Contractors claim “great victory” in $100 million Knight-Swift settlement

Thousands of drivers claiming they were misclassified as independent contractors stand to gain from a $100 million settlement against Knight-Swift Transportation (NYSE: KNX), while the ongoing question of whether such contractors should be considered trucking company employees remains unclear.

A settlement agreement in the lawsuit, Van Dusen et al v. Swift Transportation, which began in 2009, was filed in the United States District Court for the District of Arizona on March 11. If approved by the court, it will resolve claims made by roughly 20,000 owner-operator drivers against Knight-Swift’s predecessor, Swift Transportation, since 1999 up until Knight and Swift merged on September 8, 2017.

The amount received by any individual driver will be based on various factors, including the number of hours worked and how much they were paid.

“We think this is a great victory for the drivers and hope it potentially changes the way drivers are treated in the industry,” Lesley Tse, a lawyer at the firm representing the drivers, Getman Sweeney & Dunn, told FreightWaves. “A lot of this was about the fact that drivers were classified as independent contractors, but we alleged that the company still exerted control over them, to the extent that they were really employees. But because they were classified as independent contractors, they were denied proper benefits, such as receiving a guaranteed minimum wage.”

Tse said she hopes drivers classified as independent contractors in the future will “be allowed to have control over the way they do their work in ways they previously didn’t have.”

Knight-Swift said in a statement that the amount of settlement had been accounted for on its balance sheet as of December 31, 2018, and “does not expect that the settlement will have a material impact on its future results of operations.”

The question of whether and when an owner-operator should be considered a company employee has been the source of conflict for years, with the issue heating up more recently with companies accused of taking advantage of port drivers.

Last year three subsidiary companies of New Jersey-based third-party logistics and warehousing company NFI Industries were accused of misclassifying employees as independent contractors and locking them into exploitative lease-purchase agreements.

The resulting conflict involving the Teamsters Union, which has sought to organize independent drayage drivers, was cited as a contributing factor in NFI’s decision earlier this year to vacate a major warehouse serving the Los Angeles-Long Beach port area.  

Disputes over driver classification also raise the issue of whether they can be resolved using mandatory arbitration. A truck driver who sued Missouri-based Prime Inc. for back wages and prevailed in the U.S. Supreme Court in January was considered a test of the ability of motor carriers to force arbitration in driver classification cases.

But the outcome of that case should not be considered a green light for class action lawsuits against trucking companies, according to industry experts that assert companies have recourse for arbitration at the state level.

In the Knight-Swift case, settlement efforts began in September 2017, at the time of the merger, and continued for over a year with the help of a mediator.

“Throughout the settlement negotiations, the parties attempted to resolve complex, difficult, and hotly disputed issues including the amount of the settlement fund, the scope of the settlement period and scope of the settlement class, the procedures for notice, confidentiality, and the scope of any release,” according to the settlement document, all of which resulted in an agreement executed on February 7.