California AG Cracks Down on Trucking Companies

California Attorney General Edmund Brown Jr. announced a crackdown on trucking companies operating at the Ports of Long Beach and Los Angeles that reportedly abuse their workers by denying them protections under state workers’ compensation, disability and minimum wage laws.

These companies reportedly engage in cost-cutting schemes that take advantage of their workers and avoid California taxes. They unlawfully classify their workers as “independent contractors,” circumventing state employment taxes and labor laws that guarantee workers' comp and disability benefit and the right to a minimum wage.

“We are cracking down on these two companies and investigating several others that are taking advantage of their workers and cheating the state out of payroll taxes,” Brown said. “These are low-paid truck drivers working long hours under onerous conditions who are not getting the benefits they deserve.”

Beginning in February 2008, the Attorney General’s office authorized a task force to investigate trucking companies at Long Beach and Los Angeles Ports. The investigation uncovered numerous state labor law violations committed by several trucking companies operating at the ports. Two of the lawsuits were filed in Los Angeles Superior Court and several more will be filed in the coming weeks.

The lawsuits allege that the trucking companies named in the suits have an unfair advantage over their competitors in violation of California Business and Professions Code 17200 by depriving employees of benefits and protections entitled to them under California law. These companies are also cheating the State of California out of thousands of dollars in state payroll taxes.

Jose Maria Lira, a fleet operator responsible for transporting cargo from the Ports of Los Angeles and Long Beach, controlled all aspects of his drivers’ work, yet reportedly classified his employees as independent contractors and made them sign documents stating that they were independent. Lira leased his trucks to drivers, reportedly requiring them to sign a lease agreement stating that the driver would pay Lira 50% of his gross earnings each month in return for use of the truck, plus an additional 10% for management fees.

In fact, Lira reportedly required them to claim independent contractor status contrary to their true status as employees. The drivers worked exclusively for Lira, working 60 hours or more per week, delivering cargo in Lira company trucks. Under these conditions, the drivers should have employee status with its legal protections and benefits under the law.

The second lawsuit filed is against the Pac Anchor Transportation Inc. (“Pac Anchor”) and Alfredo Barajas.

Brown asserted that Pac Anchor and Barajas engaged in a shell game in which Alfredo Barajas supplied Pac Anchor with 38 trucks and drivers. Pac Anchor directly paid Barajas’ truck drivers, providing them with 1099 tax forms at the end of the year. Barajas and Pac Anchor reportedly misclassified the drivers as independent contractors in order to keep operating costs down and to avoid paying the mandated taxes and benefits.

The investigation found that the drivers should be classified as employees because they do not own the trucks they drive, do not have a business independent of Pac Anchor or Barajas, have no real opportunity for “profit” other than compensation on a piecework basis delivering loads, and can be terminated at will.