XPO Logistics calls terms of $30M driver misclassification settlement 'favorable'

Dive Brief:

A federal judge has approved two preliminary settlements on behalf of 784 current and former XPO Logistics first-seat port drivers in California, according to the Teamsters. The awards cover XPO Cartage and its drivers, as well as XPO Port Services and its drivers.
The awards are worth nearly $30 million, stemming from class-action lawsuits that alleged the drivers were "willfully misclassified, left unreimbursed for truck costs and received less than minimum wage," the Teamsters said. The preliminary settlements cover claims going back to 2013.
During the cases, XPO argued it correctly classified its owner-operators as independent contractors, given that the contractors have flexibility and freedoms that are not found in any employment relationship. The settlement allows XPO to deny liability.

Dive Insight:

Despite the settlement for the Teamsters — which General President James P. Hoffa hailed in a press release as a "huge win" for unions that have criticized XPO for years — the union acknowledged the LTL giant will still not classify the drivers as employees. XPO argued during the case that it correctly classified its owner-operators as independent contractors.

The reason XPO stuck to its ground was that the owner-operators had flexibility and freedoms that do not exist in a typical employment relationship. XPO said it believes its independent contractors want that flexibility, including opportunities to set schedules and to choose loads. XPO's independent contractors can also own their carrier businesses, and hire others to run multiple trucks.

The arguments made by the unions and XPO are a timely microcosm of what is taking place in California, where Golden State lawmakers seek to force companies to classify most independent contractors as employees using AB5.

But even before the passage of AB5 in 2019, California state government has awarded contractors millions of dollars in wage settlements. In recent years, California's labor commissioner’s office has awarded $50 million to about 500 truckers who claimed misclassification, according to the Los Angeles Times.

Ron Herrera, Teamsters international vice president of the Western region, said carriers should expect further scrutiny.

"Misclassification of workers is all too common in the ports of Los Angeles and its surrounding areas, and while XPO is notorious for doing this, there are far too many employers still cheating workers out of the pay and the rights they deserve," Herrera said in a press release.

But XPO said it was moving on, while keeping an eye on AB5.

"With the legal and regulatory landscape in California evolving, we reached a settlement on terms that are favorable for XPO and should put this matter behind us," said Joseph Checkler, XPO spokesperson.