Automann

Worker Classification Battle with AB5 in the Background Rages in California

Chicago-based STG Logistics, one of the largest containerized logistics providers in the nation, got more than it bargained for when it acquired XPO Logistics’ intermodal unit for $710 million last March.

Not long after the acquisition, 260 workers for the former XPO company were ruled to be employees and not independent contractors by the National Labor Relations Board (NLRB).

Not only that, but these workers, now employees, immediately applied to unionize. Ballots went out in June. Some of these workers had been seeking both employee status and unionization while the company was still under the XPO banner. In response, STG asked for a review of the NLRB decision just after unionization ballots had gone out. Ballots were set to be counted on July 15, but because of STG’s appeal, the ballots were impounded when the NLRB decided that STG’s request for review “raises substantial issues.”

The original NLRB decision was made by William Cowen, regional director of the National Labor Relations Board’s Region 21. At the time of his decision, he said the company (then XPO) was “in the same business as the drivers, namely delivery services to clients using a myriad of resources including the last-mile delivery services of the drivers at issue in this case.”

Because the drivers had no “proprietary interest” in their routes, Cowen said, they don’t “operate independent businesses with real and actual entrepreneurial opportunity for gain and loss.”

That independence guideline in determining whether a worker is an employee, or an independent contractor is a key part of the ABC test handed down by the California Supreme Court in the Dynamex decision and later codified in AB5, the state employee classification law.

In its petition to negate Cowen’s ruling, STG said, “There is no dispute that owneroperators are entrepreneurial businesses and individuals over whom STG exercises little control.”

The original filing by the Teamsters and the workers to the NLRB included secondseat drivers, and STG said the owneroperators, “not STG, maintain either an employment or an independent contractor relationship with them.”

One way in which companies like STG can show compliance with AB5 is to make employees out of drivers who were otherwise considered to be independent contractors. If the Cowen decision stayed in effect, STG would presumably be compliant with AB5.

In its filing, STG argued the drivers it considered independent contractors have “entrepreneurial opportunity” in that they “negotiate their compensation,” can hire second-seat drivers independently, made a “significant initial investment to acquire a tractor” and “do not have to wear uniforms or even physically appear at STG’s terminals to accept loads.”

In its response to STG’s appeal, Teamsters’ lawyers listed several work requirements at STG that they say indicate the drivers should have been classified as employees:

Drivers are subject to random inspections at gates and railroad terminals. “If XPO finds any violations, drivers are required to fix those violations,” the filing said. Drivers are required to submit daily logs, even if they are not working. And they are required to receive a load at least in a rolling 35-day period. If they don’t, they are terminated.

The statement by STG that compensation is negotiated is not true, according to the union filing. “Drivers have unsuccessfully tried to negotiate XPO’s rates, but XPO does not negotiate.”

“Dispatchers decide what work they will send to each driver and rarely provide drivers with the option to choose which assignment they want,” the filing says.

According to some analysts who are experts in California’s AB5 law, the original NLRB decision by Cowen is on firm ground and will more than likely be upheld.