Employment Issues to Consider in Defending Trucking Cases...Jun 03, 2015 · –All time...

Employment Issues to Consider in Defending Trucking CasesWednesday, June 3, 2015

Presented By the IADC Transportation Committee

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Presenters

Noelle M. Natoli-Duffy Foley & Mansfield, PLLP

Los Angeles, CA

[email protected]

Louis C. Klein Foley & Mansfield, PLLP

Los Angeles, CA

[email protected]

mailto:[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


Whether an individual is an employee or a contractor is a legalquestion 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


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.


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.


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 IssuesEstrada 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 practicePosting on company website


• 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


• “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


Overall…

An Independent Contractor Relationship is MoreLikely 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


Overall…

An Independent Contractor Relationship is LessLikely 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


• 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


• 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)


• 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...”



• 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”



• 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



– 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.)


So… what does all of that mean???

–Definitions (§395.2)

• On-duty time versus off-duty time


• 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”


• 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


• 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


• 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


• 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. 9-2001 (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 FAAAApreempted 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 Diltsdecision

• 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 non-priority 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


• 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



– 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



– 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


• 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 Foley & Mansfield, PLLP

Los Angeles, CA

[email protected]

Louis C. Klein Foley & Mansfield, PLLP

Los Angeles, CA

[email protected]



Employment Issues to Consider in

Defending Trucking Cases

Wednesday, June 3, 2015

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Employment Issues to Consider in Defending Trucking Cases...Jun 03, 2015 · –All time...

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Transcript of Employment Issues to Consider in Defending Trucking Cases...Jun 03, 2015 · –All time...