Teamsters.org reports that California truck drivers were awared $1.2
Ten California port truck drivers who haul cargo for Best Buy, Puma and Lowe’s have been awarded more than $1.2 million by the California Labor Commissioner for wage theft due to misclassification as independent contractors.
The decision orders K&R Transportation, which was purchased by NFI Industries in 2017, to pay the drivers for unpaid wages, unpaid meal and rest breaks and illegal paycheck deductions based on claims filed in 2017. The company has until April 25, 2019, to either appeal or pay the drivers the amounts owed; if they do neither, then the decisions will become final judgments. If final judgments go unpaid, K&R’s customers could be held liable for future claims under California’s new joint liability law, Senate Bill 1402.
Click on the links below to read:
- Fact sheet regarding the April 2019 Order, Decision, and Awards against K&R Transportation;
- CA Labor Commissioner’s Order, Decision, and Awards;
- Fact sheet on the history of lawlessness at the California Cartage family of companies, which were purchased by NFI Industries, at the Ports of LA/Long Beach;
- Summary of the Labor Commissioner’s decisions at the Ports of LA/Long Beach.
Read the full story at California Port Truck Drivers Awarded Over $1.2 Million for Wage Theft | Teamsters
The Order of the Labor Commissioner determined that the workers were employees and not independent contractors by reviewing the Borello factors. The order states:
C. Working Relationship of the Parties – Employee or Independent Contractor
As the Labor Commissioner’s jurisdiction is limited to disputes between employees and employers, the first matter to be resolved is whether Plaintiffs were Defendant’s employees or independent contractors.
Since the California Labor Code does not define “employee,” courts generally apply the common law test to distinguish between employees and independent contractors. See Estrada v. FedEx Ground Package Sys., Inc., 154 Cal. App. 4th 1, 10 (2007). Under the common law, “[t]he principal test of an employment relationship is whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired.” S. G. Borello & Sons, Inc. v. Dep ‘t of Indus. Relations, 48 CaL3d 341,350 (1989); see also Futrell v. Payday Cal., Inc., 190 Cal. App. 4th 1419, 1434 (2010).
However, the putative employer’s right to control work details is not the only relevant factor and the control test cannot be “applied rigidly and in isolation” since the right to control factor “is often of little use in evaluating the infinite variety of service arrangements,” Borello, 48 Cal.3d at 350. Thus, a number of “secondary indicia” are relevant to the employee/independent contractor determinatior. Id. ‘These additional factors, which include the right to terminate at will, also include:
(a) whether the one performing services is engaged in a distinct occupation or business; (b) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; ( c) the skill required in the particular occupation; (d) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work; (e) the length of time for which the services are to be performed; (f) the method of payment, whether by the time or by the job; (g) whether or not the work is a part of the regular business of the principal; and (h) whether or not the parties believe they are creating the relationship of employer-employee.
Borello, 48 Cal. 3d at 350; see also Futrell, 190 Cal. App. 4th at 1434.
The Borello court listed additional factors (some overlapping or related to those outlined above) developed by other jurisdictions. These include:
(1) the alleged employee’s opportunity for profit or loss depending on his managerial skill; (2) the alleged employee’s investment in equipment or materials required for his task, or his employment of helpers; (3) whether the service rendered requires a special skill; ( 4) the degree of permanence of the working relationship; and (5) whether the service rendered is an integral part of the alleged employer’s business.
Borello, 48 Cal. 3d at 355.
The secondary factors “cannot be applied mechanically as separate tests; they are intertwined and their weight depends often on particular combinations.” Germann v. Workers’ Comp. Appeals Bd., 123 Cal. App. 3d 776, 783 (J 98.1). “[T]o determine whether a worker is an employee or independent contractor, a court should evaluate each service arrangement on its facts, and the dispositive circumstances may vary from case to case.” Ruiz v. Affinity Logistics Corp., 754 F .3d 1093, 1100 (9th Cir. 2014) (internal quotation marks and modifications omitted).
1. Right to Control
By statute, the question of control remains highly pertinent to the distinction between employees and independent contractors. Labor Code § 3353. As previously noted, a Defendant’s right to control need not extend to every possible aspect of the plaintiffs work for this factor to indicate the existence of an employee/employer relationship. The relevant question is whether Defendant retains “all necessary control” over the plaintiff’s performance of his job duties. Borello, 48 CaL3d at 3 57. In other words, “the fact that a certain amount of freedom is allowed or is inherent in the nature of the work involved does not change the character of the relationship, particularly where the employer has general supervision and control.” Air Couriers Int’l v. Employment Dev. Dep’t, 150 Cal. App. 4th 923, 934 (2007) (internal quotation marks omitted). Nevertheless, the statutory test of “control” may still be satisfied “even where ‘complete control’ or ‘control over details’ is lacking – at least where the principal retains pervasive control over the operation as a whole, the worker’s duties are an integral part of the operation [and] the nature of the work makes detailed control unnecessary[.]” Yellow Cab Cooperative, Inc. v. Workers’ Comp. Appeals Bd., 226 Cal. App. 3d 1288 (1991).
The testimony and evidence presented demonstrated that Defendant retained pervasive control over the drayage operation as a whole. K&R provides transportation services to its clients. Plaintiffs move cargo for K&R’ s clients. Plaintiffs do not have their own clients and do not know how much K&R charges its clients for the services Plaintiffs provide. K&R set the rates it paid Plaintiffs. Plaintiffs could not negotiate the rates as they were generally unaware of what they were being paid per movement until they were issued weekly settlement statements by K&R. Plaintiffs were unable to pick and choose which loads they wanted to move. Instead, K&R determined each Plaintiffs assignments and Plaintiffs performed the work that was assigned to them. K&R also installed GPS devices on the trucks to monitor Plaintiffs’ locations.
Defendant argues there are details of Plaintiffs’ work that were not under their control. For example, Plaintiffs generally set the days and hours they worked and decided when to take time off. Plaintiffs also determined their own routes for deliveries. Plaintiffs were able to reject offers to deliver loads. Plaintiffs did not have to wear K&R uniforms and could haul freight for other companies. Plaintiffs could also hire other individuals to drive their trucks and choose where to obtain truck maintenance and where to purchase fuel. Notwithstanding these assertions that Plaintiffs could control certain aspects of their work, the right-to-control test does not require absolute control. That Plaintiffs generally set their own schedule, for example, does not belie the fact that all Plaintiffs credibly testified to working regular schedules – generally 12 to 14 hours per day, five or six days a week. Such “regular schedules are consistent with employee status and reflect employer control.” Air Couriers Int’l, 150 Cal. App. 4th at 93 7. See also JKH Ente1prises, Inc. v. Department of Industrial Relations, 48 Cal.Rptr.3d 563 (2006) (finding drivers were employees even though they were “not required to work either at all or on any particular schedule”). In addition, there is “no inconsistency between employee status and the driver’s discretion on when to take breaks or vacation.” Air Couriers Int’l, 150 Cal. App. 4th at 937.
K&R’s claim that its failure to control the actual routes similarly falls short because “the simplicity of the work (take this [container] from point A to point B) ma[kes] detailed supervision, or control, unnecessary.” Air Couriers Int’l 150 Cal. App. 4th at 937. Hence, even if Defendant “lack[ed] … control over some parts of its [drivers’] jobs” it would not “counteract the extensive control it does exercise.” Alexander v. FedEx Ground Package Sys., 765 F.3d 981, 990 (9th Cir. 2014); see also Cotter v. Lyft, Inc., 60 F. Supp. ~d 1067, 1075-76 (N.D. Cal. 2015) (“a finding of employee status for a particular worker or group of workers does not require that the company retain the right to control every last detail”).
Likewise, although some Plaintiffs hired other individuals to drive their truck, this does not prevent a finding that Plaintiffs are employees. It is undisputed that Plaintiff Huaman had to get K&R’s approval to hire a driver and that K&R evaluated this driver’s performance by having him pass a driving test. The Ninth Circuit has held that, “where drivers ‘retain[ ] the right to employ others to assist in performing their contractual obligations,’ but the company had to approve all helpers, this [i]s indicative of control of the details of the drivers’ performance under California law.” Alexander, 765 F.3d at 994 (quoting Narayan, 616 F.3d at 902); see also, Ruiz, 754 F.3d at 1102-03 (considering that “[the defendant] retained ultimate discretion to approve or disapprove of those helpers and additional drivers”). This is true even if “approval [i]s largely based upon neutral factors, such as background checks required under federal regulations,” because a driver’s “unrestricted right to choose these persons … is an ‘important right [that] would normally inure to a self-employed contractor.”‘ Alexander, 765 F.3d at 994 (quoting Borello, 256 Cal.Rptr. 543, 769 P.2d at 408, n. 9).
Finally, Plaintiffs are an integrated part of K&R’s business because they perform the core activity of delivering cargo. Thus, despite “purporting to relinquish” some control to Plaintiffs, K&R “retained absolute overall control” over the key parts of the business and the statutory control test is satisfied. See Borello, 48 Cal.3d at 355-56, 256 Cal. Rptr. 543, 769 P.2d 399. (See also JKH Enterprises, 48 Cal.Rptr.3d at 579 [” … the functions performed by the drivers, pick-up and delivery of papers or packages and driving in between, did not require a high degree of skill. And the functions constituted the integral heart of JKH’s courier service business. By obtaining the clients in need of the service and providing the workers to conduct it, JKH retained all necessary control over the operation as a whole.”) (emphasis in original).
2. Secondary Factors
a. Distinct Occupation or Business ·
This factor weighs in favor of Plaintiffs. There was no evidence presented that Plaintiffs engaged in a separate business nor did Plaintiffs have their own clients. Rather, K&R obtained the clients who were in need of transportation services and provided the workers who conducted the services on behalf of K&R. Without drivers, K&R would not be able to operate their business. Given that the work Plaintiffs performed was wholly integrated into K&R’s operations, it cannot be found that Plaintiffs were engaged in distinct occupations or businesses from that of K&R.
b. Work Done Under Principal’s Direction
This factor is largely duplicative of the control factor. Harris v. Vector Marketing Corp. (N.D. Cal. 2009) 656 F.Supp.2d 1128, 1139. Although the task of driving is usually performed without supervision, this independence from supervision is inherent in the work itself given “that the simplicity of the work (take this [container] from point A to point B) ma[kes] detailed supervision, or control, unnecessary.” Air Couriers Int’l, 150 Cal. App. 4th at 937. Thus, this factor overwhelmingly favors Plaintiffs.
c. The Skill Required
This factor tips to Plaintiffs because a significant level of expertise or specialized skill is not required for the job of truck driving. Although Plaintiffs’ work requires a Class A Commercial Driver License, little other experience or skill is required. See Yellow Cab Cooperative, Inc. v. Workers’ Comp. Appeals Bd., supra, 226 Cal. App.3d at p. 1299 (the skill required on the job is such that it can be done by employees rather than specially skilled independent workmen.” [Citations omitted.])
d. Whether the Principal Supplies the Instrumentalities, Tools, and Place of Work
Plaintiffs credibly testified that they signed their lease agreements with K&R employees. K&R did not dispute supplying the trucks necessary for Plaintiffs’ work by arranging for truck leases. As such, this factor weighs-in Plaintiffs’ favor. See Ruiz, 754 F.3d at 1104 (holding that, where “Affinity supplied the drivers with the major tools of the job by encouraging or requiring that the drivers obtain the tools from them through paid leasing arrangements,” this factor favored employee status).
e. Investment in Equipment or Material
Although K&R arranged the truck leases, Plaintiffs made an investment in the equipment used to transport goods for K&R’s clients. Plaintiffs either currently own and operate their truck to earn a living or sold their trucks at a profit. There was no evidence presented that K&R ever had an ownership interest in Plaintiffs’ truck. Thus, this factor favors K&R. Plaintiffs reliance on Santa Cruz Transportation, Inc. v Unemployment Appeals Bd., 235 Cal.App.3d 1363 (1991) for the proposition that a fixed lease payment does not “constitute an entrepreneurial contribution by [a worker]” is misplaced. Unlike the Plaintiffs in this case, in Santa Cruz, the worker in question – a taxi cab driver – had no ownership interest in the vehicle they drove and instead leased a cab for 12-hour shifts set by the putative employer so that the employer could lease the cab to more than one driver in one day.
f. The Length of Time for Performance of Services and Degree of Permanence
The length of time for performance of services favors plaintiffs. While the independent contractor agreements entered into by Plaintiffs and K&R were purportedly for discrete periods, Plaintiffs testified that they signed such agreements from the commencement of their relationship with K&R. Given that the length of the relationships between K&R and Plaintiffs ranged anywhere from one to 17 years and that Plaintiffs regularly worked an average of 10 to 14 hours per day, five to six days per week for K&R, the lack of actual long-term contractual arrangements is given little weight. The regularity of their work and the length of time for which Plaintiffs performed services for K&R demonstrates that Plaintiffs were not contracted for a specific job or period and is indicative of relationship that is commonly associated with employment.
[T]he length an indefinite nature of [Plaintiffs’] tenure with [K&R]… point toward an employment relationship …. This was not a circumstance where a contractor was hired to perform a specific task for a defined period of time. There was no contemplated end to the service relationship at the time that [Plaintiffs] began working for [K&R].
Narayan, 616 F.3d at 903; see also Antelope Valley Press. v. Poizner, 162 Cal. App.4th 839, 75 Cal.Rptr.3d 887, 900 (2008) (“[T]he notion that an independent contractor is someone hired to achieve a specific result that is attainable within a finite period of time … is at odds with carriers who are engaged in prolonged service to [an employer].”); Air Couriers Int’l, 150 Cal. App. 4th at 929 Air Couriers Int’l, 150 Cal. App. 4th at 926 (holding that, where many drivers had worked for “years,” these “lengthy tenures” were “inconsistent with independent contractor status”) ..
g. The Method of Payment
The method of payment is neutral. K&R paid Plaintiffs a predetermined piece rate per load. While such a pay structure can reasonably be associated with an independent contractor operating his own business, it is also one associated with an employee working on a piece rate basis as piecework payments are another way for employers to control their workers. Borello, 48 Cal.3d at 357 (piecework payment formula ensured diligence and quality control). Moreover, in this case, K&R determined the rates, not Plaintiffs, as is typically the case in an employer-employee relationship. “[W]here, as here, there is ample independent evide11ce that the employer has the right to control the actual details of the [employee’s] work … , the fact that … the employee is paid by the job rather than by the hour appears to be of minute consequence.” Tiebergv. Unemployment Ins. App. Bd.(1970) 2 Cal.3d 943, 953; see also Germann v. Worker’s Comp. Appeals Bd., 123 Cal.App.3rd 776, 787 (1981) (“[P]ayment may be measured by time, by the piece, or by successful completion of the service, instead of a fixed salary, and still constitute employee wages if other factors indicate an employer-employee relationship.”)
h. Opportunity for Profit or Loss Depending on his Managerial Skill
If the individual’s “opportunity for· profit or loss appears to depend more upon the managerial skills of [the alleged employer]… than it does upon the [individual’s] own judgment and industry,” this factor weighs in favor of employee status. See Real v. Driscoll Strawberry Assocs., Inc., 603 F.2d 748, 755 (9th Cir. 1979). Plaintiffs’ compensation was based on a piece rate established by K&R. K&R controlled the work assignments and thus Plaintiffs’ workload. While there was some testimony presented that a group of drivers got together and demanded some_ type of help when the ports were completely congested, there was no evidence presented that Plaintiffs were able to negotiate the rates they were paid by K&R. Even if Plaintiffs were able to negotiate an increase, the ability to obtain a discretionary pay raise is not the type of profit-maximizing “managerial skill” that is characteristic of independent contractor status as there is little difference between that and an employee negotiating a pay raise during an annual review or when job duties change, for example. Additionally, testimony was presented that Plaintiffs received “bad” work or no work as a consequence of rejecting loads. It is evident then that Plaintiffs’ opportunity to earn more compensation was largely dependent on the jobs K&R assigned and how much K&R decided to pay for the jobs. These restrictions favor Plaintiffs’ position that they are employees.
K&R argues that Plaintiffs could have hired more drivers to work more hours or “could have made the choice to · haul freight for other companies” to suggest that Plaintiffs’ could change their “bottom lines.5”
As previously noted, it is undisputed that K&R retained the discretion to approve or disapprove of individuals Plaintiff drivers could have hired. Consequently, Plaintiffs “opportunity” to affect their bottom lines by hiring more drivers is largely illusory. Suggesting that Plaintiffs haul for other companies as a way to change their bottom lines also misses the mark. What is important is Plaintiffs opportunity for profit or loss while driving for K&R, not for other companies. The opportunity for profit or loss exists at all times for most individuals, whether an employee or an independent contractor, if the focus is simply performing services for “other companies.”
i. Parties’ Belief
The agreement signed by the parties expressly identifies the relationship as one of an independent contractor, and read as a whole disclaims any authority on K&R’ s part to direct Plaintiffs as to the manner or means of their work: This, however, is belied by K&R’s procedures, which in fact allow K&R to control significant aspects of Plaintiffs’ work, and it therefore provides only limited insight into the Plaintiffs’ state of mind. Ultimately, though, “neither [K&R]’s nor the drivers’ own perception of their relationship as one of independent contracting” is dispositive. See JKH Enters., 142 Cal. App. 4th 1046, 1064; See also Borello, 48 Cal. 3d at 349 (“The label placed by the parties on their relationship is not dispositive, and subterfuges are not countenanced.”)
As discussed above, all the factors weighed and considered as a whole establish an employment relationship and it is found that K&R failed to meet its burden of proving that Plaintiffs are independent contractors. K&R retained all necessary control over the operation as a whole, and Plaintiffs’ services were an integral part of K&R’ s business. Substantial evidence supports the finding that Plaintiffs were functioning as employees rather than as true independent contractors.
Source: Zelaya v. K&R Transportation