Legal Developments On Sleeper Berth Claims, Dynamex Legislative Developments, and Non-Compete Agreements.

by gspencermynko

 

Judge says drivers should be paid for sleeper berth time

Trucking companies who utilize sleeper berth equipment for their drivers, will be interested in two recent legal cases. The Fair Labor Standards Act requires employers to pay a minimum wage to employees for all “hours worked.” Two federal district courts recently determined sleeper berth time logged in excess of eight hours per day is compensable and counts as hours worked. (Julian v. Swift Transport. Co. Inc. and Browne v. P.A.M. Transp., Inc). The basis for their reasoning was that over-the-road drivers are “on-duty” 24 hours per day. The judge said that drivers should be paid at least minimum wage for time spent off-duty and in their sleeper berths. The ruling doesn’t institute any new requirements for carriers, but it could open the door to lawsuits brought by drivers

The Ninth Circuit Court of Appeals and the U.S. District Court in Nebraska previously reached a different result. Those courts held sleeper berth time was not compensable hours of work unless the driver actually performed work in the sleeper berth, according to a U.S. Department of Labor regulation that specifically addresses the issue. Having to account for sleeper berth time obviously is a big deal because that’s a lot of time every day that would be considered compensable.

Given the different court holdings, carriers should review their policies to ensure that drivers-while logged as “off duty” or “sleeper berth”-are relieved of all duties related to the equipment and the load. For example, drivers should not be required to respond to communications or to guard a load during this time. Carriers should train drivers and then periodically remind them that they must log all work time as on duty.

Dynamex Legislation Passes California Assembly

On Wednesday, May 29, 2019, California’s legislative Assembly passed AB 5, which seeks to codify the ABC Test set forth in the Dynamex decision. This proposed new law expands the Dynamex ruling to apply to all of California’s Labor and Unemployment Insurance Codes. While the legislation codifies the test set forth in Dynamex as applied to Industrial Welfare Commission wage orders, it also makes life even more challenging for average Owner-Operators and the companies using them. The best hope now is that the legislature will take trucking business considerations into account during necessary compromise negotiations with the state Senate, and the bill will be modified from its present form to address some key issues and perhaps exempt trucking companies. Currently, the bill would exempt doctors, dentists, lawyers, architects, accountants, engineers, insurance agents, investment advisers, direct sellers, real estate agents, hairstylists and barbers who rent booths at salons, and marketers and human-resources professionals with advanced degrees.

Under the ABC test, a worker will be deemed to have been “suffered or permitted to work,” and thus an employee for wage order purposes, unless the employer proves:

(A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;

(B) that the worker performs work that is outside the usual course of the hiring entity’s business; and

(C) that the worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed.

But AB 5 actually goes beyond Dynamex: it would expand the ruling to apply to unemployment insurance taxes – which was not covered within the Dynamex decision – thereby exposing trucking companies to additional employment costs for which they would be liable.

As currently drafted, the legislation specifically identifies several industries that are exempt from application of the Dynamex standard and would, instead, be subject to the pre-Dynamex test that was set forth in S.G. Borello & Sons, Inc. v. Department of Industrial Relations. Although the trucking industry is not included in the list of exempted industries, stakeholders continue to work with the legislation’s sponsor to establish a workable exemption for the trucking industry. The legislation will next be heard in the California Senate Labor Committee.

However, there is still a chance that if Trucking does not get an exemption, the argument that Federal law preempts California law on the question of whether Owner-Operators are actually independent contractors is still in play. Unfortunately, there’s still uncertainty as to where things stand in California with regard to independent contractors in the trucking industry due to ongoing legal battles on the federal preemption question. Ultimately, the US Supreme Court may have to decide the question once and for all. Stay posted for developments.

Is Your Non-Compete Agreement Enforceable

I regularly get asked if Non-Compete agreements are enforceable. Many motor carriers have experienced both the offensive and defensive side of non-compete agreements. On one hand, trucking companies have drafted agreements to protect their legitimate business interests (e.g., customer relationships and confidential information). On the other hand, trucking companies have tried to hire workers who are subject to their own non-compete agreements. This is an uncertain area of law and I’m frequently asked “Is this thing enforceable?”

Contributing to the uncertainty, California is particularly hostile to non-competes. With a few exceptions, California courts will not enforce non-compete agreements against departing workers, and post-employment restrictive covenants – therefore this is a difficult jurisdiction for the enforcement of non-compete agreements. The question usually comes down to whether an exception applies.

Therefore, motor carriers should pay close attention to the rules in California and draft agreements that meet only their specific needs. Enforceability depends on a motor carrier’s success in convincing a court that it carefully crafted a narrowly-tailored agreement designed to protect a legitimate, protectible interest. Enforcement problems often result from over-reaching: Asking all employees to sign non-compete agreements rather than just those with customer relationships or access to confidential information. Geographic restrictions that are too broad and far exceed the worker’s geographic area of responsibility. Insisting on a broad geographic non-compete when a more limited (and more enforceable) client-specific non-solicitation provision would suffice. Prohibiting a worker from working in any capacity for a competitor is generally always invalid.

From a defensive standpoint, motor carriers should consider the consequences of hiring an employee who is subject to an ongoing non-competition obligation to a former employer. This consideration should include an analysis of whether the prospective employee can be effectively utilized despite the non-compete and the cost and time of defending against a noncompete lawsuit.