Truck Law

A Transportation Law Blog from TransportationAttorneys.NET

Month: November, 2016

9 Things Trucking Companies Do to Get Sued (Employment Law)

by gspencermynko

Here’s a list of 9 mistakes a trucking company can make that can end up causing a lawsuit. This list focuses on Employment Law – Please read this carefully and ask yourself how your company stacks up.

1. Classifying employees as exempt when they are not.

Many employers will classify employees as “exempt” from overtime requirements and meal and rest break requirements. This is a very dangerous prospect for trucking companies. An exempt employee is normally someone who is a high-level executive, administrative or professional employee. There are also certain other exceptions. Notably, “Over the road” truck drivers generally are exempt from overtime. Outside of drivers and high level administrators and corporate executives, most employees are non-exempt. Therefore, an employer can get into big trouble for penalties for failure to pay overtime, additional wages for failure to provide meals and rest breaks, failure to pay all wages at termination and back pay for overtime. The employer can further be liable for not providing accurate wage statements.

The bottom line is to make sure you know which employees are exempt and nonexempt.

2. Lax Enforcement of lunch breaks.

Employees must be provided with at least a 30 minute, unpaid, off duty meal if they are employed to work for a period of more than five hours. The meal must be provided no later than by the end of the employee’s fifth hour of work. Failure to provide the meal break in this time frame can result in one additional hour of wages being owed to the employee.

3. Not having harassment and discrimination policies in place.

Employers have an affirmative duty to take reasonable steps to prevent and promptly correct harassing conduct. Furthermore, the law presumes that when a supervisor is aware of the harassment, the company is also aware and has a duty to correct the problem. California employers are required to instruct supervisors to report any complaints of misconduct to a designated company representative, such as an HR manager, so the company can try to resolve the claim internally. Make sure your internal policies are up-to-date so you can avoid discrimination and harassment lawsuits.

4. Terminating an employee who takes a leave of absence.

Employees have legal protection when they’re away from work for various reasons, including Worker’s Compensation, disability, pregnancy, family and medical leave, military leave, jury duty and many more. Furthermore, California employees have the right to accrue and use paid sick leave. The laws of California provide protection from retaliation for taking leave – the employer cannot wait and terminate the employee once he or she returns to work. If the company terminates an employee while the employee is on protected leave, or soon after the employee returns to work, the burden of proof will shift to you to prove that the termination was for a legitimate, non-discriminatory business reason, unrelated to the protective leave.

5.  Withholding final payment when employees do not return company property.

An employer is not, I repeat not, entitled to hold a final paycheck until items such as laptops, cell phones, uniforms, tools, etc. are returned. Furthermore, final paycheck deadlines carry a hefty penalty if the deadline is not met. There are no exceptions. Do not let yourself fall into this trap.

If an employee is terminated or quits and gives at least 72 hours notice, the employee’s final check must be ready on the last day of work. If an employee quits without giving at least 72 hours notice, a company has 72 hours to prepare the final check. If the employer does not provide the final check to the employee, waiting time penalties start accruing. The penalty is one day of wages for every day that the check is late up to 30 days.

6. Thou shall not make illegal deductions.

California Labor Code section 224 permits deductions authorized by law and those authorized by the employee for benefits such as health insurance or benefits. No other deductions are permitted.

One example of an illegal deduction is for a loan made to an employee, with loan payments deducted from the paycheck. This is an illegal deduction. If you loan an employee money, you should have the employee sign a promissory note and have that reviewed by a lawyer. The employee should then make payments to you according to the specified payment schedule.

7. Do not rely on noncompete agreements to protect confidential information.

Generally speaking, noncompete agreements are prohibited in California, with only a few exceptions. There are ways to protect trade secrets, such as customer lists and pricing information, however, the law is very strict in this regard and this requires careful compliance.


8. “Use it or lose it” vacation policies are illegal in California.

If an employee has accrued vacation, it is considered a form of wages and cannot go away. Employers can place a reasonable cap on the accrual of vacation, but you cannot take away what the employee has already accrued. All accrued and unused vacation must be paid out at termination at the current rate of salary. There is no limit on how far back in time the employee can make a claim for unused vacation. Generally speaking, it is safe to cap vacation accrual for up to 20 days per year. If this is what your company does, the accrual stops until such time as the employee takes vacation and falls below the cap.

9. Thou shall not misclassify employees as independent contractors.

Anyone who has read my articles for any period of time knows how problematic this can be. Furthermore, I know how an independent contractor can be quite happy with his 1099 until a Worker’s Compensation claim, unemployment insurance, disability insurance, or paid family leave becomes an issue. Furthermore, the FTB or IRS  may get wind that the independent contractor has not been making his or her quarterly payments, and owes lots of money but can’t be found or has no assets. A situation like this makes the employer a ripe target.
While I realize this is not a complete or comprehensive list of prohibited behavior, it would behoove your company, no matter how big or small, to consult with an experienced lawyer and make sure you have in place written policies and procedures to protect you from lawsuits. As always, the price of prevention is far cheaper than the price of a cure.

Will a Trump Administration Breathe New Life into the Independent Contractor Business Model?

by gspencermynko

The Obama Administration came down hard on Independent Contractor Misclassification by utilizing enforcement initiatives through the US Department of Labor and the IRS.
During Obama’s administration, the Federal Government entered into a Memorandum of Understanding (MOU) with a number of states, including California. This “misclassification initiative”  between the US Department of Labor and the state governments that signed off on the MOU essentially created a free flow of information between federal agencies like the IRS and US Department of Labor, and their state counterparts, like the Franchise Tax Board(FTB),  California Department of Labor Standards Enforcement (DLSE), and Employment Development Department (EDD). So what happened was if, for example, California’s EDD audited a trucking company for misclassifying their drivers as independent contractors, EDD would share that information with the IRS or other federal agencies. Likewise, if the IRS were to audit a California trucking company and determine that the drivers were misclassified as independent contractors, it would share their findings with the relevant California tax and labor departments (FTB, EDD, DLSE).
Now that a Republican administration will be taking over the White House, a new Secretary of Labor will be appointed and it is likely that the United States Department of Labor may back off their enforcement efforts regarding the misclassification of truck drivers as independent contractors.  Hence, we may see the IRS and US Dept. of Labor to become significantly less aggressive in their pursuit of trucking companies who classify drivers as Independent Contractors. However, states are somewhat independent when it comes to cracking down on independent contractor misclassification, and we therefore can expect the state of California to continue its aggressive targeting of trucking companies that misclassify drivers as independent contractors. 
But is there hope for the IC business model in CA? 
There is a pending Federal Court case case in the Southern District of California challenging the ability of California’s Labor Commissioner to invalidate contracts between owner operators and motor carriers. On July 22, 2016 the California Trucking Association (CTA) filed a lawsuit against the California Labor Commissioner, Julie Su, challenging her use of California state law to reject contracts between owner operators and motor carriers. The thrust of CTA’s argument is that Congress deregulated interstate trucking with the enactment of the Federal Aviation Administration Authorization Act (FAAAA) , and therefore preempted the use of any state law which would impact how motor carriers provide services. According to court documents, “The CTA seeks a declaration that the FAAAA preempts the Commissioner’s use of California State law – as embodied in the Borello test – as a basis to ignore the written contractual agreements between owner-operators and motor carriers. S.G. Borello & Sons, Inc. v. Dept. of Industrial Relations, 48 Cal.3d 341 (1989).” CTA goes on to assert that the United States Supreme Court “determined under the FAAAA: ‘(1) that state enforcement actions having a connection with, or reference to, carrier rates, routes, or services, are preempted; (2) that such pre-emption may occur even if a state law’s effect on rates, routes, or services is only indirect; (3) that, in respect to pre-emption, it makes no difference whether a state law is consistent or inconsistent with federalregulation; and (4) that pre-emption occurs at least where state laws have a significant impact related to Congress’ deregulatory and pre-emption related objectives.”  While I will not provide an extensive legal analysis of their arguments, the CTA contends that The FAAAA prohibits California from disrupting the enforcement of the contractual arrangements between owner-operators and motor carriers and mandating the use of employee drivers instead of owner operators .
The CA Labor Commissioner disagrees.
The thrust of the California Labor Commissioner’s repsonse to the CTA is that the FAAAA does NOT preempt California Law regarding whether a driver is an Independent Contractor or Employee (“There is not a single decision of the United States Supreme Court construing the FAAAA…to preempt a generally applicable state wage and hour law that is applied by a state to motor carriers”). The Labor Commissioner goes on to state “CTA seems to think by entering into a contract that designates a driver as an independent contractor, a motor carrier magically obtains FAAAA immunity from all of those state laws…every
one of which protects persons who are employees under California law (whether
designated as such by their employers or improperly classified by their employers as independent contractors).” Again, without doing an in-depth analysis, the California Labor Commissioner, in their attempt to have CTA’s case dismissed, is asserting that the state is free to determine who is an Independent Contractor without the interference of the Federal Government.
(As of the writing of this article, the Federal Court has yet to issue a decision on this matter)
So what does this have to do with Donald Trump?
At the moment maybe nothing. However, this is a case being brought in federal court and I think it’s a fair statement to say that the Trump administration would be sympathetic to the CTA’s position and hostile to the California Labor Commissioner’s position. Would the Trump administration insert itself into this controversy by lending legal support to the CTA? If Trump appoints a new Supreme Court Justice to break the current 4-4 tie, could this case end up appealed all the way to the United States Supreme Court? Alternatively, could president Trump and the Republican controlled Congress enact new laws expanding the federal policy of Deregulation in trucking and ultimately block California’s aggressive targeting of trucking companies who utilize independent contractor drivers.
Of course, I have no idea what might happen and all of this is simply fun speculation.  That said, I’m going to be keeping an eye on CTA v. Julie Su , Case No. 16-CV-1866- CAB-MDD, to see how things turn out. Stay tuned.

Federal Court Rules Charging O/Os for Satellite Communications System is an Unlawful Usage Fee

by gspencermynko

A recent Federal Court of Appeals case ruled that Independent Contractors cannot be required to pay a $15 weekly usage fee to use the motor carrier’s satellite communications system

In Fox v. TransAm Leasing, Inc., The 10th circuit Court of Appeals ruled that the $15 usage fee violates 49 CFR section 376.12(i) which precludes a motor carrier from requiring an independent contractor to “purchase or rent any products, equipment, or services from the authorized carrier as a condition of entering into the lease agreement.” In this particular case, the plaintiffs, three independent owner operators, represented themselves in a class of similarly situated truck drivers.  They sued defendant TransAm Trucking Inc. and TransAm Leasing Inc. claiming that The defendant violated the Department of Transportation’s truth in leasing regulations by requiring the independent contractors, who lease their trucks and driving services to TransAm, to pay TransAm $15 each week to use their satellite communication system.
Truck drivers who entered into independent contractor agreements (ICAs) with TransAm Trucking filed a class complaint on Nov. 1, 2012, against TransAm Trucking and TransAm Leasing Inc. in the U.S. District Court for the District of Kansas.  The plaintiffs alleged that TransAm violated the Kansas Consumer Protection Act by making false representations to the truckers to entice them to contract with TransAm.  The plaintiffs also brought 13 claims alleging that the terms of TransAm’s agreement violated the U.S. Department of Transportation’s truth-in-lending regulations.  TransAm brought counterclaims alleging that the truckers breached their contracts with TransAm.
The District (lower) Court granted class certification as to the plaintiffs’ claim that TransAm violated the truth-in-lending regulations by requiring the truckers to pay TransAm $15 each week to use TransAm’s satellite communications system.  The system provided a means of communication between the carrier and the truckers, route planning, keeping automated records of drivers’ hours and state fuel taxes and monitoring the temperature of any refrigerated trailer being hauled.

By holding that TransAm violated the no forced purchase provision of the federal leasing regulations, the court walked a fine line between characterizing the satellite system usage as a forced purchase of services, as opposed to a negotiated allocation of operational costs. Interestingly, the court rejected the rationale in OOIDA v. Mayflower, which found that a motor carrier may pass through or allocate the cost of its auto liability insurance to owner operators so long as the carrier does not profit from the transaction. The Court nevertheless acknowledged the difference between a forced “purchase” of services or products (on one hand) and the negotiated allocation of operational costs (on the other hand). So, the Court arguably left the door open for continued reliance on the rationale underpinning Mayflower when a carrier allocates or transfers some of its operational costs to owner-operators, regardless of whether those costs relate to required insurance, so long as the allocation is properly documented.
No Real Victory for the Truck Drivers
Even though the Court of Appeals held TransAm violated the no forced purchase provision of the federal leasing regulations, the Court still ruled in favor of TransAm because the owner-operators failed to present evidence of actual damages. This result seems consistent with the conclusion disgorgement of the charges for an unlawful forced purchase (i.e., $15 /week /owner-operator) is not the proper measure of damages. The end result is that TransAm’s conduct was illegal and the court ordered them to stop acting that way, but also ruled that the drivers suffered no actual monetary damages and dismissed their case.
Carriers who charge owner operators for satellite, electronic logbook documentation, or other services should review their independent contractor operating agreements to ensure that they include required disclosures and provide owner operators the freedom of choice when it comes to the purchase of services and products.
Independent Contractor v. Employee Driver
The other issue that crossed my mind that motor carriers should concern themselves with is that by requiring “Independent Contrators” to utilize these satellite services, the argument could be made that the carrier was exerting such a high degree of control over the driver that the ICs are really misclassified employee drivers. How’s that for a scare on Haloween?
Anyone involved in Trucking and Transportation should have their Independent Contractor Operating agreements reviewed by a competent Transportation Attorney to ensure their rights are protected and the contracts do not violate State or Federal Law.