Courts Rule Against Local Cab Company in 'Employee' Classification

U.S. Labor Department officials Thursday said recent federal court rulings against Bay Area companies worth millions in unpaid back wages constitute a strong warning to employers seeking to misclassify employees as independent contractors.

San Leandro-based National Consolidated Couriers Inc. has agreed to a judgment approved by U.S. District Judge William Alsup in July requiring the company to pay $5 million in unpaid back wages and damages to more than 600 drivers, labor department officials said today.

Drivers for the company had been misclassified as independent contractors and were not receiving the minimum wage or overtime pay, the department said. The company actively worked to avoid a labor department investigation and deposition and at one point an executive directed an employee to destroy all emails relating to the case, according to Janet Herold, the regional solicitor for the department of labor.

Ultimately, however, the department was able to obtain data showing that the company was exercising managerial control over the drivers.

Likewise, the Mountain View-based Stanford Yellow Taxi Cab, Inc. called its drivers independent contractors.

However, the company required drivers to work lengthy 12-hour shifts six days a week and sit unpaid for long stretches while waiting for fares at hotels that the company worked with and prohibited them from picking up outside passengers. The company also set rules governing drivers’ behavior and dress. Herold said the company had actively interfered with the department’s investigation and retaliated against drivers who cooperated, and then argued in court that it was not violating federal law because the drivers were contractors.

A May ruling by U.S. District Judge Edward Davila, however, found that the drivers were employees, and ordered the company to cooperate with the ongoing labor department investigation. The department is still litigating to compel the company to pay nearly $3 million in back wages and damages to dozens of drivers, officials said today. Herold noted that the unpaid wages were “only the tip of the iceberg,” because the employers had also failed to pay for payroll taxes, unemployment insurance, workers compensation and other benefits that rival companies were paying for.

“Think about the competitive disadvantage those other couriers were at,” Herold said.

Herold said misclassification of employees is a growing problem.

“It used to be that misclassification was an occasional problem and now you see entire industries misclassified,” Herold said.

David Weil, administrator of the labor department’s Wage and Hour Division, said his department is actively engaging in outreach and education on the issue.

“But make no mistake,” Weil said in a statement. “We are also engaged in a nationwide, data-driven strategic enforcement initiative across all industries to ensure that workers are correctly classified and properly paid, and that those employers who are playing by the rules aren’t operating at a competitive disadvantage to those who aren’t.”

By Bay City News

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