Court tosses out class action lawsuit over classifying drivers as independent contractors
November 30, 2018
While truckers are winning misclassification suits on the West Coast, the fate of similar lawsuits elsewhere in the country is less predictable. The Seventh Circuit court of appeals in Chicago recently dismissed a class action lawsuit that claimed a trucking company misclassified drivers as independent contractors.
On Nov. 20, the United States Court of Appeals for the Seventh Circuit affirmed a lower court’s decision to dismiss a trucker’s lawsuit without prejudice. With the courts in disagreement over the reason for dismissal, it leaves one critical question unanswered: Do the truckers still have a valid argument about being misclassified as independent contractors?
The lawsuit, originally filed in January 2017, claimed that Jones Motor Co. violated the Illinois Workers’ Compensation Act, the Illinois Wage Payment and Collection Act and Illinois common law by labeling drivers as independent contractors despite treating them like employees.
According to the complaint, Jones Motor had control over its drivers in the following ways:
- Asserted exclusive possession, control and use of tractors and trailers owned and operated by drivers.
- Asserted authority to certify “as qualified” the persons permitted to operate the drivers’ highway tractors.
- Drivers were required to receive all loads through Jones Motor dispatchers. Drivers were restricted from driving for any other carrier or receiving any loads in any way other than through Jones Motor dispatchers.
- Drivers were required by their contractor operator agreement to “stop into the company office … for company orientation” within 30 days of signing their contractor operator agreement, including listening to lectures, reading handouts and taking a test at the end of the program.
- Drivers were required to adhere to Jones Motor’s “Corporate Value Statement,” “Company Speed Limit Policy,” “MVR Prohibitions,” “Passenger Policy,” “Procedures for Passing,” and “Procedures for Braking.” Drivers were warned failure to abide by these policies “may result in disciplinary action which could include termination.”
- Drivers were given probation as discipline for violating company policies.
- Drivers required to affix Jones Motor marks on their tractors and trailers.
Additionally, Jones Motor referred to drivers as employees on several occasions. On its website, Jones Motor states drivers must pass a “pre-employment” drug test. Drivers were required to sign a “Disclosure and Authorization for Release of Information for Employment Purposes.” Several other documents drivers signed used some form of the word “employee.” In total, the complaint mentions nearly 20 ways drivers were treated as employees.
Drivers were also required to purchase an occupational accident policy through Zurich American Insurance, which results in a weekly pay deduction of $38.60. Unknown to drivers, Zurich sold Jones Motor a contingent liability policy that protected the carrier from workers’ compensation claims, but only from claims filed by those who held Zurich’s occupational accident policy. Consequently, this gave Jones Motor incentive to require insurance from Zurich.
According to the lawsuit, the approximately $1,500 per year in annual premium Jones Motor paid to Zurich for the contingent liability policy did not cover and was never intended to cover the costs and exposure of Jones Motor’s liabilities for the drivers.
Whenever a driver filed a workers’ comp claim, Zurich paid benefits through the occupational accident policy fees, effectively using those premiums drivers paid to Zurich to indemnify Jones Motor for its workers’ compensation liability. Essentially, drivers paid for Jones Motor’s workers’ compensation premiums and for its attorney to represent the company against them. In Illinois, it is illegal for employees to pay their own workers’ comp.
In March, the district court ruled that the drivers failed to state a claim. More specifically, the court could not make any ruling until it was proven that the drivers were misclassified as independent contractors. Only the Illinois Workers’ Compensation Commission could make that determination, the district court judge noted. Therefore, the case was dismissed.
The appellate court agreed that the case should be dismissed but for other reasons. Affidavits revealed that Jones Motor only hired 52 truck drivers. However, the lawsuit claims damages of more than $5 million for more than 100 class members. Federal courts have jurisdiction over class actions on where there are at least 100 class members.
The appellate court vacated the opinion of the district court and ordered to modify the judgment of dismissal without prejudice to reflect dismissal for lack of subject matter jurisdiction.