STG Logistics to Pay $2.7 Million in New Jersey Driver Misclassification Settlement

STG Logistics has agreed to pay at least $2.775 million to settle allegations that it misclassified hundreds of truck drivers as independent contractors instead of employees, according to New Jersey officials.

The settlement resolves the first lawsuit filed under New Jersey’s 2021 worker misclassification law, which gives the state authority to bring civil actions against employers accused of improperly classifying workers. It also comes after STG Logistics filed for Chapter 11 bankruptcy protection earlier this year. The settlement identifies the payments to drivers and the state as priority claims that can be paid ahead of many other creditors during the bankruptcy process.

State officials announced the agreement on July 29, saying it resolves years of litigation involving employment practices at a New Jersey intermodal trucking operation. The settlement resolves the allegations without a court ruling on the merits of the claims, and STG Logistics denied liability as part of the agreement.

STG Logistics Settlement Includes Payments to Drivers

Under the settlement, $2.22 million will be distributed to hundreds of truck drivers to resolve alleged wage and hour violations.

Another $555,000 will be paid to the State of New Jersey through civil penalties and contributions to the state’s unemployment compensation and temporary disability insurance funds.

The settlement also requires STG Logistics to comply with New Jersey labor laws, cooperate with state reporting requirements, and maintain future compliance. If the company violates the agreement, it could face an additional $7.5 million penalty.

Although the settlement agreement places the company’s total obligation at a substantially higher amount within the bankruptcy proceedings, the $2.775 million announced by state officials represents the priority payments that will be made to drivers and the state under the agreement.

Investigation Began Before STG Logistics Acquired the Business

According to the New Jersey Department of Labor, the investigation began in 2019 when the agency examined employment practices at a Newark intermodal facility then operated by XPO Logistics.

STG Logistics acquired XPO’s New Jersey intermodal business in 2022 and assumed responsibility for the operation. New Jersey later filed suit against STG Logistics in December 2023.

State officials alleged that hundreds of truck drivers were improperly classified as independent contractors even though they met the legal definition of employees under New Jersey law.

STG Logistics denied the allegations. The settlement specifically states that the agreement is a compromise to resolve the dispute and does not constitute an admission of liability by the company.

Why New Jersey Challenged the Driver Classification

The state’s complaint alleges that STG Logistics exercised substantial control over how drivers performed their work while classifying them as independent contractors.

According to the complaint, the company allegedly:

• Required its name to appear on drivers’ trucks.
• Required drivers to lease their trucks exclusively to the company.
• Assigned routes and determined compensation.
• Required GPS tracking.
• Used non-negotiable independent contractor agreements.
• Limited drivers’ ability to perform work for other companies.

The complaint also alleges that STG Logistics deducted expenses including fuel, tolls, parking, insurance, maintenance, repairs, and other operating costs from drivers’ compensation.

According to the state, some drivers allegedly had deductions that exceeded their earnings during certain pay periods, resulting in negative net pay.

The lawsuit further alleged that the company failed to maintain required payroll records, provide earned sick leave, carry sufficient workers’ compensation insurance, and make required contributions to unemployment and disability funds.

How New Jersey Determines Worker Classification

New Jersey uses what is commonly known as the ABC Test to determine whether a worker is an employee or an independent contractor.

Under this standard, workers are presumed to be employees unless an employer can demonstrate that the worker:

• Is free from the company’s control and direction.
• Performs work outside the company’s usual course of business or outside its places of business.
• Operates an independently established business performing that type of work.

State officials alleged STG Logistics did not satisfy those legal requirements for the drivers involved in the lawsuit.

The settlement resolves those allegations without a court deciding whether the claims were proven.

What the Case Means for Truck Drivers

The STG Logistics settlement is significant because it is the first case resolved under New Jersey’s worker misclassification law enacted in 2021.

The case also highlights the continuing legal attention surrounding how trucking companies classify drivers. Worker classification can affect eligibility for minimum wage protections, workers’ compensation coverage, unemployment benefits, earned sick leave, disability benefits, and other employment protections that vary under state law.

For STG Logistics, the agreement brings an end to years of litigation involving employment practices at its New Jersey intermodal operation. For the trucking industry, the settlement serves as another example of how states continue to examine independent contractor relationships when they believe a company exercises significant control over drivers’ work.