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Three New California Laws Affecting Trucking Companies, Part 3: AB 621

AB 621 (Amnesty for Converting Independent Contractor Drayage Drivers to Employees)

AB 621 establishes a new section of the Labor Code that allows a motor carrier performing drayage services to be relieved of liability for statutory or civil penalties associated with misclassification of commercial drivers as independent contractors if the motor carrier enters into a settlement agreement with the Labor Commissioner, with the cooperation and consent of the Employment Development Department, prior to January 1, 2017. In the settlement agreement, the motor carrier must agree to convert all of its commercial drivers to employees, and pay all wages, benefits, and taxes owed, if any, for those workers. The bill would permit a settlement agreement to contain a provision authorizing the Labor Commissioner and the Employment Development Department to recover from the motor carrier the reasonable, actual costs of the Labor Commissioner and the Employment Development Department for their respective review, approval, and compliance monitoring of that settlement agreement.

Eligibility is interesting. To be eligible, the motor carrier may not be a defendant in a lawsuit for misclassification that was filed on or before December 31, 2015, and cannot have received a penalty assessment under section 1128 of the California Unemployment Insurance Code. It appears that if you settle a case before apply for this program you might be eligible although that is unclear. The law does not specify what happens if the lawsuit is filed after January 1, 2016 and the motor carrier then applies for amnesty. The penalty assessment seems like complete disqualification.

To participate in the program, the motor carrier must conduct a self-audit of its owner-operators showing the amounts paid to each commercial driver to compensate for the previous misclassification, and the time period applicable to the amount paid to each commercial driver prior to reclassification In addition, if the company was party to a lawsuit for misclassification that concluded on or before January 1, 2016, the company must provide documentation showing that the company has reclassified the independent owner-operators as employees.

Once the application is completed the Labor Commissioner can analyze it and determine whether, in its discretion, to grant amnesty. If the application is denied, the information in the application is not supposed to be used against the company in any way or act as an admission.

If the application is approved the company needs to enter a settlement agreement with the following terms:

(1) Pay all wages, benefits, and taxes owed, if any, to or in relation to all of its commercial drivers reclassified from independent contractors to employees for the period of time from the first date of misclassification to the date the settlement agreement is executed, but not exceeding the applicable statute of limitations.

(2) Maintain any converted commercial driver positions as employee positions.

(3) Consent that any future commercial drivers hired to perform the same or similar duties as those employees converted pursuant to the settlement agreement shall be presumed to have employee status and that the eligible motor carrier shall have the burden to prove by clear and convincing evidence that they are not employees in any administrative or judicial proceeding in which their employment status is an issue.

(4) Immediately after the execution of the settlement agreement, secure the workers' compensation coverage that is legally required for the commercial drivers who were reclassified as employees, effective on or before the date the settlement agreement is executed.

(5) Provide the Labor Commissioner and the department with proof of workers' compensation insurance coverage in compliance with paragraph (4) within five days of securing the coverage.

(6) Pay the reasonable, actual costs of the Labor Commissioner and the department for their respective review, approval, and compliance monitoring of the settlement agreement.

(7) Perform any other requirements or provisions the Labor Commissioner and the department deem necessary to carry out the intent of this section, the program, or to enforce the settlement agreement.

Payments can be made under an installment plan.

The Labor Commissioner can bring a civil action to enforce the settlement agreement and to recover attorneys' fees and costs.

In exchange, the motor carrier will not have to pay the penalties that could be assessed under the Labor Code or the Unemployment Insurance Code. There is no indication that state or federal tax code penalties are subject to the amnesty program.

AB-621 adds Section 2750.8 to the Labor Code.

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