise that every worker is an employee. The employer bears the burden of proving a worker is an independent contractor under specific factors. Mistakes are costly. Misclassification can carry penalties, fines, back wages, and even criminal liability.

The factors the DOL considers are found here: https://www.dol.gov/agencies/whd/fact-sheets/13-flsa-employment-relationship and the IRS factors can be found here: https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee

The final takeaway is getting worker classification right is essential. Consult with your local legal counsel to evaluate classifications in your organization to make sure you are compliant.