From the California Labor Commissioner:

March 1, 2013 | Long Beach, CA – California Labor Commissioner Julie A. Su won a California Superior Court trial yesterday when the court ruled that Port of Long Beach truck drivers working for Seacon Logix, Inc. were employees and not independent contractors.

“The Labor Commissioner is committed to attacking misclassification wherever it occurs in California,” said Christine Baker, director of the Department of Industrial Relations (DIR). The California Labor Commissioner’s office, also known as the Division of Labor Standards Enforcement (DLSE), is a division of DIR.

“In this case, drivers had signed agreements labeling them independent contractors but the Court saw the truth behind the label,” Labor Commissioner Su stated. “The Court found that the company exerted sufficient control over the drivers such that the drivers were employees of the company and thus, enjoy all basic labor law protections.”

The case originated from wage claims filed by four drivers in the Long Beach office of the Labor Commissioner’s office, also known as the Division of Labor Standards Enforcement (DLSE). The drivers claimed unreimbursed business expenses and unlawful deductions, including weekly truck rental fees and liability insurance costs for the Seacon Logix trucks they drove for the Gardena-based shipping and trucking company. Hearings on the claims on Nov. 16, 2011 resulted in a decision requiring Seacon Logix to pay $105,089.15 for violations including unlawful withholding of wages, interest and waiting time penalties. Seacon Logix appealed the hearing decision with the Superior Court.

The appeal was heard in a four-day bench trial from Feb. 25-28 at the California Superior Court in Long Beach, where the drivers were represented by attorneys for the Labor Commissioner. Yesterday’s ruling upheld the Labor Commissioner’s hearing decision and ordered Seacon Logix to pay $107,802, including interest. The drivers will receive the full amount of that award.

“This case highlights the critical need for labor law enforcement, particularly where misclassification cheats hardworking men and women like these port truck drivers out of the full pay to which they were entitled,” continued Labor Commissioner Su. “This is wage theft and we will do everything in our power to stop it.”

Employers improperly classify employees as independent contractors so they do not have to pay payroll taxes, the minimum wage, overtime, comply with providing meal periods and rest breaks, or reimburse their workers for business expenses. In addition, employers do not have to cover independent contractors under workers’ compensation insurance and they are not liable for payments under unemployment insurance, disability insurance, or social security. However, those short term savings are increasingly becoming a potential business-killing liability down the road, as rulings like the above point-out. And not only will the business pay repercussions at the state level, they will likely be hearing from Uncle Sam and the IRS sooner-than-later.