It’s a difficult time to be a transportation company in California. Last month, the California Labor Commission ruled that an Uber driver was a company employee and not an independent contractor. Although the case involved only one driver and a minimal amount of damages, it is expected to spawn a slew of class action claims in multiple states challenging Uber’s business model.
The Uber decision followed a disastrous ruling for the trucking industry in a case against Wal-Mart in the Northern District of California in late May. Ridgeway v. Wal-Mart involves a class action claim by drivers against Wal-Mart claiming that Wal-Mart violated California’s wage and hour laws by failing to pay drivers at least minimum wage for time spent on tasks like inspections, waiting time and completing paperwork, and for time spent taking DOT mandated layovers. Wal-Mart, like many trucking employers, paid its employees primarily on the basis of a per-mile rate and it argued that the value of these minor pre-and post-trip services was subsumed within the mileage rate paid. Courts in federal wage and hour cases typically allow employers to average the compensation paid to drivers over the entire time worked in determining whether the minimum wage requirement has been met, so most trucking companies which pay drivers on a mileage basis do not violate the minimum wage laws. In the Wal-Mart case, the Court refused to follow this typical practice and found that Wal-Mart needed to pay at least the hourly minimum wage for the actual time spent on each of these tasks, in addition to the mileage rates paid.
The Court’s decision on payment for layover periods is particularly troublesome. What started as a stipend provided to drivers taking their DOT mandated rest periods in their tractors was morphed by the Court into an obligation to pay at least minimum wage for each DOT mandated 10 hour rest period.
The cost of doing business in California has always been high, but as a result of these decisions, it has just become higher.
For more information on this case, please click here.
Please click here for the case and Wal-Mart Order.