Misclassification lawsuit thrown out over technicality

A trucking company has temporarily escaped allegations of misclassifying independent contractor drivers in a case being heard in an Illinois federal court.

Judge Elaine Bucklo of the U.S. District Court for the Northern District of Illinois granted Channahon, Ill.-based Direct Trucking, doing business as Sparc Transport, its motion to dismiss a class-action lawsuit filed by one of its drivers.

The lawsuit alleges that the trucking company illegally deducted wages from drivers by misclassifying them as independent contractors. Additionally, the named plaintiff accuses Sparc Transport of a predatory lease-purchase agreement.

Although the court’s decision is a setback for drivers in the case, it is not necessarily the end.

Misclassification allegations

Pedro Baez filed the lawsuit against Sparc Transport last December, accusing the company of exerting complete control of drivers’ operations despite being hired as independent contractors.

According to the complaint, Sparc Transport deducted up to thousands of dollars from his pay each week. Deductions included truck payments, insurance, tolls and a fuel card. Sparc Transport also charged a $5,000 escrow, which never was repaid to Baez.

Baez did not control which loads he hauled. Rather, he was required to regularly check in with Sparc Transport dispatchers, who told him which loads to haul and when and where to pick them up. When making deliveries, he had to meet strict time constraints set by the company.

Other aspects of driver control included:

• Drivers required to comply with instructions dictated by written and unwritten policies, procedures and directives regarding drivers’ duties
• Drivers required to report to or contact dispatchers employed by Sparc Transport each day, at which time drivers were provided with delivery assignments
• GPS devices installed on trucks, allowing the company to track drivers throughout the day
• Required background checks and drug testing prior to being hired
• Drivers required to give timely advance notice for any time off; failure to do so would result in discipline or termination

Typical of employee drivers, the independent contractors were not allowed to have their own customers. Additionally, they did not have the authority to negotiate pay with customers. Instead, independent contractors were compensated by Sparc Transport.

The lawsuit seeks class action status for more than 100 similarly situated drivers. Class action claims include violations of the Illinois Wage Payment and Collection Act.

Lease-purchase allegations

Separate from the class-action misclassification claims, Baez also has accused the company of a predatory lease-purchase agreement.

Since Baez did not own a truck when he began working for Sparc Transport, he entered into an “installment sales contract” to purchase one with the company. Baez made monthly payments toward ownership of the truck.

When he stopped working for the company, Sparc Transport told him he could not use the truck to work for another company. He was forced to return the truck after paying thousands of dollars in payments. According to the complaint, nothing in the contract states that Baez needed to continue driving with Sparc Transport in order to purchase the truck.

Procedural screw-up stops lawsuit

In February, Sparc Transport moved to have the misclassification lawsuit dismissed based less on the merits of the allegations and more on the grounds of court jurisdiction.

Baez filed the complaint in a federal court rather than a state court under diversity jurisdiction, which allows non-federal questions to be heard if two requirements are met:

• Plaintiffs are citizens of different states than defendants
• Amount in controversy exceeds $75,000

Sparc Transport argued that the complaint did not provide any proof or factual allegations pertaining to any dollar amount owed to plaintiffs. Therefore, the lawsuit did not meet the $75,000 threshold.

Bucklo granted the trucking company its motion but for a different reason. In the complaint, Baez is recognized as a “citizen” of Indiana. Sparc Transport President Edward Kim, on the other hand, is described as a “resident” of Illinois. Diversity jurisdiction requires plaintiffs and defendants to be citizens of different states. Since Baez used the word “resident” for Kim, not “citizen,” the judge dismissed the case based on that technicality.

Baez can still file an amended complaint correcting the issue and resurrect the case. In her order, Bucklo advised Baez to also address the issue of the amount in controversy in the amended complaint in anticipation of a second challenge under those grounds.

Regarding the lease-purchase claims, Sparc Transport points out that the contract was between the company and Baez’s company, PA Baez Inc., not Baez himself. Since Baez is the plaintiff in the case, not his company, claims pertaining to the contract must be thrown out. Bucklo did not address the issue in the order, leaving it open for another challenge if an amended complaint makes similar claims.

As of Thursday, May 23, no amended complaint had been filed.

Amended complaint

On Thursday, May 23, Baez filed an amended complaint addressing the issues that led to the first complaint’s dismissal.

In the amended complaint, Baez changed Kim to a citizen of Illinois from the originally stated status of resident of the state.

In an attempt to address the issue of establishing an amount of controversy that meets the second requirement, the amended complaint simply added the following paragraph:

“Specifically, and as set out further below, plaintiff worked for Sparc close to two years, suffered deductions which were often in excess of a thousand dollars a week, and was required to incur out-of-pocket expenses totaling hundreds of dollars per month. These amounts, together with the 5% monthly statutory interest provided for by (Illinois wage law), are in excess of $75,000.00.”

Other than those two changes, the rest of the amended complaint is identical to the original, including the lease-purchase allegations that Sparc Transport had previously challenged. LL