California AG sues drayage companies with ‘independent contractors’

By Charlie Morasch, Land Line staff writer | Monday, September 08, 2008

California Attorney General Jerry Brown has filed civil lawsuits against two drayage trucking companies operating at the ports of Long Beach and Los Angeles – alleging the firms “abuse their workers by denying them protections under state workers’ compensation, disability and minimum wage laws.”

The lawsuits – and Brown said several more will be filed in coming weeks – allege that trucking companies have an unfair advantage over their competitors by depriving employees of benefits and protections they’re entitled to under California law.

“These companies are also cheating the State of California out of thousands of dollars in state payroll taxes,” a statement from Brown’s office read.

The first company sued was Jose Maria Lira, a fleet operator who transports cargo from the ports. The case alleges that he “controlled all aspects of his drivers’ work,” yet classified his employees as independent contractors and made them sign documents saying they were independent, Brown’s office said.

A lease agreement that Lira’s drivers signed stated the driver would pay Lira 50 percent of his gross earnings each month in return for use of the truck, plus an additional 10 percent for management fees.

Drivers worked 60 hours or more per week exclusively for Lira, delivering cargo with Lira company trucks.

The second suit filed Friday was against Pac Anchor Transportation Inc., and owner Alfredo Barajas. Pac Anchor and Barajas used “a shell game,” Brown alleges, in which Barajas supplied the company with 38 trucks and drivers. Pac Anchor directly paid the drivers and avoided higher operating costs and taxes and benefits by providing them with 1099 tax forms at the end of the year.

“We are cracking down on these two companies and investigating several others that are taking advantage of their workers and cheating the state out of payroll taxes,” Brown said in a statement. “These are low-paid truck drivers working long hours under onerous conditions who are not getting the benefits they deserve.”

Brown’s office began investigating trucking companies at the ports through a task force beginning in February. The investigation “uncovered numerous state labor law violations committed by several trucking companies operating at the ports.”

Unfortunately, non-conforming or blatantly illegal leases aren’t a rarity, said Joe Rajkovacz, regulatory affairs specialist for OOIDA.

“This kind of litigation is not a surprise,” said Rajkovacz. “There is other litigation in the country concerning misclassification status of drivers and often bogus lease-purchase programs are at the root of these suits. Most lease purchase arrangements have a fatal defect in that they are not designed to allow the driver to be successful as an independent contractor.”

– By Charlie Morasch, staff writer
charlie_morasch@landlinemag.com

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