Los Angeles – City Attorney Mike Feuer announced a significant ruling today in his ongoing lawsuits against three of the largest trucking companies operating at the Port of Los Angeles over allegations that they purposely classified hundreds of drivers as “independent contractors,” and not “employees” to evade providing benefits, paying minimum wage and appropriate taxes and covering operating costs.
The three trucking companies – CMI Transportation LLC (CMI), K&R Transportation California LLC (K&R) and Cal Cartage Transportation Express LLC (Cal Cartage) – argued in the trial court that California’s recent ABC test for worker classification is preempted by federal trucking regulations. The trial court agreed with their argument, and Feuer’s Office appealed through a petition for writ of mandate. Yesterday the Second District Court of Appeal reversed the trial court, finding that the ABC test is not, in fact, preempted by federal law. The case now returns to the trial court, for an evaluation under California’s ABC test.
“This is a significant step for hundreds of hardworking drivers in and around the Port whom we allege are employees, yet are systemically and unlawfully classified as independent contractors,” said Feuer. “The misclassification we allege may boost trucking companies’ bottom lines, but it kicks these drivers in the teeth by requiring them to pay outrageous expenses just to do their jobs. It’s wrong and that’s why we’re fighting.”
The lawsuits allege that the three trucking companies purposely classify their drivers as independent contractors rather than employees to avoid obligations to pay employee benefits, such as unemployment insurance, workers’ compensation, minimum wage and reimbursement for thousands of dollars of business expenses. Allegedly misclassifying drivers also allows each company to avoid paying applicable California taxes, instead shifting this responsibility to the drivers.
In September 2019, California Assembly Bill 5 (AB5), which codified and expanded a 2018 Supreme Court decision regarding the “ABC test” for determining whether a worker is an independent contractor or an employee, was signed into law.
Under California’s ABC test, a worker is presumed to be an employee unless the company proves that the worker:
A) is free from the control and direction of the company in performing work, both practically and in the contractual agreement between the parties; and
B) performs work that is outside the usual course of the company’s business; and
C) is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the company.
According to the lawsuits, CMI, K&R and Cal Cartage allegedly exert near complete control over their drivers’ assignments and details of their work. The companies allegedly make assignments, unilaterally set the rates they pay drivers and retain and exercise the right to terminate drivers without cause, all allegedly in defiance of the ABC Test.
The lawsuits seek to enjoin each of the trucking companies from continuing to engage in such practices and to adopt measures that immediately remedy violations. The lawsuit also seeks restitution of any money or property the companies acquired or retained as a result of the alleged business practices, as well as civil penalties of up to $2,500 for each violation.
Deputy City Attorneys Danielle Goldstein and Christopher Munsey are handling the litigation.
Read the Second District Court of Appeal decision here.