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Truck Driver Misclassification Runs Afoul of Labor Laws

A case brought to the National Labor Relations Board (NLRB) by the U.S.’s largest union could shift the tide into whether misclassification of an employee as an independent contractor is an unfair labor practice.

The International Brotherhood of Teamsters, which represents more than 1 million workers in the U.S. and Canada, initially filed charges alleging that five trucking, warehousing and logistics companies are violating federal labor law by misclassifying truck drivers operating in the ports of Los Angeles and Long Beach as independent contractors.

Region 21 of the NLRB, which services Southern California, issued the complaint on Thursday, saying that the misclassification of those employees obstructed them from engaging in legally protected activity and gave them the impression they’re not covered by federal labor law.

The designation of “independent contractor” enables businesses to exclude employees from basic benefits including health insurance, paid sick leave, a guaranteed minimum wage and overtime pay.  Supporters of the classification say that independent contractors can benefit from making their own schedule.

Independent contractors cannot form unions under U.S. federal law.

Five companies operate under the umbrella of customized transportation and logistics solutions service provider Universal Logistics Holdings (ULH). The four ULH subsidiaries named in the suit include Deco Logistics, which does business as Container Collection; Universal Intermodal Services; Southern Counties Express; and Universal Management Services.

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A hearing on the matter will take place June 1, the filing said.

ULH did not respond to a request for comment.

As part of the complaint, the NLRB wants the parties to not only reclassify its drivers as employees, but also compensate them for income lost as a result of their misclassification, which could set a new precedent.

“Wage theft, unsafe working conditions and the fear that comes from not having a safety net—this is the reality for thousands of port truckers like us,” said David Averruz, a port truck driver for Container Connection, who the complaint alleges was unlawfully terminated in retaliation for his union activities. “I’m glad the NLRB has finally taken up this issue and recognized that ULH and Container Connection broke the law. But, I also know that there’s so much more to be done to win justice for me and my coworkers. We need our basic rights respected, and we’ll keep fighting until we win.”

In resolutions sent to retailers including TJX and Urban Outfitters earlier this year, the Teamsters called misclassification a significant problem for drivers who haul goods from U.S. ports, resulting in a potential $850 million in wage theft every year.

Alongside the misclassification accusations, the NLRB’s complaint is filled with allegations against the logistics services provider for interrogating employees about their union activities and the union activities of other drivers; threatening drivers that if they own their own truck, they are not employees and cannot be represented by the union at the company; threatening drivers that organizing would be futile because they did not have a right to organize if they owned a truck; and providing employees “less desirable” assignments and decreasing the number of assignments in retaliation for their union and other protected concerted activities.

Additionally, the NLRB claims that ULH has interfered, restrained and coerced employees in the exercise of their Section 7 rights by telling them that they should not try to change their co-workers’ opinion about having/supporting a union.

The NLRB also alleged that ULH terminated two employees—Averruz and Manuel Chavarria—in retaliation for their union and other protected concerted activities, with Chavarria being fired while he was on Covid-19 disability leave.

“With this powerful complaint, the NLRB has put real teeth into our country’s foundational labor laws and put ULH on notice that no company, no matter how big or powerful, is above the law,” said Eric Tate, secretary-treasurer of Teamsters Local 848. “If ULH doesn’t change its ways, it will be ordered to reclassify its workforce of purported independent contractors and pay millions of dollars to its hundreds of misclassified workers. And because of California’s new law to hold bad actors in the industry accountable, retailers who use ULH’s services could become jointly liable for the company’s unlawful conduct and millions of dollars in liability as well.”

Amid the potential federal labor law violations, the NLRB General Counsel seeks precedent-setting full remedies beyond the traditional limited remedies of reinstatement and backpay.

The order would require that ULH reclassifies its workforce of purported “independent contractors” as employees and make them whole for any consequential damages as a result of the prior misclassification.

Other concessions the labor board would enforce include granting the union access to non-work areas during drivers’ non-work time, providing the union with contact information for each driver at the facility

Additionally, the ULH board would have to train supervisors and managers regarding employee rights; and post an employee rights poster in the workplace at all facilities.

ULH and its subsidiaries have been under the microscope from various federal agencies for more than a decade. The U.S. Department of Labor’s Wage and Hour Division investigated Container Connection from 2009 to 2011 for Fair Labor Standards Act (FLSA) violations, and found that Container Connection had violated the FLSA by misclassifying 103 port drivers and failing to pay the minimum wage. Subsequently, 11 Container Connection drivers won a 2016 final court judgment ordering the logistics services provider to pay them over $2.2 million for wage theft damages. The company has faced at least six additional misclassification lawsuits in California Superior Court, most of which have been settled.

Another 12 wage and hour misclassification claims at the California Division of Labor Standards Enforcement (DLSE) resulted in at least eight final judgments and stop work orders ordering the company to stop conducting business in California until it paid workers. In 2020, the California Employment Development Department found three ULH/Container Connection drivers to be employees who had been misclassified as independent contractors.

Most recently, in October 2021, the NLRB ordered Universal Logistics companies to reinstate and award backpay to truckers that it fired in 2019 upon hearing that they would unionize.

The complaint also arises in the wake of a unionization push at XPO Logistics, where 250 port and rail truck drivers operating in Southern California filed with the NLRB in January to host an election to organize. At the center of the push, the contractors allege that their current employment status is being misclassified by XPO on purpose to deny them the extra benefits received by its current base of nearly 12,000 drivers.

The action by the NLRB was the second in one week that dealt with Universal’s activities in California. In its release, the Teamsters noted that drivers at Container Connection had filed a complaint against the company with the California Occupational Safety and Health Administration (Cal/OSHA) charging it with negligence in its Covid-19 protocols in that state.