What is the ABC test and how does it apply to drayage drivers?

New Jersey's ABC test presumes workers are employees unless a company proves: (A) the worker is free from control or direction, (B) performs work outside the company's usual business or places of business, and (C) operates an independent business. In STG's case, regulators found the company failed all three prongs because drivers displayed the STG name on trucks, leased exclusively to STG, had routes assigned by the company, and were subject to electronic monitoring.

Why is the $80.9 million settlement value so much larger than the $2.2 million drivers will receive?

STG is exiting Chapter 11 bankruptcy with approximately 90% of its debt eliminated. The settlement agreement incorporates into the bankruptcy plan, meaning most of the $80.9 million is classified as 'general unsecured claims' that will be eliminated through the bankruptcy discharge. However, the $2.2 million to drivers is designated as 'priority' under bankruptcy code, ensuring workers are paid ahead of other creditors.

When does the ABC test become binding law in New Jersey, and what does this mean for carriers?

New Jersey codifies the ABC test on October 1, making it statutory law rather than case precedent. This means drayage carriers and other transportation companies operating in New Jersey must ensure their independent contractor arrangements comply with all three prongs of the test or face potential litigation and penalties similar to the STG case.

What specific practices did regulators flag as evidence of improper control?

Regulators cited: mandatory STG company branding on trucks, exclusive leasing arrangements 'for STG's exclusive possession, control and use,' centralized route assignment by the company, and electronic monitoring of drivers. The state also found violations related to wage payment records, workers' compensation insurance, and misclassification under the Worker Protection Law.

How does federal branding law conflict with the state's ABC test interpretation?

The Association of Bi-State Motor Carriers president noted that federal law requires displaying company names on trucks, yet New Jersey regulators cited this branding requirement as evidence of employer control, suggesting state and federal standards may conflict. This creates compliance uncertainty for carriers attempting to follow both federal and state regulations simultaneously.

Labor & Workforce

High Impact

STG Logistics Settles $2.2M Drayage Driver Misclassification Case

Aug 3, 2026

Strike, layoff, and labor-rule headlines daily

Daily supply-chain brief. Free, unsubscribe anytime.

The signal

2 million payout to affected drayage drivers, with an additional $555,000 directed to state unemployment and disability funds. 9 million in total, represents a landmark enforcement action—the first filed under New Jersey's 2021 misclassification law—and signals heightened regulatory scrutiny over contractor classification practices in the logistics industry. The timing is particularly significant as New Jersey codifies its ABC test on October 1, establishing stricter standards for determining independent contractor status.

The case traces back to 2019 when the drayage operations were part of XPO Logistics before being sold to STG in 2022. Regulators determined that STG failed to meet any prong of the ABC test, citing factors such as mandatory company branding on trucks, exclusive leasing arrangements, controlled route assignments, and electronic monitoring—all indicators of employment control rather than true independence. For supply chain professionals and carriers, this settlement underscores the rising cost of contractor misclassification and the compliance complexity ahead as states implement stricter worker classification rules.

The case raises industry tensions, particularly around federal branding requirements that state labor departments may view as evidence of control. Carriers operating in New Jersey and other states adopting similar ABC standards face potential operational restructuring and elevated compliance risk if they continue current independent contractor arrangements.

#worker-misclassification

#drayage-drivers

#nj-abc-test

#independent-contractor

#settlement

#labor-compliance

#supply-chain-labor

#contractor-classification

Frequently Asked Questions

What This Means for Your Supply Chain

Simulation Suggestion

this month

What if carriers must reclassify 50% of drayage operations from independent contractors to employees?

Model the operational and cost impact if New Jersey's ABC test enforcement forces drayage carriers to reclassify significant portions of their independent contractor workforce to employee status, requiring changes to payroll systems, benefits administration, workers' compensation coverage, and wage record-keeping.

Run this scenario

Simulation Suggestion

strategic

What if other states adopt New Jersey's ABC test before your compliance deadline?

Simulate the cascading compliance burden if Pennsylvania, New York, Connecticut, and Delaware adopt versions of New Jersey's ABC test within the next 12 months, requiring carriers to simultaneously adjust contractor agreements, monitoring systems, and operational controls across multiple jurisdictions.

Run this scenario

Simulation Suggestion

immediate

What if enforcement actions result in $5M+ settlements for your carrier annually?

Model financial exposure and cash flow implications if your drayage operation faces similar worker misclassification litigation in New Jersey and adjacent states, including settlement payouts, bankruptcy impacts, legal fees, and operational disruption costs over a 24-month period.

Run this scenario

Go deeper:

Supply Chain Simulation: A Guide for Operators

What discrete-event, agent-based, and Monte Carlo simulation actually do, in plain language for supply chain leaders.

Get the daily supply chain briefing

Top stories, Pulse score, and disruption alerts. No spam. Unsubscribe anytime.

The signal

Frequently Asked Questions

What This Means for Your Supply Chain

Related Articles