PAM: Lawsuit Threatens Driver Wage Model

PAM Transport Inc. of Tontitown is fighting a class-action lawsuit brought in 2016 that it said could send shock waves through the trucking industry and radically change the way drivers are paid.

“We think this could lead to trucking companies going out of business,” said Angela Clark, PAM’s vice president of risk management.

The attorney leading the plaintiffs’ suit said that PAM’s fears are overstated, that the dispute is just an issue of the company failing to pay its drivers minimum wage for the time they spend on company duty, whether they are driving or not. The trial is scheduled to start early next year in U.S. District Court Judge Timothy Brooks’ court.

PAM has appealed Brooks’ recent rulings allowing the suit to be certified as a class action. The case hinges on whether the company is required to pay over-the-road (OTR) drivers for all the hours they are on duty, even if they are not actively working. PAM’s appeal is pending before the 8th U.S. Circuit Court of Appeals.

“We believe that an unfavorable outcome in this case will eventually negatively affect most trucking companies, not just those based in Arkansas,” Clark wrote in an email to Arkansas Business. “Recent rulings serve to overturn the basic tenets of driver compensation that [have] existed since industry inception. If the most recent ruling stands, which basically states that all over-the-road truck drivers must be paid at least minimum wage for 16 hours a day, seven days a week, then the pay for performance model of compensation is dead.”

Three drivers filed suit, saying that PAM had paid them less than the minimum wage required by the federal Fair Labor Standards Act, when all hours they were on duty were factored in. Almost all OTR drivers across the industry get paid a rate per mile, but they also spend hours not driving, either sleeping in the tractor’s berth or at a rest facility or waiting for cargo to be loaded or unloaded.

The suit, filed by attorneys with Swartz Swidler of Cherry Hill, New Jersey, includes several subsets of drivers, including new drivers, solo drivers and team drivers. PAM attempted to have the class action decertified, but Brooks ruled against it in late January.

Lead plaintiff attorney Justin Swidler said the class-action suit now includes about 4,000 drivers who have joined the action and 20,000 who are included unless they specifically opt out.

Any potential monetary damages are hard to predict, but PAM paid out about $4 million in 2015 to settle a 2013 suit filed by newly hired drivers who claimed their wages fell short of the minimum.

‘Extremely Hyperbolic’

Swidler said the idea that the lawsuit would ravage the existing compensation model for drivers is absurd. Most carriers have nothing to worry about, he said, because their pay-per-mile levels easily clear the minimum wage standard even if nonworking hours are included.

Shortly after Brooks’ ruling in October that off-duty hours spent in a sleeper berth could constitute work, Business Insider, an online news website, wrote that the decision could “drastically change” driver compensation. Swidler said that kind of characterization is “extremely hyperbolic,” but one that PAM is advocating.

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“There aren’t a lot of trucking companies left that are operating under this idea of they can pay drivers what amounts to less than minimum wage,” Swidler said. “It is worth pointing out that there is nothing in the court’s decision that in any way directs companies that they have to stop using a cents-per-mile pay. It is a distinction that some reporters have not got right. It’s a question of when you are paying so little for the driving time that when you add in the time that you aren’t driving, now you are earning less than minimum wage. That’s the problem PAM finds itself in, and I don’t believe that problem is quite as common in the trucking industry as PAM wants to pretend it is.”

Swidler said a recent report by the American Trucking Associations showed that median pay for OTR drivers was $1,000 a week. Even at 16 hours a day with non-driving hours added, the hourly wage comes out to $12.50, well over minimum wage.

The PAM suit will be based on Arkansas’ minimum wage, which rose to $9.25 in January and will hit $10 in 2020. Stephens Inc. Vice President Brad Delco, a transportation industry analyst, said there was an initial “buzz” from industry executives that the case could affect compensation, but that has dissipated.

“There may be a couple of instances where it could be problematic when there is not an abundance of freight where a trucker is out and he is not getting the miles he is used to,” Delco said.

“If you’re not getting the same miles, it could become problematic. It could be problematic for some of the team drivers where you have two truck drivers in the same truck. It has not been as big of a deal in conversations between investors and these large public carriers.”

Can of Worms

Clark, in her email, said the court’s rulings open up a number of non-work activities that trucking companies would be on the hook for. PAM’s lead attorney, Reid Estes of Dickinson Wright in Nashville, Tennessee, wouldn’t discuss the specifics of PAM’s case, other than to refer to the appeal of Brooks’ rulings the company has filed in the 8th U.S. Circuit.

“This ruling essentially means that drivers must be paid at least minimum wage regardless of whether they are furthering the company’s business or acting on their own behalf for personal reasons,” Clark wrote.

“For example, a company would have to pay a driver at least minimum wage not only for driving to deliver a load of freight but also for time spent driving home after the load is delivered, the time spent driving to a movie theater, the time spent watching that movie, visiting a doctor, visiting a casino, driving to a vacation destination, taking a shower at a truck stop, etc. If it falls within the 16 hours a day, then it must be compensated at a minimum wage rate or greater.”

Clark said states with a higher minimum wage than Arkansas could suffer if trucking companies decide to relocate to avoid possible future lawsuits. “The idea that trucking companies are up in arms is either because they misunderstood the ruling or it is just not true,” Swidler said. “I don’t think there are a whole lot of trucking companies that have this problem. We have seen it misunderstood and that misunderstanding leads to, ‘Wow, this is a sea change.’

“It’s really not. I don’t want that to be lost, because PAM wants to claim it is a sea change so they can explain what they’ve been doing to these drivers for so long.”