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May 24, 2016

Truck drivers misclassified as independent contractors cost employer $7 million

Employee Classifications 

A shipping company in California will pay $7 million after improperly classifying 38 truck drivers as independent contractors, providing yet another example of the importance of accurate employee classification. The issues for the California shipping company began when the local Teamsters union attempted to organize the drivers. During the organizing process, the California Department of Industrial Relations (DIR) determined that the truck drivers were actually employees, not independent contractors. The independent contractor test DIR used is similar to a variety of federal tests and guidance issued by the US Department of Labor. Many employers mistakenly believe that a written contract between the parties will be the deciding factor in establishing an independent contractor relationship, but that’s not the case. Rather, the focal point for many of these tests is the actual relationship between the parties. Factors to consider include how much control the employer is exercising over the workers and whether the activities of the workers are an integral part of the employer’s business (Camacho, et al v. Pacific 9 Transportation, Inc., CA Dept. of Industrial Relations, Dec. 2015).

Tips: Properly classifying your workers is incredibly important and, if done incorrectly, employee misclassifications can have significant financial repercussions. If you’re concerned about whether you have properly classified a worker, contact your Vigilant employment attorney and see our Legal Guide, “Independent Contractor or Employee?”, for more information.

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