$80.9M STG settlement exposes bankruptcy's role in erasing worker claims

For legal professionals, the STG case illustrates a collision between state labor enforcement and federal bankruptcy law. An $80.9 million judgment was effectively reduced to a 3.4% cash recovery because driver misclassification claims were discharged—except for a priority slice. With the ABC test becoming state statute on October 1, this settlement previews the litigation landscape for transportation companies that rely on independent contractors.

STG Logistics has agreed to a landmark $80.9 million settlement to resolve a driver misclassification case brought by New Jersey—but only $2.775 million of that will be paid in cash, $2.2 million directly to eligible drayage drivers and $555,000 to the state for penalties and unemployment/disability funds. The rest will be discharged in the company's recently concluded Chapter 11 bankruptcy, which eliminated 90% of its debt. The settlement, approved in Essex County Superior Court, establishes that over 2,200 misclassified drivers who operated as independent contractors will receive lump-sum payments based on their earnings from January 1, 2017, to the present.

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The total $80.9 million figure largely represents back wages, penalties, and interest calculated under New Jersey wage and hour law, but its discharge in bankruptcy means the state and drivers recovered only about 3.4% of the face value.

The case carries outsized significance because it lands just weeks before New Jersey codifies the "ABC test" for worker classification on October 1, 2026—a standard already used by the state to pursue STG. The ABC test, derived from New Jersey unemployment law, presumes workers are employees unless the employer can prove: (A) the worker is free from control; (B) the work is outside the usual course of business; and (C) the worker is customarily engaged in an independent trade. Drayage drivers hauling containers for a logistics giant like STG struggle to meet the "B" prong, making these settlements a bellwether for the entire freight sector.

For the trucking industry, the numbers are stark. The $2.2 million payout, while modest per driver, signals that state attorneys general are willing to pursue misclassification claims aggressively even when the employer is in bankruptcy. Crucially, the drivers' portion was designated as a "priority" claim under the bankruptcy code, meaning workers were paid ahead of unsecured creditors. This precedent could embolden other states to target transportation companies that rely on owner-operator models. Carriers across New Jersey are already voicing alarm that the ABC test's codification will subject them to similar enforcement actions, potentially restructuring the economics of drayage operations.

From a legal perspective, the settlement's structure illustrates a growing trend: regulatory claims are being resolved inside bankruptcy reorganizations, with the most vulnerable creditors—here, workers—receiving nominal cash while the bulk of the liability evaporates. The total $80.9 million figure largely represents back wages, penalties, and interest calculated under New Jersey wage and hour law, but its discharge in bankruptcy means the state and drivers recovered only about 3.4% of the face value. This outcome underscores the tension between federal bankruptcy law and state labor enforcement.