Monthly Archives: July 2014

Trucker Owner-Operator Misclassification Awards Piling Up

Palay Law Firm has long been representing the interests of California-based truckers in disputes with their employers.  The last few years have seen an increasing number of trucking companies reclassifying their employees as independent contracts.  Known as “owner-operators,” these individuals are for all intents and purposes employees.  For the most part, the intentional classification of drivers as independent owner-operators is a scam that is only meant to line the pockets of the trucking companies.  The drivers are still common-law employees, regardless of whether their employers make them sign independent contractor agreements.  The companies exert control over almost every aspect of the relationship, from the drivers’ hours worked to who can perform work on their trucks to where they can buy fuel to what logos must be on their trucks and uniforms.

Why does this matter?  Most labor laws in California do not apply to independent contractors.  That makes sense.  If Company A, which sells T-shirts, hires Company B, a marketing company, to design a website, the relationship between Company A and Company B would most likely be independent.  Company B can hire its own employees — as many as it needs to get the job done — and supervises them too.   In this independent contractor relationship, Company B has control over its employees, and it must comply with California labor laws.  Company A simply pays for Company B’s services and Company B produces a website for Company A.

In this example, Company B is a separate legal entity with its own employees, and it provides a service — web design — that is independent from Company A’s business — making T-shirts.  Company A has its own employees too.  The relationship is clearly independent.

But what if Company A were to take one of its own clothing designers and reclassify her as an independent contractor?  There are circumstances in which that would work.  Say, if the clothing designer used her own equipment, worked outside of Company A’s offices, could design clothes for other T-shirt companies, and had her own business, it is very likely that she could lawfully be classified as an independent contractor.

But what if the newly reclassified independent contractor still worked in Company A’s office, using Company A’s equipment, could only design clothes for Company A, and did not have her own business?  The chances are that she would be found to be an employee, regardless of the “independent contractor” title given to her.

As an employee, rather than an independent contractor, the clothing designer for Company A would have significant rights.  Company A would have to follow California labor laws, including paying overtime, if applicable, withhold employment taxes from her paychecks, and pay payroll taxes.  If the clothing designer were to leave Company A, she could receive unemployment (assuming that she was otherwise eligible), and, while employed, she could receive workers’ compensation benefits (again, if otherwise eligible).

By classifying an employee as an independent contractor, therefore, an employer can skirt these fundamental California labor laws and avoid paying significant amounts of payroll taxes.

Back to our trucker cases.  These owner-operators, who drive trucks with their company’s logo on them and cannot haul for any other company, are more than likely employees.  The companies they work for are avoiding California labor laws and not paying payroll taxes.  Employees and the taxing authorities alike are up in arms.  The recent strike at the Port of Los Angeles is evidence of the drivers’ dissatisfaction.

But the drivers are not without recourse.  Over the past few years, Palay Law Firm has been able to recover hundreds of thousands of dollars for misclassified owner-operators.  Their claims are typically for wrongful deductions from wages.  Their employers pay them on a per-mile or per-job basis, then deduct their pay for line items like insurance, fuel, maintenance, tolls, etc.  If the owner-operators were truly independent contractors, these deductions might be legal.  But since the owner-operators are truly employees, and California employers cannot make deductions from wages for typical business expenses, these owner operators can seek full reimbursement for these deducted expenses in a claim against their trucking company.

See the factors that courts and the Labor Commissioner use to determine whether a truck driver has been misclassified as an independent contractor.

Below are recent Labor Commissioner decisions that were rendered in favor of our clients in owner-operator misclassificaiton cases (the amount in parentheses is how much the Labor Commissioner awarded and the location is where the hearing took place).

In these cases, the amount awarded was nearly 100% of the amount claimed by our clients.

If you have been classified as an owner-operator, or it has happened to someone you care about, do not hesitate to contact Palay Law Firm at (805) 641-6600 or contact us through our online intake form.  We represent owner-operators throughout the state.  They just need to be based in California.

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Federal Court Denies Request for New Trial and Awards Nearly $460,000 in Attorney Fees

The Central District of California just issued an order denying a request for a new trial and granting attorney fees in the amount of nearly $460,000.

In the case of Monagahan v. Telecom Italia Sparkle of North America, Inc. (TISNA), our client Kevin Monaghan alleged that he had been misclassified as an independent contractor and that TISNA had terminated his employment because he complained about the misclassification and failure of TISNA to pay earned wages. Plaintiff Monaghan sought damages for wrongful termination and the failure to pay wages, plus additional penalties recoverable under the Labor Code.

The jury agreed with Mr. Monaghan on most points, finding that TISNA had terminated his employment because of his complaints about misclassification as an independent contractor and the failure to pay wages. The jury awarded Mr. Monaghan over $1.2 million in damages and assorted penalties.

After trial, TISNA moved for judgment on the wages portion of Mr. Monaghan’s case, saying that the jury verdict wrongly awarded Mr. Monaghan various commission wages, and TISNA moved for a new trial on a similar basis.

Mr. Monaghan, for his part, moved for an award of attorney’s fees.

The court denied TISNA’s motions and granted Mr. Monaghan’s motion for attorney fees, awarding him everything but a requested “lodestar multiplier” on the base amount of his attorney fees. Each of the decisions is below.

Court Order on Motion for Attorney Fees

http://www.strausslawyers.com/wp-content/uploads/2014/07/2014.07.30-135-Ct-Civil-Minutes-re-Attorneys-Fees.pdf

Court Order on Motion for Judgment as a Matter of Law and for New Trial

http://www.strausslawyers.com/wp-content/uploads/2014/07/2014.07.30-134-Ct-Order-denying-Def-Motion-for-Judgment-as-a-Matter-of-Law-or-New-Trial.pdf

Related article: Palay Law Firm Secures $1.2 Million Judgment in Federal Jury Trial

Palay Law Firm Secures $1.2 Million Judgment in Federal Jury Trial

A jury empaneled in a federal district court has returned a verdict of over $1.2 million in an employment lawsuit brought by a former employee against Telecom Italia Sparkle of North America, Inc. (TISNA).

Plaintiff Kevin Monaghan of Carpinteria, California, who worked as an outside salesperson, alleged that TISNA intentionally misclassified him as an independent contractor.  He further alleged that TISNA terminated his employment in retaliation for his complaints about the misclassification and TISNA’s failure to pay him wages owed.  Monaghan also sought pre- and post-termination wages and commissions he had earned, but which TISNA had not paid.

The jury agreed with Monaghan, awarding him $1,233,193.35 against TISNA, plus his attorney’s fees and costs.

The verdict included $252,729 for Monaghan’s back pay and $609,153 for future economic loss on the retaliation claim and $335,000 in unpaid wages and benefits.  TISNA must also display a notice in a prominent portion of its website with an admission that it has violated the law by misclassifying employees as independent contractors.

California law forbids the willful misclassification of employees as independent contractors.  California law also prohibits employers from retaliating against workers who say they intend to make a claim with any government or law enforcement agency about their employer’s illegal employment actions.

“The verdict sends an important message that employers cannot skirt California employment laws by classifying would-be employees as independent contractors,” said Brian D. Hefelfinger, attorney for Strauss & Strauss, APC, attorneys for Monaghan.  “Nor can they simply fire an employee who exercises his right to complain about unlawful practices.”

TISNA, headquartered in New York, is a subsidiary of Telecom Italia, an Italian telecommunications company with a worldwide network of data- and voice-transmission cables.  TISNA caters to North American customers seeking bandwidth on that network.  

During the three-day trial, Monaghan presented evidence that TISNA terminated his employment one week after he voiced his complaints of illegal activities to TISNA’s Human Resource Manager.  In that email, Monaghan said he intended to file a claim with the California Labor Commissioner regarding TISNA’s failure to pay him a bonus he had earned.  The bonus was available to TISNA employees, but Monaghan, classified as an independent contractor, was ineligible.  TISNA swiftly terminated Monaghan’s employment and denied him the bonus and ongoing commissions from sales he had made prior to his termination.

“We tried to expose what we saw as inconsistencies in their story,” said Hefelfinger.  “Any time a party’s story changes, it puts their credibility at issue.  When the employer’s stated reason for a termination changes, it suggests that the real reason was illegal.  We must have done our job, because the jury found in our favor on almost every issue.”

Monaghan may now move for his attorney’s fees and costs, which are available under California law.

The case is Monaghan v. Telecom Italia Sparkle of North America, Inc., United States District Court for the Central District of California case number 2:13-cv-00646 ABC (PLA).  Copies of the documents from the case are available at www.pacer.gov.