Drayage drivers who hauled for STG Logistics in New Jersey may be eligible for a piece of a more than $2.2 million payout following the resolution of a legal case over driver misclassification, according to FreightWaves. The settlement's total cash payout is $2.775 million, with $2.2 million going to drivers and the remaining $555,000 paid to New Jersey in penalties and contributions to the Unemployment Compensation and State Disability Benefits Funds.
Settlement breakdown
The settlement document, filed in the Superior Court of Essex County, puts the total value of the settlement at slightly more than $80.9 million, FreightWaves reported. That headline figure, however, is largely symbolic: STG is coming out of a chapter 11 bankruptcy proceeding that cut its debt load by 90%, and most of the $80 million-plus settlement will be swallowed by the bankruptcy case.
| Settlement component | Amount |
|---|---|
| Cash payout to drivers | $2.2 million |
| New Jersey penalties and benefit fund contributions | $555,000 |
| Total cash payout | $2.775 million |
| Total settlement value | $80.9 million (slightly more) |
| Contingent payment if STG fails obligations | $7.5 million |
| General unsecured claims (paid per bankruptcy plan) | More than $70 million |
Bankruptcy context
"This agreement…shall be incorporated into the (bankruptcy) plan," the settlement document states. The state's Attorney General and the Department of Labor and Workforce Development said in a prepared statement that the bankruptcy "resulted in many debts being canceled." But the drivers' portion is considered "priority" under both the bankruptcy code and the settlement agreement, ensuring workers are compensated ahead of other creditors, the agencies' statement said.
The balance of more than $70 million is what the settlement agreement refers to as the "general unsecured claims" that would only be paid out "to the same extent that general unsecured claims are ordered to be paid…according to the plan." That plan is wiping away about 90% of the company's debts, according to FreightWaves. An additional $7.5 million payment by STG is also required, but only if the company fails to meet certain obligations drawn up as part of the settlement.
Case history
The settlement ends litigation that traces back to an investigation that began in 2019, when the drayage operations were part of XPO Logistics (NYSE: XPO). They were sold to STG in 2022 as part of XPO's ultimately successful plan to reposition itself as a pure-play LTL carrier. The state agencies said the suit against STG, which dates back to 2023, was the first filed under a 2021 law that allowed litigation against employers that New Jersey believes had misclassified workers who were effectively full-time employees as independent contractors.
ABC test and carrier concerns
While the settlement document does not mention New Jersey's ABC standards — the test that governs when a worker can be considered a truly independent contractor — the announcement of the deal by the state agencies does.
The state agencies said in their announcement:
Under New Jersey's ABC test, workers are presumed to be employees unless a company can prove the individual is largely free from the company's control, performs work outside the company's usual business or outside its places of business, and has their own independent business. STG failed to meet any of these requirements.
FreightWaves reported that the fact that such a large settlement is coming right before New Jersey on October 1 codifies the ABC test that was used by New Jersey in its action against STG is creating another level of concern among the state's carriers.
Driver payouts
Drivers eligible for a payout can receive an amount based on their earnings from January 1, 2017 to the present. The payment will be a lump sum, according to the settlement terms reported by FreightWaves.
Watch list
- October 1 ABC test codification: New Jersey codifies the ABC test, which could affect how drayage carriers classify drivers going forward, according to FreightWaves.
- STG's compliance with settlement obligations: Failure to meet certain obligations triggers an additional $7.5 million payment.
- Bankruptcy plan distribution: General unsecured claims of more than $70 million will only be paid to the extent ordered under the plan, which cuts about 90% of STG's debts.
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