New England Biz Law Update
California’s labor commissioner has issued a citation of more than $868,000 against Costco Wholesale, Ryder Last Mile and trucking subcontractor Mega Nice Trucking for misclassifying delivery drivers as independent contractors and failing to provide required wage-and-hour protections.
Investigators found that drivers delivering large items for Costco were paid a flat daily rate, received no overtime, and were subject to detailed scheduling, routing and performance requirements that indicated employee status.
This enforcement action serves as a reminder that companies may face liability for misclassification and wage violations when they exert control over contracted or subcontracted workers.
Although Costco and Ryder used a subcontractor to supply the drivers, regulators determined that the companies exercised sufficient operational control to be treated as joint employers.
The citation includes unpaid wages, liquidated damages, waiting-time penalties and civil fines, with more than $660,000 designated for payment directly to affected workers. All three companies have appealed.
For employers, the case highlights that subcontracting does not eliminate exposure when a company influences how work is performed, and that flat day-rate pay structures remain a common red flag for misclassification.
Multi-state employers should reassess worker classification under each jurisdiction’s test, particularly in states with strict ABC-style standards, and review vendor and subcontractor relationships to ensure wage-and-hour compliance throughout the delivery chain.
