National Consolidated Couriers Inc. agreed to pay $5 million in unpaid wages and damages after misclassifying more than 600 delivery drivers in California as independent contractors, the US Department of Labor announced today.

The case is one of two misclassification cases announced by the Department of Labor. In another case, the department is pursuing almost $3 million in back pay and damages against Stanford Yellow Taxi Cab of Mountain View, Calif., for misclassifying dozens of drivers as independent contractors.

“As these court rulings indicate, the tide is turning against those employers who misuse independent contractor status to take advantage of workers,” said Regional Solicitor Janet Herold of the Labor Department’s Western Region, who litigated both cases. “The courts recognize the nature of this problem and stand ready to ensure that justice is served.”

National Consolidated Couriers misclassified workers since April 2010, according to court records. The San Leandro, Calif.-based firm required drivers to operate at its direction and wear badges. They were also subject to discipline by the company and did not negotiate pay.

The company also tried to destroy records showing an employment relationship with drivers during the course of the federal investigation, according to the Labor Department.

Judgement in the National Consolidated Couriers case was filed last month.

In the taxi case, Stanford Yellow Taxi Cab required drivers to be on the job six days per week for 12-hour shifts but did not compensate them for all hours, according to the department. Stanford also did not allow drivers to change their schedules or operate independently by reaching out directly to passengers. The company also had a dress code.

In addition, the cab company threatened and intimidated drivers who were cooperating with investigators, according to the department. One worker was fired days before trial.

“Misclassification is workplace fraud, plain and simple,” said US Secretary of Labor Thomas Perez.
“It hurts workers by denying them a fair day’s pay for a fair day’s work, and it also undermines the competitiveness of businesses that are playing by the rules. At the Labor Department, through vigilant and vigorous enforcement, we are cracking down on irresponsible employers who game the system and cheat their employees — and that’s what they are: not contractors, but employees.”

Investigations by the Labor Department’s Wage and Hour Division resulted in more than $79 million in back wages for more than 109,000 workers misclassified as independent contractors in federal fiscal year 2014.

While the Labor Department is pursuing misclassification, others are pursuing it as well.

In a separate California case, right-to-control proved a major factor in a recent California Court of Appeals decision that found four Southern California truck drivers were employees, not independent contractors.

Logistics provider Seacon Logix used the drivers, which it classified as independent contractors, to haul items from the ports of Los Angeles and Long Beach to warehouses. But drivers took issue with paycheck deductions for use of trucks, and the state Labor Commissioner’s Office ruled the drivers should be reimbursed as they were employees and not independent contractors.

Seacon took the case to court, however, the trial court also ruled the drivers were employees. In its appeal, Seacon argued the trial court’s ruling was not supported by substantial evidence and the damages were excessive.

But the Court of Appeals agreed with the lower court.

“In finding that respondents were employees, not independent contractors, the trial court credited respondents’ testimony that Seacon controlled the manner and means of their work, and rejected Seacon’s evidence that respondents retained such control,” the Appeals Court wrote. “The court also relied on evidence that Seacon required drivers to enter into both a lease agreement and a sub-haul agreement or transportation agreement, thereby obligating drivers to lease their trucks from, and drive them for, Seacon. The court determined that this arrangement gave Seacon ‘tremendous control’ over the drivers because if they did not comply with Seacon’s requirements, they would lose their trucks. The trial court’s conclusions are fully supported by the evidence.”