San Diego, California — California regulators have fined Costco Wholesale Corporation and its delivery partners nearly $870,000. The penalty follows findings of widespread driver misclassification among delivery workers in the region.
The case highlights the growing efforts of states to hold large corporations accountable for subcontractors’ denial of basic employee rights, including minimum wage, overtime, and benefits, to drivers. Officials say the misclassification affected dozens of drivers who, despite working full-time, were paid as independent contractors.
Regulators Find Widespread Violations
According to the California Labor Commissioner’s Office, the investigation found that Mega Nice Trucking LLC misclassified 58 drivers between August 2022 and September 2024, with Costco and Ryder Last Mile Inc. jointly responsible for unpaid wages. The companies allegedly directed driver schedules, monitored performance, and required uniforms—criteria consistent with exerting control over employees.
The state’s findings followed complaints from former drivers, who reported falsified payroll records and flat-rate pay structures that concealed overtime violations. Approximately 75% of the assessed penalties will be allocated to compensating affected workers, although all three companies have appealed the decision.
Why Driver Misclassification Violates California Labor Laws
California’s AB 5 law clearly defines who qualifies as an employee. Under this law, drivers engaged in a company’s core business functions are presumed to be employees, not contractors. Misclassification often deprives workers of key protections, including:
- Minimum wage and overtime pay
- Workers’ compensation and unemployment insurance
- Paid rest and meal breaks
- Employer-paid payroll taxes and benefits
When companies exercise control over drivers’ routes, hours, or uniforms, they can be held liable for wage theft under the California Labor Code. Driver misclassification cases like this emphasize the importance of enforcing fair labor standards across logistics and delivery sectors.
Take Action Today: Legal Help for Misclassified Workers
If you suspect you’ve been misclassified or denied fair pay, our employment lawyer in San Diego can help you determine your rights under California law. We assist workers in recovering unpaid wages, benefits, and compensation for misclassification.
Contact us today for a free, confidential consultation and discover how our team can assist you in obtaining the justice and financial recovery you deserve.
