BNA Daily Labor Report: Port Drivers Not Contractors, Say Lawsuits

September 9, 2008: California Attorney General Edmund G. Brown (D) announced Sept. 5 he has filed lawsuits against two companies operating at the ports of Los Angeles and Long Beach for allegedly evading California Labor Code protections by classifying their truck drivers as independent contractors rather than employees (Cal. ex rel. Brown v. Lira, Cal. Super. Ct., No. BC397601, complaint filed 9/5/08; Cal. ex rel. Brown v. Pac Anchor Transp., Cal. Super. Ct., No. BC397600, complaint filed 9/4/08).

The suits, filed in the Los Angeles County Superior Court of California, allege that the trucking companies have gained an unfair advantage over their competitors in violation of Sec. 17200 of California's Business and Professions Code because they deprived employees of protections and benefits they are entitled to under California law such as workers' compensation and the minimum wage. In addition, the lawsuits charge that the companies cheated the state out of thousands of dollars in state payroll taxes.

The state, which has asked the court for an injunction prohibiting the "unlawful and unfair conduct," is seeking more than $5 million in restitution and civil penalties.

In announcing the filing of the lawsuits, Brown said that the state is "cracking down on these two companies and investigating several others that are taking advantage of their workers and cheating the state out of payroll taxes. These are paid truck drivers working long hours under onerous conditions who are not getting the benefits they deserve," he said.

The lawsuits resulted from an investigation by a task force created by the attorney general in February to look at the practices of trucking companies at the two ports. According to Brown, the investigation uncovered numerous state labor law violations. The state expects to file more suits in the coming weeks, he said.

Details of Lawsuits

In a lawsuit filed Sept. 5, Brown charged Jose Maria Lira, a fleet operator responsible for transporting cargo from the ports, with violating state labor law by misclassifying truck drivers as independent contractors, thus allowing him to lower his costs of doing business by not paying state employment-related taxes and not providing workers' compensation insurance.

Specifically, Brown charged that Lira violated the Business and Professions Code, Sec. 17200, by engaging in acts of unfair competition including failing to pay unemployment insurance taxes as required by Unemployment Insurance Code Section 976; failing to pay employment training fund taxes as required by UIC Sec. 976.6; failing to withhold state disability insurance taxes as required by UIC Sec. 984; failing to withhold state income taxes as required by UIC Sect. 13020; failing to provide workers' compensation as required by Labor Code Sec. 3700; and failing to provide employees with itemized written statements as required by Labor Code Sec. 226.

According to Brown, the drivers should have been classified as employees because Lira controlled all aspects of the drivers' work. He required drivers who leased his trucks to sign an agreement stating the driver would pay Lira 50 percent of his gross each month for use of the truck plus an additional 10 percent for management fees. He required them to sign documents stating they were independent even though they worked exclusively for Lira, worked 60 hours or more a week, and delivered cargo in Lira company trucks, the charge alleged.

The state is seeking at least $50,000 in compensation and back taxes in that suit.

The second suit, filed Sept. 4, charges Pac Anchor Transportation, Inc.--a company that has agreements with various shipping companies to transport cargo and containers from the two ports, and Alfredo Barajas, the company's manager and truck dispatcher--with violating the Business and Professions Code and Industrial Welfare Commission wage order protections. Specifically, the suit charges the company with failing to pay unemployment insurance taxes or employment training fund taxes; failing to withhold state disability insurance taxes and state income taxes; failing to provide workers' compensation; failing to provide employees with itemized written statements; failing to reimburse employees for business expenses and losses; and failing to ensure payment of California's minimum wage.

In contending that the drivers should be classified as employees, the attorney general said the drivers do not own the trucks they drive, do not have their own businesses or customers separate from Pac Anchor, use trucks, tools, and equipment furnished by the company, and the company can discharge them without cause at any time.

Charging that the drivers suffered monetary losses in excess of $1 million, the attorney general asked the court to order restitution of unpaid minimum wages and "money or property which the defendants acquired by their violations of the code." In addition, the attorney general is seeking a civil penalty of at least $4.156 million.

Teamsters Applaud Action by Brown

In a Sept. 5 statement applauding the filing of the lawsuits, Jim Sanangelo, the Western Region International vice president for the International Brotherhood of Teamsters, said by classifying the drivers as contractors, these "trucking companies exploit the system to deny workers and their families their right to benefits and fair compensation. Attorney General Brown is doing the right thing by standing up against these trucking companies who cheat the harbor communities out of good middle-class jobs."

Chuck Mack, an IBT international vice president and director of the union's port division, said that this practice exists in every port in the country. "It is our hope that these lawsuits will be the beginning of the end of this independent contractor scheme," he said.

For the past several years, IBT has been attempting to find ways to help change the drivers' status from independent contractors to employees so that they could be organized.

A spokeswoman for Pac Anchor told BNA Sept. 8 that the company had not yet seen the lawsuit so she could not comment on it. An official for Lira could not be reached for comment.

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