March 18, 2019 10:00 AM, EDT

Knight-Swift Transportation Holdings Settles Owner-Operator Lawsuit for $100 Million

Swift truck on highwayJohn Sommers II for Transport Topics

Knight-Swift Transportation Holdings Inc. has agreed to pay a $100 million settlement to an estimated 20,000 owner-operator truck drivers who alleged in a federal class-action lawsuit filed in 2009 that they were misclassified as independent contractors and not paid the legally required minimum hourly wage.

The lawsuit, originally filed in the Southern District of New York, was transferred in 2010 to federal court in the District of Arizona. It alleged that Swift, before its 2017 merger with Knight Transportation, had violated the Fair Labor Standards Act.

The settlement agreement, filed with the federal court on March 12, must still be approved by the federal judge overseeing the case.

Knight and Swift trucks

Knight and Swift merged in 2017. (John Sommers II for Transport Topics)

The lawsuit was filed against Phoenix-based Swift, Interstate Equipment Leasing, Swift founder and CEO until his retirement in 2017 Jerry Moyes, and Chad Killebrew, a Swift executive vice president.

The drivers also alleged violations of state wage and contract laws as well as violations of federal forced labor statutes, according to the settlement. The trucking company has denied the allegations and contends that the owner-operators were properly classified as independent contractors under state and federal law.

The settlement resolves resolution claims in the lawsuit arising during the period Dec. 23, 1999, through Sept. 8, 2017, the date of the merger between Swift’s parent entity and Knight Transportation.

The owner-operators alleged in the lawsuit that Swift controlled their work and by law employed them to transport goods by truck for the carrier’s customers.

“Defendants control when, where and how plaintiffs deliver freight,” the 2009 complaint said. “They control the route truckers use. They control virtually every aspect of the way truckers perform their work. They control the equipment the truckers are to use, its maintenance and condition.”

But after the more than nine-year court fight, the owner-operators and Knight-Swift management agreed it was time to settle, according to the settlement.

“After carefully evaluating the merits of trying the Sheer/Van Dusen lawsuit versus settling it, we chose the latter as continued litigation of this lawsuit would be protracted, burdensome and expensive for the Company,” Knight said in a March 15 statement to Transport Topics. “Settlement resolves the uncertainty surrounding this lawsuit, which we believe is beneficial to the Company and its shareholders.”

Knight-Swift said it reserved the settlement amount on the company’s balance sheet as of Dec. 31, 2018, and that it does not expect that the settlement will have a material impact on its future results of operations.

The attorneys for the drivers did not return a message seeking comment on the settlement.

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“Although this case has been in litigation for over nine years, has generated three appeals, three mandamus petitions and a petition for certiorari and has resulted in four separate opinions from the Ninth Circuit, it is no exaggeration to say that the case is still at its very inception,” the settlement said. “Absent a settlement, litigating the case from now to a final judgment could consume many additional years given the class allegations and the extraordinary number of other contested issues.”

“Fading memories and lost documents as well as the difficulties of finding and maintaining contact with class members — some of whom last worked for defendants as long ago as 2002 — already pose serious problems. Years of additional litigation will only add to those difficulties.”

The terms of the settlement allow for the drivers’ attorneys to seek up to one-third of the gross settlement fund as attorney’s fees, as well as costs, expenses and costs of administration. However, they said they plan to take 29% of the total $100 million plus costs limited to no more than $750,000.

The disbursements of the settlement funds go to the drivers via a complex formula. In general, the original named plaintiffs in the case may apply for up to $50,000 in service awards, while all of the members of the settlement class will receive a minimum of $250, regardless of when they worked as compensation for the nonwage damages arising under the “forced labor and other state claims.”

The drivers’ attorneys said they believe the five original named plaintiffs were entitled to a larger share to take on Swift, “a formidable opponent,” and their names would be publicly circulated throughout the industry.

“Plaintiffs believe that few starting truckers would put their names on such a suit, particularly now when Google searches will reveal the lawsuit they filed against their employer a part of the public record in perpetuity,” the settlement said. “Plaintiffs believe that the professional harm that results from publicly suing one’s employer is a risk that few are willing to take.”