On Jan. 12, the U.S. Department of Labor’s Wage and Hour Division shared that a national auto parts distributor and an Arizona logistics firm were found to have misclassified 1,398 drivers as independent contractors over nearly a nine-year period from 2012 to 2020. As a result, those two companies will pay a total of $5.6 million in back wages and liquidated damages.

Founded in 1973, Parts Authority is a leading national distributor of automotive replacement parts, tools, equipment and transmissions. Headquartered in Lake Success, New York, the company has more than 200 U.S. locations.

Diligent Delivery Systems has a national headquarters in Houston with 46 locations nationwide. The company serves the automotive, healthcare, retail and e-commerce, oil and gas, agriculture and other industries.

According to the Dept. of Labor, the U.S. District Court for the District of Arizona has ordered joint employers Parts Authority Arizona LLC and Arizona Logistics — operating as Diligent Delivery Systems — to pay $2.8 million in back wages and an equal amount in liquidated damages to affected employees. The consent judgment also orders Parts Authority and Diligent Delivery Systems and its owner Larry Browne, to pay $150,000 in civil money penalties.

The DoL said that a Nov. 17, 2022 judgment obtained by the department’s Office of the Solicitor in San Francisco also required Parts Authority to treat their delivery drivers as employees.  

The action comes after the department’s Wage and Hour Division found that by misclassifying employees, the company failed to meet minimum wage requirements; paid straight-time rates for all hours worked; failed to pay at time and a half for hours over 40 in a workweek; and failed to keep required timekeeping records. 

Additionally, the division found that the company required employees to use their personal vehicles for deliveries without compensation. By doing so, the employers denied their drivers’ rights under the Fair Labor Standards Act.

“Employers cannot avoid their obligations to pay the minimum wage and overtime through contracting with another entity to obtain employees,” Solicitor of Labor Seema Nanda said. “The U.S. Department of Labor will combat misclassification schemes and wage theft through pursuing all the employers that are responsible for depriving employees of their rights under the Fair Labor Standards Act.”

The DoL said the investigation and subsequent litigation covered the periods of April 20, 2012 to March 31, 2020. The division’s Phoenix District Office investigated the case and department’s Office of the Solicitor in San Francisco litigated.

“Parts Authority, Diligent Delivery Systems and Larry Browne misclassified nearly 1,400 delivery drivers as independent contractors, denying them of their rights to minimum wage, overtime pay and other benefits and protections,” Principal Deputy Wage and Hour Administrator Jessica Looman explained. “We will continue to identify and address misclassification that not only hurts the workers who are deprived of their wages, but also puts responsible employers at a competitive disadvantage.”