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Two divisions of Covenant settle in big case by drivers alleging ‘no-hire’ conspiracy

Covenant Transport, Southern Refrigerated are latest to deal; case alleged drivers ‘under contract’ couldn’t get hired by other firms

Photo: Jim Allen/FreightWaves

Four companies now have settled a class-action lawsuit brought by a group of drivers who alleged uncompetitive behavior by eight companies in their recruiting activities.

The lawsuit in the U.S. District Court for the Central District of California has been referred to as an “anti-poaching” suit. But it actually targets what the four original plaintiffs say are industry practices that ultimately limit the movement of drivers among employers. What the drivers deem a conspiracy was specifically designed to block companies from poaching other drivers. 

The latest settlement with the plaintiffs is from the Covenant Transport and Southern Refrigerated subsidiaries of Covenant Logistics (NASDAQ: CVLG) . Documents submitted to the court last week give no indication of the size of the settlement. An email sent to Covenant’s outside attorneys at the firm of Susman Godfrey had not been responded to by publication time. 

In early July, Schneider National (NYSE: SNDR) settled with the plaintiffs, as did Paschall Truck Lines. (Although Covenant and Southern Refrigerated are both owned by the same parent, they are individual defendants, bringing the total settlements up to four).

Settlement documents for those companies also gave no indication of the terms, which is standard procedure.

Remaining defendants are CRST International, C.R. England, Stevens Transport and Western Express.

CRST’s role in the lawsuit is key, because the plaintiffs specifically went after CRST’s requirements that drivers who go through its training course remain with the company while they pay back the educational expenses that CRST incurred to train them. A similar provision at C.R. England also is cited.

Those terms were part of a recent federal court decision in Iowa that involved the question of poaching. CRST ended up seeing an earlier court victory overturned. In that case, actions by Swift (NYSE: KNX) to recruit drivers from CRST who had gone through the training program resulted in CRST winning an initial $15 million judgment against Swift. But the judgment was reversed on appeal when it was found that Swift had not engaged in “intentional interference” with the CRST drivers it was trying to hire.

The original case in California dates back to 2017, with a fully amended complaint filed in April 2020. (The incidents in question occured before Knight acquired Swift in 2017).

According to the amended complaint, the companies that were defendants “entered into a no-poaching conspiracy whereby they agreed not to hire employees who remain ‘under contract’ with another company.” That was at the heart of the CRST complaint against Swift: that the workers who went through training were still under contract to CRST when they were approached by Swift.

In the class-action suit, “under contract” is defined as employees who attended a training school operated by one of the defendant companies. The lawsuit cites a requirement of the CRST contract that came up in the Swift case: that until all the funds are repaid, a student can’t work elsewhere.

But in the Swift case, the question was mostly whether Swift acted illegally if it hired any CRST drivers still repaying the training funds.

The California poaching case is different in that it alleges a conspiracy among companies not to hire drivers who are under contract with unpaid obligations to the company that trained them. Though it alleges a conspiracy, it does not suggest there were clandestine meetings or arrangements to carry it out. 

“Defendants communicate with each other concerning all new trucker applicants,” the amended suit from 2020 says. “If they learn that an applicant remains ‘under contract’ to another trucking company, then they are denied a job pursuant to the no-poach agreement. Again, this is true even though the applicant is currently unemployed and otherwise satisfies all qualifications for employment at the prospective employer company.”

The lawsuit gives an example for one of the plaintiffs, complete with screenshots of text messages and emails. The plaintiff, Cloud McClendon, was being trained by CRST, had an accident and was fired. But he still owed the company money for training.

Documentation in the lawsuit shows he sought employment with Western Express in 2016, was very close to being hired but then was told he couldn’t have the job because he was under contract to CRST.

As McLendon protested in one text message about his under-contract status, “That just means I have to pay them off is all. Which is why I need to work.” To which a recruiter at Western said, “No, it means by law we can’t hire you until after you’re released from the contract or we could be sued by CRST.” He found a similar reaction with C.R. England, according to the case. 

The CRST-Swift case that was recently reversed on appeal would seem to suggest that a lawsuit over hiring such a driver would fail, as that appellate decision essentially holds that the mere act of recruiting a driver who has a financial obligation to the company that trained him is not “intentional interference.”

However, if the remainder of the defendants in the class-action case also settle, the case in a federal court in California will not be able to establish any precedents on the question of what constitutes poaching versus fair, legal recruitment of drivers.

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John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.