Taxi Company Shuts Down for Failure to Pay Workers' Comp

By William Vogeler, Esq. on January 09, 2017 | Last updated on March 21, 2019

A workers' compensation case has put a California taxi company out of business.

Faced with more than $500,000 in fines, A-C Transportation Services, Inc. closed the doors on 20 cabbies on Dec. 31, 2016. The Department of Industrial Relations announced that the closure was part of a settlement based on the company's failure to provide workers' compensation for its drivers.

Kevin and Jennifer Kroh, who also did business as Healdsburg Cab Company, agreed in the settlement to pay a fine of $200,000 and to cease doing business. They had argued unsuccessfully that the drivers were independent contractors rather than employees, and not entitled to workers' compensation.

Cost of Business

"They say they are protecting workers, but they are putting them out of business," said Kevin Kroh, president of the Santa Rosa-based company.

Workers' compensation weighs heavily on many businesses throughout the state, but Silicon Valley reports the lowest costs. The Los Angeles region spends the most fighting and closing workers compensation claims, according to California's Workers' Compensation Insurance Rating Bureau.

Meanwhile, the state is moving on legislation to require businesses to cover certain officers and directors of private corporations and working members of partnerships and limited liability companies that may have been previously excluded from coverage. Effective Jan. 1, 2017, it closes a loophole that allowed some small companies to reduce their worker's compensation premiums by excluding the coverage.

Moving On

Uber and Lyft, which have cut into the taxi business, typically do not pay workers' compensation for their drivers. They are treated as "gig workers." Since they're not typically full time employees, they're not typically covered by workers' compensation insurance. This is, of course, controversial.

The Bay Area market has been broken up by such ride-hailing services, forcing operators to search for niche markets. But with one less company around due to worker's compensation fines, another is ready to pick up customers.

"I have every intention to be the last man standing in Santa Rosa," Mark Neese, owner of Santa Rosa Yellow Cab, told the Press Democrat.

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