Employment

New Jersey Appellate Court Explains General Contractor Liability Defenses

John C. Lane

The case arises from a ship-maintenance contract, but its principles apply equally “on land.”

USNS Red Cloud

Williams Savaria lost his life onboard the U.S.N.S Red Cloud when he fell into the ship’s 30-foot deep anchor chain locker. Bayonne Dry Dock & Repair Corp. was contracted to perform maintenance on the ship and retained 5 Seasons LSB Corporation as a subcontractor. Savaria was employed by 5 Seasons. His estate’s lawsuit against Bayonne Dry Dock was dismissed because, as the appellate court affirmed, Bayonne was under no contractual duty to ensure that 5 Seasons employed proper safety protocols in performing its sub-contractor work on the Red Cloud.

Bayonne Dry Dock, a general contractor, had hired 5 Seasons on four previous occasions to perform similar work, all with good results. 5 Seasons was engaged to paint the inside of the anchor chain locker on the Red Cloud and was contractually required to observe all OSHA and state safety regulations. Prior to the painting, Bayonne made sure through atmospheric testing that entry to the anchor chain locker was “safe and permitted.” A notice to that effect was posted. The 5 Seasons workers built a scaffold to enable entry into the locker.

The 5 Seasons supervisor, who speaks Korean, needed to delay entry to the locker until he could fetch “fall protection.” Using hand signals, he instructed the workers to rest until he returned with that safety equipment. Savaria’s first language was Spanish although he spoke some English. A co-worker ignored this warning and descended into the locker before the supervisor returned. Savaria followed, using a rope attached to a pipe to assist him. During his descent, he was heard to exclaim, either in Spanish or English, that he could not “hold on any longer.” He fell 30 feet to the bottom and was declared deceased at the scene.

The court examined possible exceptions to the rule of non-liability, surveying past legal precedent. It found that Bayonne Dry Dock did not control the means and manner of 5 Seasons’ work. It hired a reputable subcontractor of known good reputation. 5 Seasons was contractually obligated to provide its workers’ safety equipment. Bayonne had no duty to ensure that 5 Seasons provided the safety procedures required of it. Nor was Bayonne required to determine whether language barriers precluded the following of instructions. Those duties all lay with 5 Seasons.

Facts of individual cases will be important, but the legal principles apply to all work settings. If no exception applies, the New Jersey courts will not impose a duty of care upon the general contractor to ensure that its subcontractors’ employees “safely perform their work.” The case is Estate of Savaria v. Bayonne Dry Dock & Repair Corp., in a per curiam opinion of the Appellate Division of the Superior Court of New Jersey rendered on August 13, 2024.

Supreme Court to Handle Another Arbitration Dispute: Are Bakery-Product Delivery Drivers Transportation Workers or Bakery Workers?

John C. Lane

And why does it matter? Because if they are transportation workers, their putative class action under the FLSA must proceed in court, not by contracted-for arbitration. But if they are bakery workers, they must submit to arbitration. The Second Circuit held they are not transportation workers and therefore must submit to arbitration. The Supreme Court has agreed to hear the workers’ further appeal, in Bissonnette v. LePage Bakeries Park St., LLC.

Certainly Section 1 of the Federal Arbitration Act forbids a transportation worker, even an independent contractor, to be compelled to arbitrate a claim against an employer. That was settled by the Court in its 2019 decision in New Prime, Inc. v. Oliveira. The unusual setting in Bissonnette raises the issue for the Court of whether the workers are transportation workers or, perhaps, bakery workers.

The workers entered into distributor agreements with defendant bakery companies. In a putative class action, they alleged they were misclassified as independent contractors rather than employees, in violation of the FLSA and Connecticut law, seeking reclassification and damages. The bakery defendants moved to compel arbitration under a contractual provision that also excluded class or other representative actions. But what was their job?

Under the agreements, plaintiffs purchased their own service territories, identified new customers, developed relationships with existing customers, ordered and delivered products, stocked and replenished products in customers’ locations, and otherwise promoted sales and customer service. Plaintiffs purchased bakery goods from defendants and sold them to the customers at a profit, which they kept.  They increased profits by increasing business. The goods came from outside Connecticut and were transported by the workers to their final destinations in Connecticut, using their own vehicles.

Plaintiffs claimed they were transportation workers, transporting bakery products on the intrastate leg of interstate commerce. In contrast, the bakery companies focused on the business aspect of the work, to say that plaintiffs are not transportation workers because their primary activities are in the bakery industry, not the transportation industry. They are more akin to sales workers or managers responsible for all aspects of a bakery products distribution business. Thus, they argue, the Section 1 exception is no impediment to the application of the full Federal Arbitration Act.

The Connecticut district court agreed with the defendant bakeries, ordering the workers to arbitration. The Second Circuit affirmed. The Supreme Court recently granted certiorari to decide whether these distributors of bakery products are in the bakery industry or the transportation industry. And that determination will decide whether their employment claims will be resolved in court or in arbitration.

Thwarted by Supreme Court, New Prime Settles Truck Driver Class Action Wage Claims

John C. Lane

According to a Transport Topics report on July 29, 2020, New Prime, Inc., has settled two putative class-action lawsuits by its truck drivers for allegedly improper compensation payments and violations of the federal Fair Labor Standards Act, as well as state laws. Transport Topics reports that the settlement, awaiting court approval, will provide a total of $28,000,000 for a potential class of 40,000 drivers, most of whom are independent owner-operators.

On January 15, 2019, the Supreme Court of the United States ruled against New Prime, Inc., in its petition to refer to arbitration a class action lawsuit claiming that New Prime improperly paid truck drivers which it had classified as independent contractors, allegedly in violation of the federal Fair Labor Standards Act. The Court ruled that under the Federal Arbitration Act, an independent owner-operator’s contract is a “contract of employment” of a transportation worker, falling squarely into a class of FAA-exempt agreements. That sent the case back to the First Circuit, and ultimately to the District Court for Massachusetts. A second putative class action suit, Haworth v. New Prime, was filed in 2019, according to Transport Topics. The settlement reportedly resolves both lawsuits.

Photo by bongkarn thanyakij on Pexels.com

As reported, New Prime believes its business model, using independent owner-operators in its trucking operations, is “completely lawful and compliant with all regulations.” The settlement, though, was “the right thing to do,” New Prime’s general counsel advised Transport Topics.

The settlement brings to a close the saga of New Prime v. Oliveira, but the issues of arbitration of truck driver employment claims, and waiver of jury trials and class actions, will remain on the foreground for trucking companies and on the dockets of the courts.

LEGISLATIVE UPDATE: Independent Contractor v. Employee

The Lane Law Letter

NJ: Proposed Legislation

NJ State House

It was all but certain to pass. New Jersey Governor Phil Murphy was waiting to sign it. Television ads proclaimed its virtues. But the State’s anti-independent contractor bill (similar to California’s AB5) was pulled from the last legislative session. Groups representing independent contractors in myriad occupations made forceful and practical arguments against the bill. Included were freelance writers, musicians, doctors, various independent teachers, truckers, graphic designers, bakers, and others. Many legitimate independent contractor businesspeople prefer the freedom of owning and operating their own businesses. They do not want to be artificially classified as employees, a move they say would harm their businesses. The legislation was re-introduced on January 14th, and referred to the Labor Committees of both the Senate and Assembly. We are watching developments in both New Jersey and New York, which is also considering similar legislation.

CA: Preliminary Injunction Granted

Much to the relief of many, on January 16th, Judge Benitez granted a preliminary injunction to the California Trucking Association, temporarily stopping the enforcement of AB5 upon motor carriers. In his decision, Judge Benitez writes, “…there is little question that the State of California has encroached on Congress’ territory by eliminating motor carriers’ choice to use independent contractor drivers, a choice at the very heart of interstate trucking. In so doing, California disregards Congress’ intent to deregulate interstate trucking, instead adopting a law that produces the patchwork of state regulations Congress sought to prevent. With AB-5, California runs off the road and into the preemption ditch of the FAAAA.”

CA Federal Court Restrains Enforcement of “ABC Test” for Motor Carriers

John C. Lane
Edward J. Schwartz United States Courthouse

A federal district court in southern California issued a temporary restraining order on New Year’s Eve barring the enforcement of the state’s Assembly Bill 5, set to go into effect on New Year’s Day. AB 5 adopted the “ABC test” to determine if a particular worker is an independent contractor or an employee. The test hits particularly hard on the motor carrier industry, because many trucking companies use legitimate independent contractors – owner-operators – as part of their business model. The court’s decision was compelled largely because under the Federal Aviation Administration Authorization Act (“FAAAA”), states are not to enact or enforce their own laws related to a price, route, or service of any motor carrier regarding transportation of property. The TRO applies only to the motor carrier industry.

The ABC test presumes that a worker is an employee, not an independent contractor. The hiring party can rebut that presumption only if it can establish each of three factors:

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