From JDSupra, Matthew Berns, Jessica Birdsong, Christopher Carlson, Lauren Morgan Fincher, Samuel Fishel, and Clayton Friedman discuss a recent settlement in which the New Jersey Deprtment of Labor and Workforce Development and New Jersey Office of the Attorney General resolved claims that PDX misclassified delivery drivers as independent contractors. Matthew, Jessica, Christopher, Lauren, Samuel and Clayton write:
PDX North, Inc. (PDX), a last-mile automotive parts distribution company, recently settled with the New Jersey Department of Labor and Workforce Development (NJDOL) and New Jersey Office of the Attorney General (OAG) (collectively, the state) to resolve allegations that PDX violated New Jersey’s worker classification laws.
According to the state, from 2006 to 2025, PDX misclassified delivery drivers as independent contractors instead of being classified as employees. Per the state’s allegations, this misclassification violated New Jersey’s Unemployment Compensation Law and Temporary Disability Benefits Law arguably depriving drivers of robust employee protections and benefits, such as minimum wage and overtime, sick and family leave, unemployment and temporary disability benefits, and workers’ compensation.
The settlement resolves a long dispute between PDX and NJDOL that began in 2006 when NJDOL conducted an audit of PDX and found that it had misclassified its drivers as independent contractors. Thereafter, NJDOL conducted several more audits, all of which similarly alleged that PDX had misclassified its drivers. PDX challenged NJDOL’s findings, thus transferring the dispute to the New Jersey Office of Administrative Law. That matter was stayed for several years while PDX challenged New Jersey’s ability to apply its worker classification laws to PDX in federal court but resumed in 2022 after PDX’s federal court claims were dismissed.
On December 5, 2025, PDX and NJDOL agreed to settle their dispute, with the settlement covering NJDOL’s claims against PDX from January 1, 2006, to January 1, 2026. PDX denied any liability and agreed to pay $5 million to New Jersey contingent upon its ability to obtain financing to resolve the matter. As of March 5, 2026, PDX has obtained financing and paid the required $5 million, thereby bringing the settlement fully into effect. The settlement also includes a suspended $2 million penalty, which PDX will only pay if it breaches the agreement before January 1, 2029.
In addition to the monetary terms, PDX has agreed to begin submitting filings with NJDOL and paying unemployment compensation and disability benefits fund contributions. PDX will also reclassify all drivers as employees by January 1, 2027.
Why It Matters
This settlement is a reminder that states — and particularly New Jersey — are paying attention to how businesses classify their workers and will take action to ensure that workers receive the benefits and protections they are entitled to under state law. Indeed, in addition to its settlement with PDX, New Jersey has brought alleged worker misclassification claims against several other businesses in the distribution and delivery industry over the past several years. Businesses should be aware of state concerns regarding these issues and ensure that they are classifying workers appropriately and in compliance with applicable federal and state law.
