A decade-long misclassification lawsuit involving claims by drivers who hauled freight for NFI is being settled for more than $5 million, with a possible per driver payout between $30,000 and more than $50,000.
The case started in June 2015 as a lawsuit filed by a handful of drivers who delivered to Trader Joe’s grocery stores out of two Pennsylvania distribution centers. It was later widened to become a class action. It is being settled in U.S. District Court for New Jersey for $5.75 million, according to documents filed with the court last week.
Drivers eligible for a payout delivered freight for NFI from Trader Joe’s distribution centers in the Pennsylvania towns of Nazareth and Harfield. That group consists of approximately 119 drivers, according to the document.
The initial charge in the lawsuit by the drivers “(alleged) NFI misclassified them as independent contractors when they were in fact employees for purposes of New Jersey’s wage laws.”
NFI settling but doesn’t agree with allegations
According to a memorandum filed by plaintiffs’ attorneys in support of the motion for preliminary approval of the class action settlement, NFI is “(denying) these allegations and asserted a number of defenses, which it intends to pursue on appeal if this settlement is not consummated.”
“NFI does not agree with plaintiffs’ characterizations, legal arguments, or conclusions, but does not oppose the Motion for purposes of achieving settlement,” the memorandum said.
NFI and attorneys representing the class of drivers mediated the case five times. On the final one, which took place July 11, the proposed settlement was reached, according to the memorandum.
The possible payout per driver is relatively healthy for a class settlement. For example, in a recent settlement involving accusations of improper surveillance by the Lytx in-cab camera systems, plaintiffs’ attorneys boasted that the payout of less than $1,000 compared favorably to other settlements under Illinois’ strict BIPA law governing company surveillance.
A more recent point of comparison is the settlement in early 2024 that closed out a 14-year case on the issue of driver misclassification against mattress manufacturer Sleepy’s. The highest payout there was estimated at less than $27,000. It settled for $4.5 million for an almost identical-sized class of drivers.
Attorneys for the Boston-based law firm of Lichten & Liss-Riordan said in its filing that it has a lengthy history of litigation on independent contractor issues targeted against trucking and delivery companies, and “(believes) this is a fair and reasonable result given the risks and delays of continued litigation.”
“Indeed, NFI has made clear it intends to appeal any judgment entered in this case absent a settlement to the Third Circuit, which will likely take another year or more to resolve,” the firm said in its filing.
Earlier victories for drivers
The drivers had won several earlier decisions from the bench since the case was first filed in 2015.
They prevailed in their argument that New Jersey independent contractor law did apply even though the Trader Joe’s facilities were in Pennsylvania. NFI is based in Camden, New Jersey.
Class members were added as plaintiffs in the lawsuit in July 2020. And in June 2022, a plaintiffs’ request for summary judgment was partially granted, and NFI was found to have misclassified the original plaintiffs and the class of drivers as independent contractors.
Another request for partial summary judgement on how to value wage payments related to the misclassification also backed the plaintiffs in May. After that, the mediation resumed that resulted in the July agreement.
According to the plaintiffs’ filing, NFI is “(denying) these allegations and asserted a number of defenses, which it intends to pursue on appeal if this settlement is not consummated.”
The $5.75 million is to be distributed as roughly $1.9 million for the attorneys, $85,000 for the named plaintiffs ($15,000 for lead plaintiff Rafel Suarez and $10,000 for seven others), and the balance of approximately $3.7 million to go to drivers in the class who do not opt out of the settlement (should they choose to pursue separate litigation.)
Clock starts in 2009 for determining settlement size
For those drivers, their payout will be based on a formula based on the length of time they drove for NFI. The period to be used to determine the payouts starts on June 22, 2009 and goes through 2020.
According to the filing of the plaintiffs’ attorneys, “many class members who worked for a significant amount of time–such as a year or two–will receive shares approaching $30,000 and in many cases significantly more.”
The final numbers would be a function of how many class members participate in the settlement fund. The attorneys said if all 119 members participate, the average share will be $31,498.
New Jersey’s ABC test did come into play in the case through a 2016 decision by Judge Jerome Simandle. That ruling rejected NFI’s argument that the Federal Aviation Administration Authorization Act (F4A) preempted the Garden State’s ABC test for determining whether a worker is a true independent contractor or essentially an employee.
In that decision, Judge Simandle said the driver plaintiffs had presented a “plausible claim” that NFI violated the A prong of the state’s ABC test by exerting significant control of the drivers (known in New Jersey as Prong 1).
In his summary, Judge Simandle said the drivers were operating under a system in which NFI controlled them, “ranging from the order and manner in which deliveries are to be made, to supervisory responsibility, to the requirement of obtaining insurance.”
The judge also ruled that NFI had violated the C prong–or Prong 3 in New Jersey–because drivers were not permitted to do any driving for other companies while they were working for NFI, undercutting any argument that the drivers were independent. Independence is at the core of the C prong where it is part of state law.
F4A preempts state law where it can be shown that a state’s law–in this case, New Jersey’s Wage Law–would impact a transportation “price, route or service.” But as Judge Simandle wrote in his decision, “it is unclear from (NFI) how exactly Prongs 1 and 3 would significantly impact its business model. Plaintiffs’ claims regarding control and independently established business are not preempted by the F4A.”
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