November 4, 2024
Many trucking companies look to federal statutes and related authority for guidance on a myriad of labor-related issues, including whether to classify workers as independent contractors or employees. Although consulting federal legal authority is necessary, it is not, on its own, sufficient: federal law provides a floor for worker protections but, in many instances, state-level authority mandates higher standards. In the trucking industry, two common compliance issues arise when employers overlook applicable state authority, which can result in the misclassification of independent contractors or failure to pay required overtime. Inadvertently misclassifying workers because a state-level standard is overlooked can be painful and expensive, as one recent industry example made clear.
Misclassification can be costly:
On October 11, 2024, the print media delivery company Publishers Circulation Fulfillment, Inc. (“PCF”) entered into a Settlement Agreement with the New Jersey Department of Labor and Workforce Development (“NJDOL”), in which it agreed to pay a gross settlement sum of $2,750,000 for alleged contractor misclassifications. The NJDOL alleged that PCF misclassified worker statuses, resulting in several violations of wage and hour laws, including those applying to wages and earned sick leave.
Under federal standards, a number of tests can apply to worker classifications, depending on the specific context. In New Jersey, however, companies engaging independent contractors must ensure that each contractor satisfies the “NJ ABC Test,” which creates an automatic presumption that workers are employees unless each of the following are satisfied:
- The individual has been, and will continue to be, free from control or direction over the performance of work performed, both under contract of service and in fact; and
- The work is either outside the usual course of the business for which such service is performed, or the work is performed outside of all the places of business of the enterprise for which such service is performed; and
- The individual is customarily engaged in an independently established trade, occupation, profession or business.
If an independent contractor is misclassified, the worker is, by default, deemed an employee and, therefore, the employee is entitled to all applicable legal protections for employees, including overtime and paid sick leave. This is the lesson PCF paid the cost to learn.
Overtime in the Trucking Industry:
Another common misconception is that New Jersey-based trucking employees are not entitled to overtime. This is not the case.
In most fields, one of the primary protections afforded to non-exempt employees is that they are entitled to time and a half their hourly wage for each overtime hour worked.
Federal statutes, however, exempt certain trucking industry employees from overtime pay requirements under what is commonly referred to as the Motor Carrier Exemption. This exemption applies to employees who are:
- Employed by a motor carrier or motor private carrier;
- Drivers, driver’s helpers, loaders, or mechanics whose duties affect the safety of operation of motor vehicles in transportation on public highways in interstate or foreign commerce; and
- Not covered by the small vehicle exception.
Federal law, however, only sets the floor for worker protections. As PCF learned the hard way, New Jersey follows its own rules.
Instead of exempting workers from overtime wages altogether, New Jersey requires that trucking employers pay covered employees overtime compensation at a rate of time and a half the state minimum wage (as opposed to the employee’s hourly wage).
What does this mean? Employers in the trucking industry still need to pay workers overtime, but at this reduced rate, unless the worker’s salary already exceeds the time and a half state minimum wage threshold. See N.J. Stat. § 34:11-56a4(f). If the employee’s base salary is higher than the time and a half state minimum wage figure, no overtime must be paid for these covered employees.
Conclusion:
To avoid costly penalties and fines, it is imperative that trucking companies keep the floor and the ceiling in mind and establish (and follow) best practices to ensure compliance with independent contractor and wage and hour laws, under both federal and state guidelines. For further guidance, please reach out to the Trucking and Logistics Team at Becker LLC:
Michael Bartels, Chief Development Officer and T&L Team Member: mbartels@becker.legal.