Insights - February 2016 - (Page 11)

Caution Urged on California Driver Reclassification From the desks of Benesch Transportation & Logistics Practice Group (c) the amounts paid to each reclassified driver for misclassification, On Oct. 10, 2015, Governor Jerry Brown signed a state law based on the California bill AB 621 which provides an option to relieve a motor carrier performing drayage services of liability for misclassification of commercial drivers as independent contractors. Under the Motor Carrier Employer Amnesty Program of California established by the new law, carriers who misclassified drivers can apply for relief, provided an eligible motor carrier enters into a settlement agreement with the Labor Commissioner and agrees to reclassify its drivers as employees. Then, the carrier may be relieved of liability for certain statutory or civil penalties associated with its classification of the reclassified commercial drivers as independent contractors. With any government program, however, the devil is in the details, which in this case relate to compliance and to exceptions to the protection the law provides. In fact, that the enacted bill was born of a partnership between the California State Legislature and the California Teamsters calls for a double-dose of careful consideration. (d) the pre-reclassification time periods for which each payment to reclassified drivers applied, Qualifying for Protection To enjoy the protections of the amnesty program, an eligible carrier must submit an application to the Labor Commissioner establishing its eligibility, and report the results of a self-audit consistent with the Commissioner's guidelines. Carriers that reclassified drivers prior to Jan. 1, 2016, either voluntarily or as a result a "final disposition" in a civil proceeding, must also submit the following: (a) documents proving the worker reclassification, including when the reclassification commenced, (b) the identity of each driver reclassified, (e) a self-audit for all reclassified drivers, and (f) a separate self-audit for any drivers subject to reclassification that are not identified under (b) above. Exceptions to Protection An eligible carrier's performance under a settlement agreement acts as a shield against civil or statutory penalties that might have become due and payable for the time period covered by the settlement. However, there are exceptions. In addition, compliance with the settlement agreement relieves the carrier of liability for any unpaid penalties or interest resulting from the misclassification and reclassification of its drivers for the tax reporting periods for which the agreement is applicable. Nevertheless, penalties and interest resulting from any pre-agreement assessments are not waived. Reclassified drivers will receive the recovery obtained by the Commissioner pursuant to the settlement agreement so long as the driver executes a release of all claims existing against the carrier for the misclassification. A driver does not have to accept the agreement; however, the driver will still be reclassified and will be barred from pursuing a claim for civil or statutory penalties for the period covered by the agreement, and the carrier is excused from paying the amount due to the driver under the settlement agreement. Carrier Concessions As renowned economists have often quipped, though, "there is no such thing as a free lunch." Participation in the Program requires eligible carriers to agree to certain painful concessions. Among the concessions, the settlement agreement must include a vague representation providing that the carrier will "perform any other requirements or provisions the Labor Commissioner and the department deem necessary to carry out the intent of [the] section, the program, or to enforce the settlement agreement." If the carrier contracts with any workers in the future as independent contractors, the carrier has a virtually insurmountable burden to prove "by clear and convincing evidence" that the workers are not employees. The statute of limitations for a misclassification claim asserted against a carrier will be tolled from the date of the application through the date of denial, or noncompliance with the settlement agreement. If the Commissioner commences a civil action to enforce the settlement agreement, judgment may be entered within 60 days, plus costs and attorneys' fees. The judgment does not preclude an action to recover additional civil and/or statutory penalties. If Amnesty is Denied The Program provides that if an application is denied, neither the application nor its submission shall be treated as an admission by the motor carrier that it misclassified drivers as independent contractors. However, this purported "safe harbor" provision does not preclude the use of the application, or its submission, as evidence in any proceeding involving the employment status of a carrier's drivers. So, while California has provided some protection for carriers reclassifying drivers as employees, the story doesn't end there. Carriers will need to proceed cautiously to gain what protections they can and to minimize any liabilities resulting from driver misclassification. February 2016 | Intermodal Insights 11

Table of Contents for the Digital Edition of Insights - February 2016

Insights - February 2016
FMCSA Proposes Fitness Revisions
IANA Announces Expanded Sponsorship Package
IANA’s Chair Discusses Association’s 2016 Priorities
Container Weight Verification a 2016 Reality
Freight Reports
Sustainability News
Caution Urged on California Driver Reclassification
Port News
In Brief
People in the News
Welcome New Members
Intermodal Calendar

Insights - February 2016