Nearly 1,400 Arizona delivery drivers will share in a $5.6 million judgment from an auto-parts distributor and a logistics firm that jointly misclassified them as independent contractors rather than employees.

Parts Authority Arizona LLC along with joint employer Arizona Logistics Inc., operating as Diligent Delivery Systems, were ordered to pay $2.8 million in back wages and $2.8 million in damages to the 1,398 workers, according to a consent judgment obtained by the U.S. Department of Labor in federal court.

The consent judgment, issued in November and announced Jan. 12, also orders Parts Authority along with Diligent Delivery Systems and the latter's owner and CEO, Larry Browne, to pay $150,000 in penalties.

Payments to workers began late last year and will continue in installments until October 2025.

Arizona Logistics/Diligent Delivery delivered parts on behalf of Parts Authority, mostly to mechanic shops and auto dealerships, said Jose Carnevali, a spokesman for the Department of Labor. "Parts Authority and Diligent both met the legal test as an employer of drivers who delivered for Parts Authority," he said.

Parts Authority has its own drivers who performed the same tasks, he added. The judgment requires Parts Authority to treat them as employees, too.

Parts Authority, headquartered in Lake Success, New York, is a national distributor of automotive replacement parts with more than 200 U.S. locations. Diligent Delivery Systems, headquartered in Houston, has 46 locations across the U.S. that serve industries including automotive, health care, retail, energy and agriculture.

Neither company responded to requests for comment.

Various pay infractions

The action comes after the Department of Labor's wage and hour division found that by misclassifying employees, the joint employers failed to meet minimum wage requirements, paid straight-time rates for all hours worked, failed to keep required timekeeping records and failed to pay wages at time-and-a-half when drivers worked more than 40 hours in a week.

The companies also made the drivers use their personal vehicles for deliveries without compensation, in violation of 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,” said Seema Nanda, the federal department's solicitor of labor who vowed to combat employee-misclassification schemes and wage theft.

While most of the affected employees will receive a few hundred or a few thousand dollars each, depending partly on how long they worked, 16 will receive more than $50,000 each.

Nearly eight years of investigation, litigation

The investigation and subsequent litigation extended from April 20, 2012, to March 31, 2020. The wage and hour division’s Phoenix office investigated the case, and the department’s San Francisco office litigated it.

Misclassifying employees as independent contractors not only hurts workers but can put rival businesses at a competitive disadvantage.

The Department of Labor’s wage and hour division offers more information for people who think they might be owed back wages.

Reach the writer at russ.wiles@arizonarepublic.com.

This article originally appeared on Arizona Republic: AZ drivers for Parts Authority, Diligent Delivery win $5.6M judgment