NFI loses Rio Tinto account as misclassification liability grows
When NFI lost long-term customer Rio Tinto earlier this year, it signaled that driver misclassification continues to be a liability for port trucking companies and their customers, even in the wake of Proposition 22.
While the trucking industry was quick to argue that the passage of Proposition 22 in California meant that they, too, should get exempted from the employee status test in AB 5, the battle over misclassification is far from over. Tech companies’ $220 million ballot measure may have bought them an exemption from California labor laws for now, but port drivers continue proving they have rights as employees – and that misclassification has a real cost for port trucking companies.
NFI subsidiary Cal Cartage Express (NFI/CCX), which for decades hauled almost exclusively for global mining giant Rio Tinto, informed its drivers earlier this year that it had lost the Rio Tinto account. It appears that the drayage contract is now being serviced by CRST, which uses employee drivers.
Rio Tinto’s move in declining to renew Cal Cartage Express’ contract after at least 30 years came after months of drivers’ repeated appeals to Rio Tinto to enforce its Supplier Code of Conduct. They communicated their concerns to Rio Tinto through delegations to Rio Tinto’s facilities at the Port of LA and Boron, CA, as well as their corporate headquarters in Salt Lake City and Rio Tinto’s AGM in London. The drivers brought forth evidence that NFI/CCX was violating Rio Tinto’s Code of Conduct by misclassifying them, which led to labor violations including wage theft and unfair labor practice charges. These violations led the drivers to engage in five unfair labor practice strikes against NFI/CCX, with ambulatory pickets of struck trucks disrupting service at Rio Tinto’s Boron mine and port terminals.
In the months since Rio Tinto moved its account from NFI/CCX to an employee-based company, the misclassification liability has only continued to mount for NFI/CCX. Just last month, a California appeals court judge ruled that the ABC test codified in AB 5 was not preempted by federal law in an unfair competition case brought by the LA City Attorney against Cal Cartage Express. While this decision only applies to this case, it signals that the CTA’s challenge of AB 5 may not win them the pass they were hoping for.
Meanwhile, NFI/CCX drivers continue to win employee status determinations even without AB 5’s full implementation, under employee status tests that are more stringent than the ABC test. After a year-long investigation into violations of federal labor law, Region 21 of the National Labor Relations Board made a merit determination that NFI/CCX drivers are employees – not independent contractors – and will issue a complaint imminently, absent settlement.
Separately, NFI/CCX settled outstanding litigation with 14 drivers for its appeals of Labor Commissioner decisions, along with 20 claims from two other NFI port trucking subsidiaries, K&R Transportation and CMI, settling for a total of over $6 million, according to public comments made in the October 1, 2020 Port of Los Angeles Harbor Commission meeting. There are still five similar misclassification and wage theft claims filed by NFI/CCX drivers pending before the California Department of Labor Standards Enforcement, as well as class action lawsuits against CCX and other NFI port trucking subsidiaries pending in California courts.
Such liability could extend to NFI/CCX’s customers, since under California’s new joint liability law, BCO’s are jointly and severally liable for future wage theft damages when contracting with port trucking companies with unsatisfied final judgments for unpaid wages.
To avoid the risk of future such liability, Rio Tinto would be wise to create even stronger standards within both its Supplier Code of Conduct and its direct contracts with port drayage providers, and monitor them rigorously to ensure ongoing compliance.