Driver Misclassification Settlement Includes $2.2M for Back Wages

New Jersey has reached an employee misclassification settlement with STG Logistics over allegations that the company and its predecessor misclassified hundreds of truck drivers as independent contractors.

New Owner Assumed Liability

In 2019, the New Jersey Department of Labor and Workforce Development (NJDOL) began investigating XPO Logistics’ Newark intermodal operations. STG Logistics acquired XPO’s New Jersey intermodal business in 2022 and assumed liability for certain past employment practices, according to the state’s lawsuit against STG.

The NJDOL’s investigation alleged STG:

• Failed to pay all wages due
• Made unlawful deductions for fuel, tolls, parking, liability insurance, fees, and truck maintenance and repairs
• Made deductions that, in some pay periods, exceeded drivers’ gross pay and resulted in negative net pay
• Failed to maintain required records of hours worked and wages paid
• Failed to provide and pay earned sick leave
• Failed to maintain sufficient workers’ compensation coverage, and
• Failed to make required contributions to New Jersey’s unemployment compensation and state disability benefits funds.

Employee Misclassification and State Law

Under New Jersey’s ABC test, workers are presumed to be employees unless a business can prove that the individual is largely free from the company’s control, performs work outside the company’s usual business or outside its places of business and has an independent business. NJDOL alleged that STG couldn’t satisfy any of the three prongs and that the drivers therefore were employees, not independent contractors. 

Specifically, the NJDOL said the companies exercised significant control over the drivers and their work, including by:

• Requiring that the company’s name appear on drivers’ trucks
• Requiring drivers to lease their trucks to the company for its exclusive possession, control and use
• Prohibiting drivers from using the trucks for other work without written consent
• Requiring drivers to sign non-negotiable “independent contractor agreements”
• Requiring installation of GPS tracking devices in drivers’ trucks, and
• Assigning all routes, tightly monitoring deliveries and setting pay rates.

NJDOL alleged that, because the drivers should’ve been treated as employees, they were entitled to wage protections and employment-related benefits, including minimum wage and overtime, workers’ compensation, unemployment insurance, temporary disability benefits, earned sick leave, job-protected family leave and equal pay protections.

Bankruptcy Limits Immediate Recovery

STG filed Chapter 11, and the settlement lists a gross value of $80.912 million, but only $2.775 million is designated as priority claims. That amount includes $2.22 million in unpaid wage claims for eligible drivers and $555,000 to the state for penalties and employment-related fund contributions. 

The remaining $70.637 million is classified as general unsecured claims. The agreement also provides for $7.5 million in suspended liquidated damages if STG violates the agreement.

STG denied the allegations, saying it entered the agreement solely to settle the dispute.

Future Drivers Must Be Treated as Employees

Under the agreement, STG must comply with New Jersey employment laws and treat drivers who perform services in New Jersey under the company’s motor-carrier authority as employees. That requirement applies even if a driver is called an owner-operator or operates through a business entity. STG must also submit periodic reporting to NJDOL through 2028.

More info: NJDOL Settlement Agreement