Truck Driver Ruling Shows How State Law Can Decide Misclassification Claims

by Johanna C. Richter and Nikita Khare

Sparc Transport Drivers File Misclassification Class Action

On December 18, 2023, truck driver Pedro Baez filed a class action lawsuit asserting violations of the Illinois Wage Payment and Collection Act (IWPCA) against Direct Trucking, a trucking company that operates under the name of Sparc Transport in Channahon, Illinois.  Sparc Transport hired Pedro Baez and other drivers as independent contractors to complete deliveries in the general Illinois area.  In the submitted complaint, Baez alleges that, though he and the other drivers worked exclusively for Sparc between 50-70 hours a week, they should have been classified as employees rather than independent contractors.  Baez further alleges that, because of the misclassification, Sparc Transport impermissibly deducted insurance coverage, truck and trailer payments and tools from the drivers’ pay, which sometimes amounted to thousands per week.  Baez also alleges that Sparc did not reimburse drivers for out-of-pocket expenses incurred through job duties, e.g. truck maintenance and repairs, which could incur additional hundreds of dollars lost per month.

Independent Contractor vs. Employee

Under both federal and state law, employees receive a number of protections independent contractors do not. Independent contractors are not protected by minimum wage laws, overtime laws, and do not receive unemployment or workers’ compensation benefits. They also must rely on courts instead of any state agencies to solve wage disputes or protect their rights. Additionally, employers must cover certain job-related expenses for employees.  If workers are found to be misclassified, employers are often required to pay back wages, overtime, any penalties and interest, as well as state and federal owed taxes.  Federal statutes and individual states each employ different methods to determine misclassification.

Why Misclassification Claims Often Become Class Actions

Under Federal Civil Procedure Rule 23, Baez filed his IWPCA deductions and expenses claims as a class action on behalf of current and former delivery drivers providing services for Sparc Transport in Illinois. When a legal question—which, in this case, was whether the truck drivers were misclassified—applies to a group large enough that litigating each plaintiff’s individual claims becomes impractical or risks inconsistent determinations, Rule 23 allows a Plaintiff in a class action to serve as the representative party for the interests of the class. This approach is particularly useful when hundreds of workers are potentially misclassified by the same employer, which, in this case, were the “several hundred driver contractors” working for Sparc Transport.

In July 2023, the Bureau of Labor Statistics identified 11.9 million people working as independent contractors, consisting of 7.4% of the United States’ total employment. The two industries with the largest fraction of independent contractors were real estate, rental, and leasing (24.2%) and construction (18.5%). Many companies in the growing gig economy, which includes platforms such as Uber and Lyft who hire drivers as independent contractors, have also been accused of misclassification.

Illinois ABC Test

To determine whether the truck drivers were independent contractors or employees in Baez’s class action, the U.S. District Court for the Northern District of Illinois utilized the ABC Test.  The ABC Test assumes all individuals performing a service for an “employing unit” are employees unless they meet the following three criteria: (a) the individual performing the service is and will continue to be “free from control or direction,” (b) the service is “outside the course of usual business” or outside all “places of business,” and (c) the individual engages within “an independently established trade, occupation, profession, or business.”

Court Rules Sparc Truck Drivers Are Employees

Judge Elaine Bucklo ruled that the truck drivers were employees under Illinois State Law, not independent contractors, as Sparc Transport did not provide facts sufficient to overcome the presumption that workers are employees under the ABC test. The judge noted that it was undisputed that drivers worked full-time and exclusively for Sparc Transport and that Sparc Transport required the drivers to undergo background checks, driving record checks, and drug tests. Additionally, Sparc Transport required drivers to regularly check in with their dispatchers, where they were provided with instructions on which loads to haul, where to haul them to.  The company defended these policies, citing its need to make sure drivers were competent. However, the Judge Bucklo explained that the reasons that Sparc exercised this kind of control over drivers were “irrelevant” in analyzing Prong A of the ABC test. Additionally, under Prong C, drivers’ trucks bore Sparc’s logos and DOT numbers, which the company argued were required so customers could identify who is “responsible for loads and property damage.” However, Judge Bucklo responded that the intention “does not matter,” as the company ultimately still had control over the drivers.

The Federal Economic Reality Test Under the FLSA

The court’s ruling comes as the Department of Labor proposes a new final rule seeking to alter the existing Economic Reality Test established by the Biden administration in 2024, which identifies whether a worker is an employee or an independent contractor under the federal Fair Labor Standards Act.

The current test reviews the “totality of circumstances” to determine if a worker is economically dependent on the employer or is in business for themselves.  This means a number of factors can guide the final assessment of a worker’s status, and no particular factor or a combination of factors is necessarily definitive.  Factors include opportunity for profit or loss, permanence of the work relationship, and whether the work performed is integral to the business mission.  If an employment relationship is found under the FLSA, the employer must pay at least the federal minimum wage of $7.25, lawful overtime pay, and abide by all other FLSA protections for recognized employees.

The new rule establishes two “core factors” to replace the former “totality of circumstances” approach, potentially broadening who qualifies as an independent contractor under the FLSA, and also the Family and Medical Leave Act and the Migrant and Seasonal Agricultural Worker Protection Act.