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A New Jersey federal district court judge has preliminarily approved a $5.75 million settlement between National Freight, Inc. (NFI) and a class of truck drivers working for the company. However, the settlement goes well beyond a mere business dispute. This case strikes at the heart of an industry that has long perpetuated the ongoing, intentional misclassification of truck drivers as “independent contractors” rather than employees to avoid wage and hour laws.
In 2015, drivers working for NFI filed suit, alleging that the company had misclassified them as independent contractors, thereby making unlawful deductions from their pay in violation of state law. By considering the truck drivers independent contractors, NFI made them responsible for the costs of fuel, truck leases, insurance premiums, equipment, permits, and license plate fees.
NFT characterized the workers as “independent business owners” in its defense, but the court rejected that argument, certifying a class action in 2020. In a 2022 ruling, the judge found that the drivers qualified as employees under New Jersey law. Based on that ruling, the judge further found that the drivers could recover all deductions that NFI had made from their wages.
The ruling hastened the inevitability of settlement, with the court granting preliminary approval of the $5.75 million deal in August 2025. The settlement will provide varied payouts to 119 drivers based on their length of service, many of which will be five figures or more.
The results of the suit underscore a common model that logistics companies have historically used, despite their utter control over all aspects of the drivers' daily work. Companies have required so-called “owner-operators” to lease trucks, often from their own subsidiaries, and then deduct all work-related expenses from their pay.
However, New Jersey law presumes that workers are employees unless their employers can prove otherwise. Under the “ABC test,” workers are only an independent contractor if they are (A) free from control, (B) perform work outside the usual course of the company's business, and (C) operate an independently established trade. Meeting all three of these criteria is impossible for most trucking companies. Furthermore, the U.S. Court of Appeals for the Third Circuit has held that federal law does not preempt the ABC test. As a result, except in extraordinary circumstances, trucking companies operating in New Jersey must hire employees, not independent contractors.
Although this settlement may not have much of an impact on a national logistics company, it adversely affected all the drivers involved. They lost wages that the employer owed them, for years in some cases, they fell behind in bills, and/or they worked longer hours to earn more, which could compromise road safety. Misclassification also allows companies to undercut their competitors who properly classify their workers, depresses driver wages, and prompts drivers to work unsafe schedules so that they can meet their financial responsibilities. Furthermore, misclassification takes payroll revenue tax away from states, which shifts the burden to businesses who follow the law and other taxpayers.
The settlement in this case underscores the need for an overhaul in the logistics industry, not just companies pivoting to add a budget item for litigation costs. Instead, companies need to classify drivers as employees, put them on payroll, and stop charging drivers expenses that are the employer's responsibility. Companies also need to be transparent about these changes, including appointing a compliance officer to make classification decisions. States also could adopt New Jersey's approach and enforce it.
Generally, the magnitude of this settlement serves as a warning to employers, particularly in the trucking industry. As laws crack down on misclassification of workers, employers may face the penalties for failing to comply with those laws.
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