On June 9, 2022, the New Jersey District Court in Portillo v. Nat’l Freight, Inc., 15-cv-07908, 2022 U.S. District. LEXIS 103186 (D.N.J. June 9, 2022) determined that roughly 250 drivers for trucking company National Freight, Inc., and NFI Interactive Logistics, LLC, (“NFI”) were misclassified as independent contractors. Due to this misclassification, certain deductions from the drivers’ pay violated the New Jersey Wage Payment Law (“WPL”).
The Plaintiffs were a class of owner-operator truck drivers that delivered goods to various east coast Trader Joe’s retail locations. While each driver originally signed an Independent Contractor Operating Agreement with the Defendant, NFI, the drivers argued that NFI ultimately treated them as employees. In addition, the drivers asserted that NFI did not compensate them for all the necessary miles of each delivery and certain additional tasks that they were asked to perform. This misclassification as independent contractors allowed NFI to withhold funds and deduct pay for worker’s compensation, liability, and other insurances related to full-time work for NFI.
The Court’s Opinion
The Court applied New Jersey’s ABC test in determining that the drivers were employees, rejecting the claim that they were exempt from the ABC independent contractor test. Under this test, a worker is not considered an employee if (A) the individual is free from control over the performance of their job; (B) the service is outside of the company’s course of business; and (C) the individual is customarily engaged in an independently established trade, occupation, profession, or business.
The Court relied on several key facts in making its determination about control over the drivers, including the following: (1) all drivers were required to own their own trucks which the drivers would lease to the company; (2) the trucking company had exclusive control and use of the truck so long as it was being operated under the Independent Contractor Agreement; (3) the company required the drivers to install and maintain tracking devices on their trucks; and (4) the drivers started their days from the company’s warehouse offices. For the two remaining prongs, the Court determined that the drivers’ delivery services were in the company’s course of business performed at physical locations integral to their business. NFI had failed to show that the drivers were not employees.
Ultimately, in addition to determining that the drivers were not independent contractors, the Court concluded that the drivers were not exempt from the ABC control test under “Exclusion X” as the company did not pay them pursuant to this provision. The Court also rejected statutory exclusions under New Jersey’s Unemployment Compensation Law because those exclusions did not apply to WPL claims. Lastly, the Court rejected NFI’s arguments for FAAAA preemption and Truth in Leasing preemption because neither the ABC test nor the WPL interfered with federal law.
The Bottom Line
New Jersey has long been tough on independent contractor status. This stance has been extended to the trucking industry, an industry that commonly uses independent contractors. Any provider of delivery services that uses independent contractor drivers should review their agreements because New Jersey has made clear that many trucking companies and logistic providers are getting it wrong.
The authors thank Luca Provenzano, Summer Law Clerk, for his assistance and contributions to this client alert.