Costco Misclassification Case Puts Delivery Driver Rights in Focus

If you work as a delivery driver and your day involves wearing a uniform your company requires, following delivery protocols set by someone else and having your performance tracked closely, you might assume you’re an employee. Under California law, you very likely are one. However, a common practice in the trucking and logistics industry is to label workers as independent contractors instead. This means no overtime pay, no meal breaks and no minimum wage protections. A California Labor Commissioner’s Office investigation found that’s exactly what happened to 58 delivery drivers working in the San Diego area.

In November 2025, the Labor Commissioner cited Costco Wholesale, trucking subcontractor Mega Nice Trucking and logistics company Ryder Last Mile for a combined $868,128 in penalties and back wages. The agency found that the drivers had been misclassified as independent contractors for roughly two years, from August 2022 through September 2024. Of the total amount cited, about $663,000 is designated as restitution for the affected workers.

The investigation was launched after two former Mega Nice Trucking workers came forward with complaints about wage theft and misclassification in July 2024. What investigators found went beyond a technical paperwork error. According to the Labor Commissioner’s Office, Mega Nice Trucking paid drivers a flat rate and manipulated payroll records to hide what was happening.

One of the more notable aspects of this case is that the Labor Commissioner didn’t stop with Mega Nice Trucking. The agency also held Ryder Last Mile and Costco accountable as joint employers who had control over workers’ day-to-day conditions. Investigators found that they scheduled deliveries, required drivers to wear specific uniforms and tracked their performance.

Under California law, that level of involvement is enough to create employer obligations, regardless of how the subcontracting relationship is structured on paper. Using subcontractors doesn’t let companies off the hook for how workers are treated. Misclassification robs workers of wages and protections that employees typically receive.

California’s Assembly Bill 5, which took effect in 2020, established what’s known as the ABC test for determining whether a worker is an employee or an independent contractor. Under the ABC test, a business can only classify a worker as an independent contractor if it can show that the worker is free from the company’s control, that the work performed is outside the company’s normal course of business and that the worker is independently established in that same type of work.

In trucking and logistics, drivers are typically doing the core work of those businesses, which makes it very difficult for companies to satisfy the ABC test. Notably, app-based businesses like DoorDash and Uber got an exemption from AB 5 through Proposition 22, a 2020 ballot measure, but that exemption doesn’t apply to traditional trucking arrangements. 

Companies sometimes deliberately misclassify workers as independent contractors to cut costs. Workers end up facing very real financial consequences for misclassification. When a driver is classified as a contractor instead of an employee, the company doesn’t have to cover sick days, pay overtime, provide meal and rest breaks or be responsible for other benefits. In trucking, those workers also typically absorb fuel costs, vehicle maintenance and insurance themselves.

If you work as a delivery driver or in any other job where you’ve been told you are an independent contractor, it’s worth taking a close look at whether that classification is accurate. The label on your contract is not what determines your legal status. What matters is how much control your employer actually has over your work. If you show up at scheduled times, follow protocols set by someone else, wear a required uniform or have your work monitored and evaluated by the company, you may have more legal protections than you realize.

If you believe you have been misclassified or denied wages you are owed, McCormack Law Firm can help. Our San Francisco employment lawyers represent workers in wage theft, misclassification and other employment law claims. Contact us today for a free initial consultation.

Disclaimer: This article is for information purposes only. McCormack Law Firm is not involved in this case.