STG Logistics, which recently completed a financial restructuring following a Chapter 11 bankruptcy filing, has reached a settlement with New Jersey in relation to allegations of truck driver misclassification in which the company will pay more than $2.7 million.
New Jersey Attorney General Jennifer Davenport and Kevin D. Jarvis, Acting Commissioner of the New Jersey Department of Labor and Workforce Development (NJDOL), announced the settlement reached with STG Logistics Inc., STG Drayage LLC and other subsidiaries.
The case dates back as far as 2019, when NJDOL began investigating STG’s predecessor, XPO Logistics, focusing on the company’s facility in Newark.
STG purchased XPO’s intermodal business in 2022 and assumed liability for past employment practices. The investigation found that the company treated employee drivers as independent contractors in violation of the state’s restrictive “ABC test” for determining worker classification, likewise in place in California under state law.
Under said test, workers are presumed to be employees unless a company can prove the individual is largely free from the company's control, performs work outside the company's usual business or outside its places of business, and has their own independent business.
The state said STG failed to meet any of those requirements.
According to the state's complaint, XPO required that the drivers "procure and maintain their own" trucks and "at their own expense to perform work for XPO." Despite that requirement, New Jersey said XPO "required the drivers to agree to lease provisions ... that provided XPO exclusive control over the drivers’ trucks."
According to NJDOL, the company classified workers as contractors despite exercising significant control over them and their work, including:
- Requiring that the company’s name appear on drivers’ trucks
- Requiring drivers to lease their trucks to the company for its exclusive possession, control, and use, which would be customary for owner-operated equipment under the federal Truth in Leasing regulations.
- Prohibiting drivers from using the trucks for other work without written consent
- Requiring drivers to sign non-negotiable “independent contractor agreements”
- Requiring installation of electronic GPS tracking devices in drivers’ trucks
- Assigning all routes, tightly monitoring deliveries, and setting rates of pay
The settlement resolves the first lawsuit filed under New Jersey’s 2021 law that permits the state to file suit in New Jersey Superior Court against employers who have misclassified workers as independent contractors, a press release from NJDOL said.
NJDOL said under the settlement agreement, truck drivers and the state will receive at least $2,775,000 -- despite STG having filed for bankruptcy earlier this year, which resulted in many debts being canceled. The settlement amount is considered “priority” under both the bankruptcy code and the settlement agreement, ensuring workers are compensated ahead of other creditors.
“This was our first-ever Superior Court misclassification case, and we saw it through to the end -- surviving a company sale, a bankruptcy, and years of litigation,” said Acting Labor Commissioner Kevin D. Jarvis. “The message is clear: New Jersey will use every tool at our disposal to protect workers, and we’ll fight until the job is done.”
Of the total settlement, $2,220,000 will go directly to hundreds of truck drivers, primarily for STG’s violation of wage and hour laws. The remaining $550,000 will go to New Jersey, split between Wage & Hour penalties and contributions to the Unemployment Compensation and State Disability Benefits Funds.
The driver payments will be paid to drivers who operated under STG's motor carrier authority since Jan. 1, 2017, but were not treated as employees under the New Jersey employment laws, the settlement agreement states.
Additionally, if STG violates the agreement, NJDOL will receive an additional $7.5 million in penalties owed to the state. The settlement also requires STG to comply with all applicable labor laws going forward and to provide information to NJDOL to ensure ongoing compliance.
[Related: Trucking loses latest attempt to block California AB 5 and its ABC contractor test]
