Senate Bill 1402: Establishes Joint and several liability for customers who contract with or use port drayage motor carriers who have unpaid wage, tax and workers' compensation liability.
As SB 1402's effective date of January 1, 2019 approaches, the employment lawyers at Kingsley & Kingsley remind you of the rationale for the bill and the penalties for violating the new law. Senate Bill 1402 was authored by state Senator Ricardo Lara and signed by Governor Brown on September 22. “The bill seeks to end the exploitation of port truck drivers who are being left behind, even though America's economy could not run without them,” Lara said of the bill. “Senate Bill 1402 will clean up our port trucking industry in a way that is fair for absolutely everyone and protect some of our most vulnerable workers.”
Under the legislation, when retailers hire trucking companies that have unpaid legal judgments against them, those retailers become jointly liable should the trucking companies commit new violations of state labor and employment laws. Such violations could include failure to pay wages, imposing unlawful expenses on employees, failure to provide worker's compensation insurance and misclassifying employees as independent contractors.
California Employers Beware
The penalties for businesses that rely on port trucking companies with violations on record comes in the addition of new Labor Code Section 2810.4(b)(3). This provision states that a customer that engages or uses a port trucking company on a “blacklist” shall share all civil legal responsibility and civil liability owed to a driver for services obtained after the date the company appeared on the “blacklist.” The Division of Labor Standards Enforcement (DLSE) is required to compile this “blacklist” and post on its website any port drayage motor carrier with any unsatisfied judgments, including judgments for failure to pay wages, imposing unlawful expenses, failure to remit payroll taxes, failure to provide workers' compensation insurance, or misclassification of employees as independent contractors. DLSE is not allowed to place a port trucking company on the “blacklist” until the period of time for all judicial appeals has expired – so this list is for unsatisfied final judgments.
SB 1402 specifies numerous definitions and clarifications, to include:
- an expansive definition of “customer” of a port trucking company. “Customer” means a business that engages or uses a port trucking company to perform services on the customer's behalf, whether the customer directly engages or uses a port trucking company or indirectly uses a company through the use of an agent such as a freight forwarder, motor transportation broker, ocean carrier, or other motor carrier.
- “customer” does not include (1) a business with fewer than 25 workers, (2) public entities, or (3) a marine terminal operator or similar business who has incidental relationships with port trucking companies.
- violators share joint and several liability with the trucking company for the full amount of unpaid wages, unreimbursed expenses, damages and penalties. Every customer that uses a port trucking company on the “blacklist” in a given workweek shall be jointly and severally liable for unpaid wages and other damages which are found to be owed by the port trucking company for that workweek.
- joint liability under SB 1402 may be determined by the Labor Commissioner, or by a court in a civil action (following 30 days' notice to the customer). No civil action for joint liability may be brought pursuant to the Labor Code Private Attorneys General Act of 2004 (PAGA).
- prior to providing services to a customer, a port trucking company shall provide written notice of any unsatisfied final judgments. Failure to provide the notice shall not absolve the customer of joint liability under the new law. The law requires a port trucking company to notify a customer within 30 days of a final entry of judgment for specified claims.
SB 1402 has a number of exceptions that were negotiated during the legislative process. SB 1402 specifies that the joint liability provisions do not apply in the following situations:
- customers who engage with port trucking companies whose employees are covered by a bona fide collective bargaining agreement.
- where the customer and the trucking company had an existing contract at the time the company is listed on the “blacklist,” joint liability shall not apply until the expiration of that contract or 90 days, whichever is shorter.
- Where a port trucking company is not listed on the DLSE “blacklist.”
- Where the port trucking company satisfied the judgment prior to the time period for which the joint and several liability is alleged.
SB 1402 has far reaching impacts for California employers, especially given that California is home to two of the biggest ports in the country. Companies that are currently using port trucking companies should develop new policies and procedures to comply with the new law. Should you have any questions about California's wage and hour laws, contact Kingsley & Kingsley to speak with one of our experienced labor lawyers.
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