California’s high court rules carrier misclassified drivers as independent contractors

| July 31, 2014
long beach port

Long Beach Port | Pac Anchor specializes in drayage service.

Drivers signed on as independent contractors for the Long Beach, Calif.-based Pac Anchor Transportation were misclassified as contractors and should have instead been classified as employees of the carrier, the California Supreme Court ruled unanimously this week.

Because of the misclassification, the drivers were denied certain benefits they were entitled to as employees, the court ruled.


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This is the third ruling in the last two months in California that fell on the side of drivers or regulators claiming contractors were misclassified so carriers would not have to comply with certain labor laws or pay certain taxes or insurance.

The California Construction Truck Association called the ruling “another setback,” referring specifically to a ruling earlier this month that said contract drivers for Penske Logistics were still entitled to California’s required meal and rest breaks for employees, with the court ruling the Federal Aviation Administration Authorization Act of 1994 did not preempt California’s rest break law.

The rulings should cause carriers to “reexamine their employment/leasing practices,” CCTA said in its statement. “The proper use of owner-operators can still be a preferable business model — if done fairly and correctly.”

The Pac Anchor legal action was brought by the state itself, who claimed the carrier was violating the state’s unfair competition law. Like the Penske case, the legal question at hand was whether the FAAA preempted California’s unfair competition law. Judges again ruled it did not.

Alfredo Barajas, owner and manager of Pac Anchor, was also named as a defendant in the case. He owns about 75 trucks and signs drivers into lease agreements, according to court documents.


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He and the company classify the drivers as independent contractors, thereby avoiding paying unemployment insurance taxes, employment training fund taxes and withheld state disability insurance taxes, the state alleged. It also allowed Pac Anchor to skip providing worker’s compensation, itemized written wage statements to the drivers, reimbursement for business expenses and losses and ensuring payment of California’s minimum wage.

By avoiding these expenses, the carrier gained an unfair advantage over its competitors and “deprived employees of benefits and protections to which they are entitled,” according to the claims brought by the state.

The drivers “invest no capital, own no trucks and do not use their own tools or equipment,” the court documents note. “Drivers are often employed for extended time periods, but they can be discharged without cause, have no operational control, have no other customers, take all instruction from defendants and have no Department of Transportation operating authority or permits to engage independently in cargo transport,” the ruling said.

Lower courts had ruled in favor of the carrier, citing prior rulings about FAAA exemptions and state law preemption.

However, California’s high court disagreed, siding with state regulators that the drivers at Pac Anchor were misclassified and therefore, in their case, the FAAA did not preempt California’s law.

A U.S. Court of Appeals last month ruled another California carrier, Affinity Logistics, had also misclassified employees as contractors by making them sign lease agreements. Similarly, the drivers didn’t own the trucks and weren’t allowed to take them home, even though they paid $300 a week to lease them. They also had to wear uniforms, were paid a flat rate per stop and had to clear off time weeks in advance. Click here to read Overdrive’s coverage of that case.

Click here to read coverage of the Penske case.

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  • localnet

    Wow, what a scam these outfits are running. Unbelievable.

  • Craig Vecellio

    *were* running. Thankfully, they got caught.

  • Bigwheel

    This is nothing new its all over the U.S. and has been for years so why is this case special

  • MillionsofMiles

    It’s “special” as you call it because if this decision by the California Supreme Court stands (US Supreme s refuse to hear appeal), marks the beginning of the end of lease-purchase scams in the trucking industry.

  • guest

    The “drivers” are all illegal aliens so these companies do whatever they want to them…they are used to $8 per day……so they really are happy being treated like Dirt….they are used to it. lol

  • guest

    My name Pepe…me haul container….for Low Wage…

  • guest

    all illegal alien labor…..just a joke……lol

  • MrNA

    Just the tip of the iceberg. And thank some white boy Bubba drivers for paving the way. Ya’ll just as guilty for taking it in the ass from your Boss Man.

  • JJMcClure

    so what was the penalty?

  • Jack Simon

    I would be interested to see what your evidence is for saying that the drivers were “all illegal aliens”.
    I think you are full of something other than facts.

  • simon jackass

    You’re an idiot it’s southern cali. Go figure

  • Gabby

    This Shit happens more then anybody knows I myself had 5 different job offers with 5 different trucking company here in California one after the other make me this offer.
    I was so suppressed every time they told me they were 1099 me ?
    I’m not an Illegal alien I’m most definitely not a rookie driver or a fool to fall for this bull shit but there is a way to play it to your at advantage and get paid while doing it..
    Trucking company’s do this to make more money on there end.
    Mean while your stuck paying everything at the end of the year when they hand you a 1099 and not a
    10W40 like they should legally be doing. You can do this.
    when they say there 1099 you can say ? So your paying me Cash Right ? If they say no
    Then you up your starting pay By 15 % or more cause that’s what it going to coast you at the end of the year in taxes.
    If they say ok to cash hell yes But don’t give them your S/S number and make sure to put money away for Uncle Sam.
    I don’t get cash I get a check I ‘am 1099 by Choice but I make 46 cents a mile this was my counter to my Employer when he said he was going to be 1099 me.
    I make between 2,500 to 2,950 biweekly I run loose leaf I drive a 2013 Pete I know it sounds like bull shit do the math I average 640 miles a day about 6,500 miles every two weeks
    I Don’t pay for fuel repairs or anything but my food and drinks when I have time lol….. I’m a company Driver with out Benefits oh well my wife works for a big Dept. store with full medical.
    My advice for Drivers who are not asking for more pay to be 1099 is
    file a form 1091… I think that’s the number ? but do it at the same time you file your 1099 taxes that 1091 is what will make them look at your employer and determine weather you are or not a Independent Contractor.
    If you don’t own that truck your not O/Op this forces him to pay his part of the taxes for that year or even yrs. depends on how long he has been doing this to you. saves you lots of money weather or not you paid the IRS already.

    But don’t plan on having a job when you go back !
    Here’s The bright side is if he fires you..
    If you want you can legally sue for unlawful termination of an employee and it don’t matter if your an illegal alien or not.

  • Scaredycat

    Because the courts are just now listening. It all had to start somewhere now hopefully other states will follow suit. strives to maintain an open forum for reader opinions. Click here to read our comment policy.