Owner-Operator Mileage Award from the Labor Commissioner

Case Study of Unpaid Wages

California law usually finds that “owner-operators” in the trucking industry may be employees, not independent contractors. Companies usually pay these owner-operators a per-mile fee, then deduct costs and expenses, like for the lease of the truck driven by the owner-operator. They do this for many reasons, not the least of which is likely to avoid the liabilities that arise when you employ someone in California; they pass the costs and liabilities onto the owner-operators. To put it simply, the companies do this to make more money.

Despite the likely misclassification of owner-operators as independent contractors, California employers continue to pay owner-operators in this fashion. Assuming one of these owner-operators goes to the Labor Commissioner to collect unpaid wages because of the independent contractor misclassification, how would the Labor Commissioner determine what the owner-operator is owed?

A case recently came down in the Sacramento Labor Commissioner’s office that sheds some light on the issue of what an owner-operator may collect in a claim for unpaid wages. Strauss & Strauss, APC obtained the decision in a public records request. Here’s what happened:

The defendant, a trucking company in California, paid its driver as an independent contractor. The parties agreed that the driver was to earn a wage of $0.95 per mile driven. He drove an average of 550 miles per day, six days per week.

The driver performed his duties under this agreement for a nine-month period. He drove roughly 90,000 miles in that time period. Under his agreement to earn 95 cents per mile, he was paid about $87,000 in total. Though silent on this point, it appears that throughout his employment, the employer likely deducted the cost of his truck lease and other expenses, like operating expenses (fuel, maintenance, insurance, and the like), from the agreed-upon $0.95 per mile payment. This is the typical owner-operator arrangement in the trucking industry. On this basis, the employer deducted a total of about $60,000 in expenses.

The driver brought a claim for unpaid wages. The employer admitted that it had misclassified the driver as an independent contractor (as many owner-operators are misclassified and are really employees). The employer argued, however, that it could retroactively change the agreement; it argued that, if it had treated the driver as an employee, he would have been paid a much lower rate and the employer would not have made the deductions.

The driver asserted that he had an agreement to be paid the $0.95 per mile and the employer should not have deducted the owner-operator expenses, like the lease, maintenance, fuel, insurance, etc. He wanted to be paid the full $87,000 he earned at 95 cents per mile.

The Labor Commissioner agreed with the employee. The hearing officer found that the driver should have been paid the 95 cents per mile and that the employer needed to reimburse the employee for the deductions it had made. Because he had already been paid about $27,000, the Labor Commissioner awarded him about $60,000 for the illegal deductions.

The Labor Commissioner also found that the employee was owed interest on the $60,000, awarding the driver an additional amount of approximately $6,000.

Finally, the Labor Commissioner found that the failure to pay the driver all his wages owed as of the date of his termination was a violation of Labor Code section 203 (waiting-time penalties). The Labor Commissioner awarded him penalties in the amount of roughly $15,500 in waiting-time penalties.

Interestingly, the Labor Commissioner determined that the waiting-time penalties could be calculated thusly: $0.95 per mile driven, with an average of 550 miles driven per day = a daily rate of $522.50. The maximum waiting-time penalty is for 30 days of pay, or $522.50 x 30, which comes out to about $15,500.

This decision by the Sacramento Labor Commissioner illustrates just how much an owner-operator may be awarded for their miles driven and for penalties.