Asset-light model falters as XPO’s port drivers deemed employees by government authorities
Latest decisions by California Labor Commissioner reminds industry of risks in asset-light model
Some industry stakeholders were wondering whether port drivers were still filing wage and hour claims challenging their independent contractor status. The latest Orders, Decisions, and Awards (ODA’s) issued by the Labor Commissioner’s Long Beach office on Friday, April 14, 2017, put that question to rest and was a stark reminder of the costly risk drayage operators take when they stick to the asset-light business model. Four drayage drivers for behemoth XPO Logistics’ (NYSE: XPO) subsidiary XPO Cartage were awarded a total of $855,285 in back pay and penalties. The average award was $213,821.
Making the damages even steeper, for the first time the ODA’s included awards for “nonproductive time,” such as time spent inspecting the truck, waiting for dispatch, or scanning in paperwork at the end of the day. Each of the four XPO drivers were awarded an average of $38,000 in wages for unpaid hours, plus liquidated damages for the same amount, amounting to approximately $76,000 each (in addition to expenses, deductions, meal and rest breaks, and interest). The awards for “nonproductive time” were pursuant to California Assembly Bill 1513, which went into effect in 2016, and requires employers paying piece rate to compensate their employees an hourly rate for nonproductive time.
Another state ruling of employee status grants disability benefits to drivers
The California Labor Commissioner awards are not the only agency findings leading to mounting liability for XPO and other port drayage operators. The California Employment Development Department (EDD) continues to investigate claims filed by drayage drivers for state disability unemployment and benefits, resulting in determinations that the drivers are employees and therefore eligible for benefits. These awards may increase the risk that drayage operators will face audits for failure to pay or deduct the appropriate payroll taxes, triggering an avalanche of tax liability risk exposure.
XPO got dinged again when three of its drivers were recently awarded state disability insurance benefits by the EDD after separate investigations found each of the drivers were in fact employees. The three drivers had suffered from serious conditions including heart disease, a stroke, and kidney failure. The weekly benefits awarded to drivers ranged from $634 up to $1,039. One of the drivers was awarded a maximum benefits amount of over $54,000.
NLRB Complaints on misclassification go to trial
XPO faces yet another government action against its asset-light model during the next round of NLRB complaints regarding port driver misclassification, which go to trial before an Administrative Law Judge on July 24, 2017. The cases stem from XPO’s misclassified drivers having filed multiple Unfair Labor Practice charges alleging violation of their rights as employees under the National Labor Relations Act (NLRA) for protected concerted union activity. Upon investigation, Region 21 of the National Labor Relations Board determined XPO’s drivers are misclassified as independent contractors and thus protected by the NLRA. It also found merit to their Unfair Labor Practice charges, which included misclassification itself as a violation. XPO faces another very similar trial, this time against its Port Services division, beginning on October 16, 2017.
A decision is still pending from the Administrative Law Judge in the first of these cases, where the NLRB charged misclassification as a violation of the NLRA, against Intermodal Bridge Transport.