Department of Labor Actions Are a Warning to Trucking Companies

The debate over what constitutes an employee and independent contractor in the trucking industry continues to develop. Recent actions by the U.S. Department of Labor only add to the discussion and make the landscape even more volatile than it has been in the past. The DOL went after an Alabama trucking company for having classified people working for them as independent contractors when the DOL thinks those employees should have been classified as actual employees.

Why does this matter to the average trucking company? Because state and federal laws differ and put specific demands on how employers should treat employees. If a company uses independent contractors to conduct their business they can negotiate the price for service up front, avoid paying minimum wage standards, deny required break times, and hire or fire the contractor at will.

Working arrangements such as these have driven employees of trucking companies to courtrooms across the country to be classified as employees, not independent contractors. Workers are looking for back pay, compensation for missed benefits, and a clear understanding going forward that they are actual employees and not independent contractors. But the outcomes of these lawsuits has been mixed.

Conflicting Outcomes

Earlier this year a federal judge struck down an attempt by the Massachusetts’ Attorney General  to make a trucking company classify their independent contractors as employees. Under Massachusetts state law, it was quite clear that the way this company used their independent contractors should have made them employees. But the court in its decision decided that the Federal Aviation Administration Act preempted state law on how the employees would be classified because reclassifying them would necessarily impact how much money the company charged its customers, classified their routes, and conducted their interstate business.

But this decision conflicts with recent decisions out of California and elsewhere. In California two major cases declared that companies using independent contractors misclassified their contractors and should have classified them as employees. This cost the companies involved millions in legal fees and back payments, and requires them to classify their workers as employees going forward. And companies like FedEx and Uber are facing similar problems.

Dept of Labor Actions and Planning Going Forward

With these decisions in the backdrop, the DOL recently fined an Alabama trucking company for misclassifying their independent contractors. In addition to this, the DOL published a memo that warns companies going forward on their practices for classifying independent contractors improperly. The memo lays out the agency’s interpretation of what an independant contractor is and is not, and warns companies of the consequences for violating their view of the law.

What does this mean for your company? If you use independent contractors as part of your business you will need a plan to ensure that you are on the right side of the law. At Anderson and Yamada, P.C., we are here to serve your company’s needs. When it comes to regulatory and legal compliance we can advise you and defend you in all aspects of federal and state law. Contact us so we can be part of your team and serve your company.

California Labor Law Class Action Moves Forward

Certain FedEx line-haul drivers were certified as a class by a federal judge recently in their suit to be compensated under California’s labor laws related to breaks, unpaid work, and other violations. In Taylor v. FedEx Freight, Inc., Case No. 13-cv-1137-LJO-BAM (E.D.Cal. 2015), the court granted the plaintiff’s motion for certification, and the case will proceed as a class action lawsuit for violation of state labor laws.

This ruling comes on the heels of a lawsuit against FedEx for misclassifying employees as independent contractors under California’s labor laws. That case settled out of court for $228 million. Both of these suits should serve as a cautionary tale for trucking companies and how they deal with state labor laws in the ever evolving legal landscape involving delivery companies.

History of the Case

This case involves line-haul drivers who have worked for FedEx since 2012 in California. Their complaint surrounds how the company’s compensation system interacts with California labor laws. Under the company’s compensation system, line-haul drivers are paid by the mile for the freight that they deliver. According to the company, that system necessarily includes compensation for things like break and non-driving work such as placarding, paperwork, and inspections.

But at least some of the company’s drivers disagree. Their main complaint is that because they are paid by the miles they drive, they are not given the paid breaks required by California law, and they are not paid for non-driving work that they are required to do by the company.

Laws Affecting Driver’s Claims

California Labor Code §§ 1194, 1197, 226.7 requires companies to compensate their employees for all the time they are required to work, and provides that employees are entitled to a certain amount of paid breaks every day. The line-haul drivers in this case are seeking back-payment for all the time they worked since 2012 but were not paid as required by the state’s law.

While the company rejected these claims for unpaid work, they further argued that the Federal Aviation Administration Authorization Act preempts the claim. The FAAAA preempts state laws that deal with motor carrier’s routes, prices, or services. But, as the judge pointed out in his opinion, under recently decided 9th Circuit law, the FAAAA does not apply to a state’s meal and rest break laws. That recent development in the 9th Circuit will change how interstate companies deal with state labor laws within the 9th Circuit Court of Appeals’ jurisdiction.

State Labor Laws Continue to Affect Interstate Trucking Companies

This case and others that continue to be filed against trucking companies should put the industry on notice. State labor laws do affect how trucking companies do business from state to state, and it is important to stay up-to-date on all of the developments. Not understanding how state laws interact with federal laws, and how both are being interpreted by the courts, could land a company in a deep financial mess.

At Anderson and Yamada, P.C., our practice is dedicated to understanding and applying developments in trucking laws to help your company thrive and grow. Contact us so we can serve you and your company.

The Federal Aviation Administration Authorization Act and Preemption

A much anticipated case from the U.S. District Court for the District of Massachusetts that may have an impact on how the FAAAA is interpreted in the future was recently released. In Massachusetts Delivery Association v. Coakley the district court faced the task of ruling whether Massachusetts’ state law involving independent contractors was preempted by the Federal Aviation Administration Authorization Act.

The Massachusetts law in question requires companies using couriers in Massachusetts to designate their couriers as employees, not independent contractors. The couriers would rather be treated as employees because that designation brings with it protections and benefits that independent contractors do not enjoy. But shipping and transport companies prefer to employ independent contractors because doing so reduces overhead, costs, and other liabilities.

Background of Case and FAAAA Provisions

An association representing delivery companies in Massachusetts challenged the application of the state law as applied to delivery and shipping companies. In 2013 a U.S. district court judge ruled against them, but after a 1st Circuit Court of Appeals reversed, the court now finds that the FAAAA does preempt application of the state law dealing with independent contractors.

The FAAAA explicitly states that state law is preempted where the law is “related to a price, route, or service of any motor carrier …. with respect to the transportation of property.” 49 U.S.C. § 14501(c)(1). Preemption of state law means that it will not apply to a motor carrier when it deals with price, routes, or services.

In its decision, the court took a broad view of what the state law did. The Massachusetts law that required these companies to designate their delivery contractors as employees did not, on its face, relate to price, route or service. But according to the court, the law did have a logical and indirect effect on price, routes, and services. Because if these delivery companies were required to hire their contractors as employees, the price the service they provide would go up, some routes would be affected, and service would surely be impacted on some level. As a result, the court held that the FAAAA did preempt application of the Massachusetts law.

Impact of Decision and Comparisons

This is an oft litigated area of the law when it comes to motor carriers and state regulations. For example, in 2014 the 9th Circuit Court of appeals ruled that California laws regarding mandatory breaks for truckers were not preempted by the FAAAA. What results is a split in reasoning among the several courts as to what is preempted by the FAAAA and what is not.

The impact this particular decision will have on future FAAAA rulings and state law is not yet clear. But it is a victory for trucking companies because it further establishes federal laws and regulations as the superseding rules when it comes to interstate commercial shipping. That is the purpose of the FAAAA, Carmack Amendment, and other regulations: to ensure that companies dealing in interstate commerce do not have to worry about compliance with 50 different set of laws and rules as they seek to transport America’s goods throughout the country.

When it comes to your company’s legal needs, we can help. At Anderson and Yamada, P.C. we are dedicated to your industry. Contact us so we can help you navigate the intricacies of the FAAAA, Carmack Amendment, and other rules affecting trucking companies. Our practice is dedicated to meeting the needs of your company as you seek to thrive and grow.

3rd Circuit Court of Appeals Issues Precedent on Trucking Overtime Rules

The 3rd Circuit recently clarified a rule that has had some trucking companies perplexed. In Ashley McMaster v. Eastern Armored Services, Inc., Case No. 14-1010(3rd Cir. 2015) the federal appeals court for the Third Circuit defined when the overtime rules of the Fair Labor Standards Act (or FLSA) applies to truck drivers, and when it does not. The FLSA requires employers to pay their employees time-and-a-half for every hour they work over 40 hours in a work week.

There are exceptions to this rule, however. One of those exceptions (known as the Motor Carrier Act Exemption)   was a primary issue in this case. The exception at issue is found at 29 U.S.C. § 213(b)(1). That part of the code states that employees whose maximum hours of service are established by the Secretary of Transportation do not fall under the FLSA overtime rule. That essentially means that truck drivers for motor carriers are not required to be paid overtime when they work over 40 hours in a week.

But there is also an exception to that exception. In 2008 Congress passed a law known as the Corrections Act of 2008. This law made drivers of trucks weighing 10,000 pounds or less eligible for overtime pay when they drove for more than 40 hours in a week.

The Issue

The case presented an interesting issue for the court to decide. The plaintiff in the case worked for an armored trucking company where 51 percent of the time she was assigned to drive a truck that weighed more than 10,000, and 49 percent of the time she drove a truck weighing less than 10,000 pounds. The employer did not pay the employee overtime when she worked more than 40 hours in a work week. As a motor carrier, the company felt they and their employees were part of the Motor Carrier Exemption to the FLSA.

The employee did not agree. When she left her company she sued to recover the overtime she felt she was entitled to. The issue for the court was whether the Corrections Act exception applied to her or not.

The Ruling

In its decision the court ruled that the employee was entitled to the overtime. According to the court, the Corrections Act exception applied because the employee spent at least part of her time driving a truck that weighed less than 10,000 pounds. The court reasoned that the text of the exception enacted by Congress was unambiguous, and therefore should be enforced as written. And the text of the law clearly states that the Motor Carrier Act Exemption to the FLSA does not apply to drivers driving trucks that weigh less than 10,000 pounds. There was no additional exceptions to the law regarding percentages of types of trucks driven.

Conclusion

No matter what section of the trucking industry your business is a part of, you will run into questions about how different rules and regulations apply. This decision, like many others, will change the way many trucking companies approach their business. The attorneys at Anderson and Yamada are trucking industry lawyers whose advice will help guide and direct your business decisions based on trucking law.

Court of Appeals Strictly Construes the Oregon Owner-Operator Exemption

 

Owner Operator

The Oregon Court of Appeals recently issued its decision in 3P Delivery, Inc. v Employment Department Tax Section, 254 Or.App. 180 (2012), clarifying the application of ORS 656.047, generally referred to as the “owner-operator” exemption. That decision requires any motor carrier using owner-operators and seeking to apply ORS 656.047 to carefully review its method of operating and make changes as may be required. Motor carriers that use owner-operators can benefit from the owner-operator exemption provided certain requirements are met, but the Court of Appeals decision requires strict compliance. ORS 656.047 provides in part:

(1)  As used in this chapter, “employment” does not include:

. . . . .

(b)  Transportation performed by motor vehicle for a for-hire carrier by any person that leases their equipment to a for-hire carrier that personally operates, furnishes and maintains the equipment and provides service thereto.

(2)  For the purposes of this chapter, services performed in the operation of a motor vehicle specified in subsection (1) of this section shall be deemed to be performed for the person furnishing and maintaining the motor vehicle.

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