Over the past several years, California's ports have become an epicenter of union activity, where contracted motor carrier companies have been pressured to reclassify their drayage drivers as employees rather than independent contractors. Drivers have filed over 500 claims with the California Department of Labor Standards Enforcement ("DLSE"), and 18 class action lawsuits alleging misclassification. Recently, the San Diego Superior Court awarded seven drivers a judgment of over $2 million against an international shipping company.
Last week, Governor Brown signed into law AB 621, the Motor Carrier Employer Amnesty Program, which is sponsored by the California Teamsters. The new law provides drayage truck operating companies with amnesty from statutory and civil penalties, including PAGA penalties, if they conduct a voluntary self-audit and reclassification. In order to be eligible for the amnesty program, the employer must not have a suit pending against it alleging misclassification filed on or before December 31, 2015 and cannot have been assessed the final imposition of a penalty for fraud under the Unemployment Insurance Code. The bill takes effect on January 1, 2016 and expires on January 1, 2017.
To participate, employers are required to submit an application to the Labor Commissioner and conduct a self-audit of its classifications. Immediately upon submission of the application, an employer is shielded from any claim for PAGA penalties; however, if the application is denied, the amnesty would no longer apply. If an application is denied, it could not in any way support an inference of misclassification. If the employer voluntarily, or as the result of a civil proceeding, reclassified its drivers as employees on or before the bill took effect on January 1, 2016, the following information must be submitted in addition to its application: (1) documentation of the reclassification, (2) the identification of all drivers reclassified and the resulting compensation paid to them, and (3) a report of the self-audit.
Upon acceptance into the program, the Labor Commissioner negotiates and executes a settlement agreement which would require from the employer the following: (1) the payment of all wages, benefits and taxes owed to the reclassified drivers, (2) maintaining any reclassified driver's status as an employee, (3) employee classification for any driver hired to perform the same or similar duties as its reclassified drivers, (4) workers' compensation coverage for all reclassified drivers, and (5) payment of all costs associated with the Labor Commissioner's negotiation and execution of the settlement agreement. In exchange for consenting to the agreement, the Labor Commissioner may not enforce any civil or statutory penalties, including those for inaccurate wage statements under Labor Code section 226.
If a commercial driver declines to accept the terms of the agreement, an employer would still be required to reclassify that driver, but the driver would be not be owed compensation for the misclassification and would be precluded from pursuing any claims for penalties.
As California's ports continue to be a target of union activity, we will continue to issue updates on any significant legislative action affecting the operation of employer trucking companies.
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