Employment Issues to Consider in Defending Trucking Cases
Wednesday, June 3, 2015
Presented By the IADC Transportation Committee
Welcome! The Webinar will begin promptly at 12:00 pm CDT. Please read and
follow the below instructions:
•
For you information, this Webinar presentation is being recorded.
•
If you have not already done so, please join the conference call.
•
Mute your phone line. If you do not have a mute button or are on a cell phone, press *1 to mute your
phone.
•
If you are on a conference phone, please move all cellular or wireless devices away from the conference
phone to avoid audio interference.
•
If you have questions during the presentation, you may utilize the Q&A pod on the upper-right-hand side
of your screen. You may type questions here and it will be sent to the presenter for response. If your
question is not answered during the presentation, our presenter will answer questions at the end of the
webinar.
•
Visit the “Files” pod in the lower-right-hand corner of the screen if you would like to download a copy of
this PowerPoint presentation.
Type your
questions for
presenters here in
the Q&A Pod
Click on the file
name to
download this
Power Point or
any referenced
documents
IADC Webinars are made possible by a grant from The Foundation of the IADC.
The Foundation of the IADC is dedicated to supporting the advancement of the
civil justice system through educational opportunities like these Webinars. For more
information on The Foundation, visit www.iadcfoundation.org.
Presenters
Noelle M. Natoli-Duffy
Louis C. Klein
Foley & Mansfield, PLLP
Los Angeles, CA
[email protected]
Foley & Mansfield, PLLP
Los Angeles, CA
[email protected]
Four Problem Areas
• Misclassification
– Independent Contractors v. Employees
– Labor Unrest
• Hours of Service Regulations
• State Wage & Hour Laws
– Meal Periods and Rest Breaks
– FAAA Preemption
• EEOC
– Diversity
Misclassification Issues
• Independent Contractors v. Employees
– Drivers (Sub haulers) and Port Haulers
– Control, Control, Control
• What Test Do I use?
•
•
•
•
•
•
IRS - 20 factor common law test
California - 10-14 factor test
Economic Realities Test
6 Factor Test (rarely used)
Borello Test (combination of above tests) - WC, DIR, FEHA
Smell Test - Totality of Circumstances/Subjective
Misclassification Issues
Whether an individual is an employee or a contractor is a legal
question determined based upon the application of various
tests that themselves vary based upon the particular law or
regulatory agency involved.
BOTTOM LINE:
THERE IS NO ONE ANSWER
Misclassification Issues
Why is This Important?
Three Reasons:
1.
In an era of declining tax revenues and governments unwilling to levy new
taxes, federal and state agencies are cracking down on companies that
misclassify employees as independent contractors.
2.
The penalties for misclassifying an employee as an independent contractor
are severe, and include both civil and criminal penalties.
3.
Misclassified employees is a targeted area for class action plaintiff’s attorneys.
Misclassification Issues
IRS and Majority of States
•
Agreement to Investigate and Crackdown on Misclassification
•
Why? $$$$$$$$$$$$$$$$$$
•
Payroll Taxes and Proper Withholdings, Workers Compensation, Unemployment
Insurance - The Reasons Why Employers Want to Use ICs
•
January 26, 2010 – Cal. Corporation ordered to pay $20 million for
misrepresenting the types and number of employees in order to pay smaller
workers compensation premiums.
Misclassification Issues
The Crackdown:






The California Attorney General has targeted the Los Angeles and Long Beach
Ports, among other employers.
The Employment Development Department, responsible for the collection of
various payroll taxes (unemployment insurance, disability insurance,
employment training tax, personal income tax, etc.) is vigorously investigating
employers in suspect industries and aggressively enforcing the law and assessing
fines and penalties.
The California Division of Labor Standards Enforcement is actively investigating
employers to ensure they are not misclassifying employees as independent
contractors in order to avoid or minimize workers’ compensation insurance
premiums.
2010: Obama Allots $25M for DOL to Fight Misclassification.
Other agencies (IRS, FTB, etc.) are conducting their own investigations.
And don’t forget the attorneys.
Misclassification Issues
Estrada v. Federal Express Group Package System, Inc.
 After a trial, the court found that FedEx drivers were employers
and not independent contractors within the meaning of Labor
Code § 2802 because FedEx controlled their manner of dress
down to the color of their socks, the style of their hair and their
day-to-day activities. The total damages assessed in California
are in excess of $17 million
California Labor Code §226.8: violation of law to willfully
misclassify an employee as an independent contractor.
$5,000 - 15,000 penalty per violation
$25,000 penalty for pattern and practice
Posting on company website
Misclassification Issues
• Drivers and Sub Haulers
• May have more than one truck
• Hires other drivers
• Port Haulers
• Part of “landbridge” operations in transporting goods
from the harbor to an inland destination
• Port hauler must present CHL Card (Customhouse License)
– obtained by employer company, not Port hauler
• Port hauler will represent themselves as employees when
applying for the Cartmen/Lightermen Identification Card
from US Customs
Misclassification Issues
• “Control” Factors – Common Law Employees
–
–
–
–
–
–
–
–
–
–
“Right to control” details of Driver’s performance
Can Driver set and choose own hours
Can Driver decline a job or load
Who decides which route(s) to take
How is Driver paid – hourly, weekly, by mile, percentage of gross
revenue – are taxes taken out of pay
Can Driver work for other companies
Uniform requirement
Can Company enforce its policies against Driver
Risk of Loss & Profit, Investment (owner operator v. leasing)
Integral part of business
Misclassification Issues
Overall…
An Independent Contractor Relationship is More
Likely for a Worker Who:
Can earn a profit or suffer a loss from work
 Furnishes needed tools/equipment
 Is paid by the job
 Works for more than one business
 Invests in own equipment and facilities
 Pays his or her own business and traveling expenses
 Hires and pays assistants
 Sets his or her own working hours

Misclassification Issues
Overall…
An Independent Contractor Relationship is Less
Likely for a Worker Who:








Can be fired at any time
Is paid by the hour
Receives instructions from the organization
Receives training from the organization
Works full-time for the organization
Receives employee benefits
Has the right to quit without incurred any legal liability
Provides services that are integral to the organization’s purpose
Misclassification Issues
• Garcia v. Seacon Logix, Inc.
– California Labor Commissioner Case (2013)
– Drivers claimed misclassified
– Sought reimbursement of business expenses,
including fuel, repair costs, truck rental/lease
payments, insurance costs
– DLSE awared Drivers $105,090
– Los Angeles County Superior Court affirmed ruling
Misclassification Issues
• Seacon Logix, Inc.
–
–
–
–
–
–
–
–
–
–
Each Driver required to lease truck from Seacon
Truck rental fee deducted from paycheck every week
Pay and maintain liability insurance
Neither rental nor insurance negotiated
Trucks registered in Seacon’s name/Seacon logo
Drivers paid by the load hauled based on set price – rates set by
Seacon
Drivers could not turn down jobs/could not subcontract
Jobs assigned by Seacon dispatcher
Expected drivers to arrive at Seacon every day
If no show – subject to having relationship terminated
Hours of Service Regulations
49 CFR Part 395
• For purposes of discussion dealing only with:
•
•
•
•
Long-haul truckers (more than 100 air miles)
Interstate transportation (more than 1 state)
Commercial motor vehicles (as defined by FMCSR)
Property-carrying (as opposed to passenger-carrying)
Hours of Service Regulations
• Maximum Driving Time for Property-Carrying
Vehicles (§395.3)
• 10 hours off/14 hours on
– “A driver may not drive without first taking 10 consecutive hours
off duty.”
– “A driver may drive only during a period of 14 consecutive hours
after coming on duty...”
Hours of Service Regulations
• Maximum Driving Time for Property-Carrying
Vehicles (§395.3)
• Driving time: A driver may drive a total of 11 hours during
the 14-hour period
• Rest breaks: A driver must take a 30 minute break (either
in sleeper berth or off-duty) after 8 hours since his/her
last “on-duty”
Hours of Service Regulations
• Maximum Driving Time for Property-Carrying
Vehicles (§395.3)
• 60/7 Rule
– Cannot be “on duty” more than 60 hours in 7 consecutive days if
the motor carrier does not operate every day of week
• 70/8 Rule
– Cannot be “on duty” more than 70 hours in 8 consecutive days if
the motor carrier does operate 7 days a week
Hours of Service Regulations
• Maximum Driving Time for Property-Carrying
Vehicles (§395.3)
– After 7 or 8 consecutive days the driver must take 34
or more consecutive hours off-duty (must include
two periods from 1 a.m. to 5 a.m.)
Hours of Service Regulations
So… what does all of that mean???
–Definitions (§395.2)
• On-duty time versus off-duty time
Hours of Service Regulations
• Definitions (§395.2)
– On-Duty Time (14 hours total, 11 max driving
time)
• Driving Time: “All time spend at the driving controls”
• On-Duty Time: “All time from the time a driver begins to
work or is required to be in readiness to work until the
time the driver is relieved from work and all responsibility
for performing work”
Hours of Service Regulations
• On-Duty time includes:
– All time at a plant, terminal facility or other property
of a motor carrier
– All time inspecting, servicing or conditioning a CMV
– All driving time
– All time in or on a CMV except (1) time resting in
parked CMV; (2) time spent resting in a sleeper
berth; or (3) up to 2 hours riding in the passenger
seat of a CMV before/after 8 hours in sleeper
Hours of Service Regulations
• On-Duty time includes:
– All time loading or unloading
– All time repairing
– All time spent testing for alcohol or controlled
substances
– Performing any other work in the capacity, employ
or service of a motor carrier
– Performing any compensated work for a person who
is not a motor carrier
Hours of Service Regulations
• Off-Duty time—NOT DEFINED!!!
– BUT… “sleeper berth is…” (§395.2 and 395.1)
– A driver with a property-carrying commercial
motor vehicle that has a sleeper berth, must,
before driving, accumulate:
– At least 10 consecutive hours off duty,
– At least 10 consecutive hours of sleeper berth time, or
– A combination of the two
Hours of Service Regulations
• The key?
– In order to be considered “off-duty” the driver must
be “at liberty” to pursue activities of his/her own
choosing.
– But remember…all work for a motor carrier,
whether compensated or not must be recorded as
on-duty time.
Wage and Hour
• State law v. Federal Preemption
• Federal Aviation Administration Authorization Act (“FAAAA”) –
regulates motor carriers and the trucking industry
• Preemption – a state may not enact or enforce a law, regulation or
other provision having the force and effect of law related to price,
route or service of any motor carrier
• Meal and Rest Breaks
• Federal law does not require meal or rest breaks
• States with Meal/Rest Breaks laws:
– California, Colorado, Connecticut, Delaware, Illinois, Kentucky,
Maine, Massachusetts, Minnesota, Nebraska, Nevada, New
Hampshire, New York, North Dakota, Oregon, Rhode Island,
Tennessee, Vermont, Washington, West Virginia
Wage and Hour
• California
– Transportation Industry covered by IWC Order No. 92001 (Cal.Code Regs., tit. 8, §11090), Sections 11
and 12
– Meal Period – Labor Code §512
• 30 minutes for every 5 hours worked
– Rest Break – DIR Wage Orders, Section 12
• 10 minutes for every 4 hours worked
Wage and Hour
• Dilts v. Penske Logistics
– 2011 - US District Court (San Diego) held that FAAAA
preempted California meal and rest break laws because they
relate to price, route or service of a motor carrier
transporting property
– 2014 – US Ninth Circuit Court of Appeal reversed District
Court ruling finding that the FAAAA does not preempt
California meal and rest breaks laws, even if the employer
must factor the provisions into their decisions about pricing,
route selection, or the services provided.
• 9th Circuit has attempted to resolve a split among the District Courts
• Review is being sought from US Supreme Court (Cert. filed Jan. 2015)
Wage and Hour
•
Dilts v. Penske
– 9th Circuit Analysis
• California meal and rest break laws are not the sort of laws “related
to” prices, routes or services that Congress intended to preempt.
• Normal background of rules for all employers doing business in
California.
• Squarely within the states’ traditional power to regulate the
employment relationship and to protect worker health and safety
– Penske free to hire enough drivers and stagger employees’
breaks in order to provide continuous services and that a driver
briefly pulling over to stop to take breaks does not “meaningfully
interfere” with a motor carrier’s ability to choose it starting
points, end points and routes.
Wage and Hour
• Godfrey v. Oakland Port Services Corp. (Oct. 28,
2014) – California Appellate Court
– Case of first impression for California court
– State Appellate Court found no FAAAA preemption
of meal and rest break laws relying on California
Supreme Court precedent and 9th Circuit Dilts
decision
• Laws do not bind motor carriers to specific prices, routes
or services, nor do they freeze them into place to a
significant degree
EEOC and the Trucking Industry
• Statutes enforced by the EEOC
– Title VII of the Civil Rights Act of 1964
– Age Discrimination in Employment Act
– Equal Pay Act of 1964
– Americans with Disabilities Act and the
Rehabilitation Act of 1973
– GINA (Genetic Information Non-Discrimination Act
of 2008)
EEOC
• Systemic Program and Initiative
– Adopted in 2006
– Field Office cooperation
– Effort to initiate more Systemic Cases:
• The Initiative “makes the identification, investigation, and litigation of systemic
discrimination cases – pattern and practice, policy and/or class cases where the alleged
discrimination has a broad impact on an industry, profession, company or geographic
region – a top priorty.”
– If one complaint, likely more widespread
discrimination – “where there is smoke . . .”
EEOC
• Strategic Enforcement Plan
– Emphasis on Systemic Cases
– “SEP will ensure a targeted, concentrated and deliberate
effort to identify and pursue priority issues and practices and
may prioritize types of investigations and cases”
– “Systemic charges or cases that raise SEP issues will be given
priority over individual priority matters and over all nonpriority matters, whether individual or systemic.”
EEOC
• SEP Priorities
– Eliminating barriers in recruitment and hiring
(women and minorities in the trucking industry)
– Protecting immigrant, migrant and other vulnerable
workers
– Addressing emerging and developing issues
– Enforcing Equal Pay laws
– Preserving access to the legal system
– Preventing harassment through systemic
enforcement and targeted outreach
EEOC
• Emphasis on Charges and Cases
– ADA – Reasonable Accommodation
– Pregnancy Discrimination – New Guidelines
– Reduction in force – protecting older workers
– Leaves of absence
– Background checks – criminal checks [ban the box
legislation]
– Gay, lesbian, bisexual and transgender issues under
Title VII
EEOC
• Trucking Industry Emphasis
• Diversity efforts – hiring women and minorities
• Expanded recruiting
• Companies need to expand sponsorship of Women in
Trucking
• Create or continue “Diversity Days” initiatives
– Bring together community and good faith placement agencies
and human resource personnel to promote minority hiring
• Provide training to managers
– Identify and remove unintentional barriers to hiring women and
minorities into dockworker and driver positions
EEOC
• EEOC v. New Prime, Inc.
– Filed case in 2011 – same sex only training policy
– In response to 2003 harassment lawsuit, New Prime
instituted policy that all female trainees were to be trained
by females
– Discriminated against female applicants for truck driving
positions because of their sex
– Very few female trainers
– Female trainees had to wait extended periods of time
for female trainer – not so for male applicants
– Resulted in most female drivers being denied
employment
EEOC
• New Prime
– Policy suspended in March 2013
– EEOC contends that Prime should seek to prevent
sexual harassment through training and
enforcement of anti-discrimination laws and not by
segregating men and women
– August 14, 2014 US District Court ruling:
– Prime's same sex policy was the company's standard operating
procedure and is facially discriminatory resulting in disparate
treatment of female applicants and drivers.
Additional Employer Duties under
FMCSR
• Entry Level Driving Training Requirements
(§380)
• Employer must ensure entry-level drivers received
training pursuant to Section 380
• Employer must place a copy of the driver’s training
certificate in his personnel or qualification file
• All records must be produced for inspection within two
business days if requested by FMCSA
• Must keep records entire period of employment plus 1
year after
Additional Employer Duties under
FMCSR
• Testing of Alcohol and Controlled Substances
(§382)
– Pre-hiring testing
• Employer must required a test for controlled substances
prior to the driver performing “safety-sensitive” functions
• Employer must have received verified negative test result
for the driver
• Employer may require alcohol testing
Additional Employer Duties under
FMCSR
• Testing of Alcohol and Controlled Substances
(§382)
– Post-accident testing: “As soon as practicable”
• Employer must test driver for alcohol:
– If there was a fatality
– If the driver received a citation within 8 hours of the accident and
the accident involved:
» Bodily injury to a person who immediately receives medical
treatment or
» One or more vehicles incurs disabling damage requiring the
vehicle to be towed
Additional Employer Duties under
FMCSR
• Testing of Alcohol and Controlled Substances
(§382)
– Post-accident testing: “As soon as practicable”
• Employer must test driver for controlled substances:
– If there was a fatality
– If the driver received a citation within 32 hours of the accident
and the accident involved:
» Bodily injury to a person who immediately receives medical
treatment or
» One or more vehicles incurs disabling damage requiring the
vehicle to be towed
Additional Employer Duties under
FMCSR
• Driver Disqualifications (§383)
– No employer may knowingly allow, require, permit
or authorize a driver to operate a CMV if the driver
does not have a current CDL or is disqualified from
driving due to conduct
– Imposes duty on employer to run current DMV
checks on their drivers (in qualification file)
Questions for Presenters?
Noelle M. Natoli-Duffy
Louis C. Klein
Foley & Mansfield, PLLP
Los Angeles, CA
[email protected]
Foley & Mansfield, PLLP
Los Angeles, CA
[email protected]
Employment Issues to Consider in
Defending Trucking Cases
Wednesday, June 3, 2015
Thank you for Participating!
To access the PowerPoint presentation from this or any other IADC
Webinar, visit our website under the Members Only Tab (you must be
signed in) and click on “Resources”  “Past Webinar Materials,” or
contact Melisa Maisel at [email protected].