STG Logistics to Pay $2.2M to NJ Drayage Drivers as Bankruptcy Caps $80.9M Settlement

What STG's $2.2 Million Payout Means for New Jersey Drayage Drivers

STG Logistics will pay about $2.2 million in cash to drayage drivers in New Jersey to resolve a state lawsuit that accused the company — and, before it, XPO Logistics — of treating drivers as independent contractors when they should have been classified as employees. The deal, announced by the New Jersey Attorney General and the Department of Labor and Workforce Development, ends litigation rooted in a state investigation that began in 2019 and in a 2023 lawsuit, the first filed under a 2021 law that lets New Jersey sue employers over misclassification.

Although the settlement is valued at slightly more than $80.9 million, only $2.775 million will actually be paid out: $2.2 million to eligible drivers and $555,000 to the state in penalties and contributions to its Unemployment Compensation and State Disability Benefits Funds. The rest — more than $70 million described as general unsecured claims — will be paid only to the extent permitted by STG's recently concluded Chapter 11 bankruptcy plan, which erased about 90% of the company's debt. The driver payments are treated as priority claims under the bankruptcy code and the settlement agreement, so drivers are compensated ahead of other creditors.

Eligible drivers will receive a lump sum based on their earnings from January 1, 2017 to the present. The agreement also includes a conditional $7.5 million payment that STG must make only if it fails to meet obligations laid out in the settlement.

The case carries weight well beyond STG because New Jersey codifies its ABC test for independent contractor status on October 1, and the state says STG failed all three prongs of that standard. State officials cited requirements that drivers display STG's name on their trucks, lease vehicles only to STG for its exclusive use, follow assigned routes and submit to electronic monitoring, along with charges of unpaid wages, inadequate recordkeeping and insufficient workers' compensation insurance.

Why Bankruptcy Capped the Payout — and What the ABC Test Codification Changes

Why an $80.9 Million Settlement Is Really a $2.775 Million One

The headline figure reflects the nominal value of claims that the bankruptcy process will almost certainly not satisfy. According to the settlement document filed in the Superior Court of Essex County, the driver portion is treated as priority under both the bankruptcy code and the agreement, guaranteeing workers are paid before general creditors. The remaining balance consists largely of general unsecured claims that, under STG's plan, will be paid on the same basis as other unsecured obligations — and with roughly 90% of the company's debts wiped out, that basis is likely to be little or nothing in practice. The structural lesson: in a bankruptcy, how a settlement is ranked can matter far more than the number on the first page.

XPO Sold the Business, but the Exposure Was Already There

The investigation began in 2019, when the drayage operations belonged to XPO Logistics. XPO sold them to STG in 2022 as part of its successful repositioning as a pure-play less-than-truckload carrier, and the settlement sets the payout window from January 1, 2017 to the present. Whether XPO contributed to the deal is not disclosed in the state's announcement, but the sequence is a reminder for buyers of asset-heavy logistics businesses: worker-classification exposure can travel with the assets long after the sale closes.

What the October 1 Codification Changes for New Jersey Carriers

New Jersey has applied the ABC test through precedent, but October 1 makes it a codified law for the first time. Under that test, workers are presumed to be employees unless a company proves they are free from the company's control, perform work outside the company's usual business or places of business, and run their own independent business. The state said STG met none of those conditions, pointing to company branding on trucks, exclusive leasing arrangements, assigned routes and electronic monitoring as evidence of control.

That last point is what worries Lisa Yakomin, president of the Association of Bi-State Motor Carriers. If displaying a company name on a truck — a requirement that can trace to federal and state operating rules — is itself read as control, carriers following existing law could still find themselves on the wrong side of the ABC test. The settlement does not resolve that ambiguity; it sets the stage for the next case.

Who Wins, Who Loses

In the near term, eligible drivers are the clearest winners: their roughly $2.2 million is prioritized ahead of other creditors. STG also caps an open-ended liability, converting a claim valued above $80 million into a limited cash payment plus a conditional $7.5 million. New Jersey gains an enforcement precedent under its 2021 misclassification law and a small contribution to unemployment and disability funds. The clearest losers are the general unsecured creditors holding most of that $70 million balance, whose recovery will be governed by a plan that erases most of STG's debt. The wider drayage industry carries the biggest forward-looking cost: carriers that rely on owner-operators now have a concrete example of how New Jersey reads control.

How Carriers and Drivers Should Prepare for New Jersey's Oct. 1 ABC Test

For New Jersey drayage carriers, the STG case is effectively a preview of how the state will enforce its codified ABC test from October 1.

• Audit owner-operator arrangements before the October 1 codification. The STG settlement flags four control indicators the state treats as evidence of employment: required company branding on trucks, exclusive leasing to the carrier, assigned routes and electronic monitoring.
• Keep records of the business rationale for branding and dispatch requirements imposed on leased drivers. The state's position that displaying the carrier's name signals control means even compliance with federal operating rules may draw scrutiny — the concern raised by the Association of Bi-State Motor Carriers.
• Eligible drivers should expect a lump sum based on earnings from January 1, 2017 to the present, paid through the bankruptcy-approved settlement. Because driver claims carry priority status, they rank ahead of general creditor distributions under STG's plan.
• Watch two triggers: STG's additional $7.5 million payment, which comes due only if the company fails its settlement obligations, and the first enforcement actions or rulings after October 1 that define how far the codified ABC test reaches.