I have been warning everyone about the possible dangers of misclassifying drivers for some time now and, obviously, based on the current amount of new and settled cases, this problem is just getting worse. The government is targeting independent contractors (ICs) and you could be the next one in their cross-hairs. The bottom line: don’t classify your drivers as ICs unless you do it right. The following are some current cases in which these outfits, in some form or manner, were not doing something right. It is also fair to assume that none of these companies had undertaken a risk assessment of their business to enhance their level of compliance. A risk assessment offers a number of practical, alternative ways to enhance your compliance, including restructuring and re-implementing your IC relationships. Now, each of these companies are facing either an imminent risk of a judicial finding of non-compliance and/or having to pay a multi-million-dollar amount to settle their misclassification lawsuits.
UBER AND LYFT UNDER ATTACK. Lyft was recently able to extricate itself from a potentially devastating misclassification lawsuit in California at a modest cost ($12 million), while still being able to maintain its IC business model. But, that doesn’t mean they are in the clear. In fact, many states have more stringent tests for IC status than California, and there’s nothing stopping another lawyer from filing a similar lawsuit somewhere else. Meanwhile, ride-hailing giant Uber fell deeper into legal woes with some of their drivers that are challenging their IC classification in courts across the country. In addition to lawsuits in California, Texas, New York, and Arizona, new lawsuits were filed in Pennsylvania and Florida against Uber. In Pennsylvania, a class action was brought by UberBLACK limousine drivers claiming that Uber’s classification of them as ICs violates the FLSA, the Pennsylvania Minimum Wage Act, and Pennsylvania Wage Payment and Collection Law. The drivers allege they are employees and not ICs because, among other things, Uber controls the number of fares the drivers receive; requires the drivers to submit to coverage under the company’s liability insurance and then automatically deducts those premiums from the driver’s weekly fees; requires the drivers to transfer their vehicles’ title to the company; has absolute discretion to set the rates customers are charged; prohibits drivers from promoting their personal business; and much more.
AMAZON SUED BY DRIVERS. Amazon is being sued in their second IC misclassification case – this time in Arizona federal court, by drivers who deliver its products to Amazon’s customers within one to two hours of being ordered through Amazon’s “Prime Now” app. The drivers in this new case claim that they have been misclassified as ICs by Amazon and Courier Logistics Services, LLC, the company providing delivery services to Amazon, and that they are entitled to, among other things, unpaid minimum wage, overtime pay, and liquidated damages, under the Fair Labor Standards Act. The complaint alleges that the “Prime Now” drivers are required to wear clothing bearing the Amazon Prime Now logo; that they are scheduled to work fixed shifts; that they are required to arrive at a designated warehouse ahead of their shift and check in with a dispatcher; that they cannot reject work assignments or request particular areas; that they are tracked while they are out on deliveries; that they are required to use their own vehicles without reimbursement; and more.
XPO DRIVERS TO RECEIVE $2.8 MILLION. An Illinois federal district court judge approved a $2.8 million settlement of an IC misclassification claim brought on behalf of a 258-member class of drivers against delivery and logistics company, 3PDelivery (3PD), now known as XPO Logistics. The class action lawsuit was filed in 2013 alleging that 3PD violated the Illinois Wage Payment and Collection Act by misclassifying its delivery service providers as ICs; failed to properly compensate them for all hours worked; and made deductions from their pay in violation of state law. The drivers were awarded $1.8 million, while the attorneys will get the rest (over $900,000)!
PORT DRIVERS AWARDED $6.9 MILLION. The California Commissioner of Labor awarded 38 port truckers, found to have been misclassified as ICs, a total of $6.9 million for expenses incurred during the course of their “employment” by trucking company, Pacific 9 Transportation (Pac 9). The Commissioner determined that each of the 38 drivers was an employee and not an IC, and that Pac 9 owed each of them business expenses that had been unlawfully deducted from their paychecks for truck rental payments, permits and licenses, truck insurance, parking fees, inspections and fuel. In addition, the drivers were awarded liquidated damages for all of the hours that they were paid below the minimum wage, as well as meal and rest period premium pay for missed meal periods.
GOVERNOR ISSUES EXECUTIVE ORDER. Governor Pat McCrory of North Carolina issued Executive Order 83 (E.O. 83) on December 18, 2015 to address the growing problem of employee misclassification. E.O. 83, entitled the “Employee and Employer Fairness Initiative,” directs the appointment of a Director to oversee a new Employee Classification Section within the state’s Industrial Commission to serve as the primary contact for reported instances of employee misclassification that will be referred to relevant state agencies for investigation and enforcement action. The Governor also directs the Department of Revenue, the Industrial Commission, and the Division of Employment Security to each appoint liaisons that will work with the new Director to ensure their respective agencies are taking proper enforcement actions and sharing information.
DRIVERS IN SEATTLE CAN UNIONIZE. The Seattle City Council unanimously approved an ordinance (CB 118499, Version 2) on December 14, 2015 permitting drivers for taxi, transportation network companies, and for-hire drivers, including those who provide services as independent contractors to ride-hailing companies like Uber and Lyft, to unionize and have the right to collectively bargain for better terms and conditions. The ordinance, the first of its kind nationwide, was supported by the App-Based Drivers Association of Seattle, an organization of on-demand contract workers that lobbied with the local Teamsters union. Seattle Mayor Ed Murray did not sign the bill due to concerns over the unknown costs of administration and the possible burdens that may be placed on city staff regarding related rule-making, but allowed it to become law without his signature.
THE SOLUTION IS SIMPLE. Join the NTA (NorthAmerican Transportation Association). It is the only transportation organization that keeps up with all of the misclassification cases across the United States. If you want to bury this subject of misclassification of your independent contractors, then you must put enough nails in the coffin lid so that it does not open again, because if you are sued and you lose and your ICs become employees, you will be faced with a multitude of other lawsuits and fines. You could be subject to FLSA, Truth in Leasing, False Advertising and PAGA lawsuits. NTA membership dues are generally 50% less than your applicable state association dues. So, join now – you can’t afford not to! Call (800) 805-0040 and schedule a “Risk Assessment” of your operation today.