As discussed previously on this blog, recent legal developments have complicated the business plans of trucking companies that use independent contractors as drivers. These have included the Dynamex decision that changed the 30-year-old test of whether a worker is an employee or an independent contractor, but appears applicable only in certain circumstances and for only certain legal claims. This was followed by lawsuits to invalidate Dynamex and a federal district court decision finding that Dynamex was pre-empted by federal law. Compounding this confusion, California passed a law late last year that exposed large retailers to new potential liability. The bill, SB 1402, meant companies could be jointly liable when they hire companies that have violated state employment laws. Now shippers could be liable for violations caused by the motor carriers they hire.
But even under the old standards, the risks remain real. The California Labor Commissioner's recent decision against Cal Cartage demonstrates the liability companies can face for not properly classifying their drivers. In the case, the Commissioner awarded $6 million after finding intentional misclassification of drivers as independent contractors. NFI, the parent of Cal Cartage, itself appears to have escaped liability, as the violation occurred prior to its acquiring Cal Cartage. Cal Cartage is expected to appeal the case in Superior Court. The final result is certainly notable but some of the things discussed, or not discussed, in the ruling are notable as well.
For one, the Commissioner found one of the company's employees, a general manager at NFI's California Cartage Express, individually jointly liable. The decision also interestingly did not use the standard set forth in Dynamex to determine the workers were employees. Instead, it used the older Borello test, finding that Dynamex need not be used in every case and that because the workers are employees under Borello there was no need to address the new Dynamex test. The ruling also provided meal and rest break damages but did not address the recent Federal Motor Carrier Safety Administration's ("FMCSA") determination finding that California's meal and rest break laws were pre-empted by federal law. The FMCSA determination came out just days before this Commissioner decision so it's unclear if the failure to discuss the FMCSA determination at all was one of timing.
Aside from the ruling itself, the defendant's approach to the proceedings is also worth noting. The defendants cross-examined plaintiff's witnesses but chose not to present any witnesses of their own. This could be the result of a realization that the ruling would go against them regardless of the defense presented and therefore they made the decision to wait for their opportunity for a trial before the Superior Court, thus making this an even more interesting case to follow as it progresses forward.
With the many interesting elements to this case, the ruling once again illustrates the dangers for trucking companies in hiring workers as independent contractors. From the Dynamex decision to SB 1402 and beyond it seems clear the State of California is, at the very least, looking to limit the ability of trucking companies to use independent contractors rather than hiring employees. And, in this instance, the Commissioner didn't even need these new tools to issue the large award.
With this in mind, it is as important now as ever to have a strong legal team at your side to keep guide you through the growing number of changes to California law that could leave trucking companies exposed to liability under California's very extensive set of labor laws.