In Portillo v. National Freight, Inc. (“NFI”), a class of commercial truck drivers brought suit against NFI alleging that it misclassified them as independent contractors (“ICs”) and improperly deducted certain fees from their pay in violation of the New Jersey Wage Payment Law (“WPL”). The parties filed cross motions for summary judgment on the issue of whether the drivers were ICs or employees under New Jersey law. Utilizing the ABC Test, the court held that NFI misclassified the drivers as ICs when, in fact, they were actual employees of NFI.
The class of drivers were truck owner operators that made deliveries to Trader Joe’s stores for NFI, which operated as a third-party logistics company providing transportation services to its clients. The drivers entered into independent contractor agreements with NFI that had the following pertinent provisions: (1) drivers would lease their trucks to NFI and provide transportation services using those trucks; (2) NFI had “exclusive possession, control, and use” of the trucks during the term of the contract; (3) drivers would be designated as independent contractors and not employees; (4) NFI would pay drivers a flat per-mile rate; (5) drivers were responsible for all “operating expenses,” including fuel, supplies, and the cost of repairs; (6) drivers had to always maintain various forms of insurance at the drivers’ expense, but could purchase the insurance policies through NFI, who would then deduct the charges from the drivers’ pay or escrow accounts; (7) drivers were required to install, maintain, and pay for communication and tracking equipment in their trucks; and (8) drivers were required to deposit money into an escrow account so that NFI could deduct funds for the payment of items necessary for the drivers to fulfill their contractual agreement with NFI.
In addition, drivers were required to report to NFI’s warehouses to begin their shifts, confer with NFI employees about the routes that they would drive, and pick up preloaded trailers along with any necessary paperwork. Once they made deliveries at a store, the drivers were required to notify NFI of the deliveries and unload the goods from the trailers. Once their shifts were over, drivers were required to return to the warehouses, drop off the trailers, and provide proof of the deliveries to NFI employees.
In their Complaint, the drivers alleged that NFI violated the WPL by deducting certain expenses from their wages. The WPL requires every employer to “pay the full amount of wages due to his employees….” The definition of “employee” under the WPL does not include ICs. Moreover, the WPL contains no definition of an IC or the manner in which ICs can be distinguished from employees. In order to determine whether the drivers fell within the purview of the WPL as employees, the court looked to the three-part ABC Test set forth in the Unemployment Compensation Law (“UCL”). Under this test, a worker is not considered an employee if (A) the individual is free from control over the performance of their job; (B) the service is outside of the company’s course or place of business; and (C) the individual is customarily engaged in an independently established trade, occupation, profession, or business. The test presumes that workers are employees and requires employers to prove otherwise by satisfying each element of the ABC Test. If the requirements of even one prong cannot be met by the employer, than the worker is an employee under the WPL.
The court first addressed NFI’s contention that a statutory exclusion in the Unemployment Compensation Law barred application of the ABC Test and required that the drivers be deemed contractors as a matter of law. Examining the language of the UCL and relevant case law, the court held that the UCL’s exclusions were not explicitly adopted for WPL claims when the ABC Test was adopted and thus did not bar the drivers’ WPL claims. The court then turned its analysis to the three elements of the ABC Test; namely, (A) the “control” test, (B) the “course or place of business” test, and (C) the “independent business” test.
The court focused its attention on Prong B of the Test, which can be satisfied if an employer can show either that the services performed are outside the employer’s usual course of business or that the services are performed outside of all of the employer’s places of business. NFI attempted to argue that the drivers’ work was outside of NFI’s “course of business” because it was a logistics service provider that connected ICs with its clients and was not a provider of shipping or delivery services. The court disagreed, finding that NFI hired its own drivers in addition to ICs to provide transportation services to its clients and that the IC drivers coordinated directly with NFI personnel—not NFI’s clients—to complete their work. The court held that NFI’s delivery services were part of its “course of business” in addition to its logistics services and that NFI could not satisfy the “course of business” part of Prong B.
The court then turned to the “place of business” element of Prong B. In a previous ruling in its opinion on class certification, the court defined NFI’s places of business to include both its factories/warehouses and the Trader Joe locations that the drivers delivered to. NFI argued that the court should reconsider this prior interpretation because the drivers only worked on the road and at Trader Joe’s locations. Looking at the undisputed facts, the court noted that the drivers performed many services at NFI’s warehouse offices and interacted directly with NFI employees about loads, routes and deliveries. The court found that the tasks the drivers performed were necessary components of NFI’s transportation services and concluded that the drivers performed services in a physical location where NFI conducted an integral part of its business. Thus, the court held that the undisputed facts demonstrated that NFI could not satisfy Prong B of the ABC Test.
Since Prong B could not be satisfied, the court determined it did not need to address the remaining prongs and granted summary judgment in favor of the drivers on the issue of whether the drivers were employees under the ABC Test.
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