Market Overview

Teamsters, Port And Rail Drivers Defend AB5's Limits On Independent Contractors

Teamsters, Port And Rail Drivers Defend AB5's Limits On Independent Contractors

Southern California port and rail drivers, along with union and labor advocates, pushed back against industry critics of a sweeping new labor law that seeks to limit the use of independent contractors.

Last week the California Trucking Association (CTA) filed a legal challenge against the bill, AB5, saying it will result in 70,000 drivers in the state losing their ability to work and that the state-level legislation defies federal law.

A Teamsters executive fired back with a statement citing exploitative working conditions at the San Pedro ports, where around 12,000 rail and port drivers haul containers short distances to warehouses and rail yards.

"For decades, companies like Lowe's, Rio Tinto Mines and Target have enjoyed unprecedented profitability and shareholder value off the backs of the hardworking truck drivers who haul their imported cargo from our nation's seaports to their warehouses," said Fred Potter, vice president-at-large, International Brotherhood of Teamsters, and director of the Teamsters' Port Division, in the statement, released last week.

"It's no surprise that their trucking contractors are going to court to perpetuate a scheme — deemed illegal by multiple regulatory agencies and courts long before Assembly Bill 5 was introduced in the California Legislature — that has robbed the typical driver of tens of thousands of dollars a year due to their misclassification as independent contractors."

A Long History

Long before AB5 was introduced in the California Legislature, port and rail drivers had battled employers over lost wages connected to driver misclassification.

Between 2011 and 2018, port and rail drivers filed 1,006 wage claims with the California Labor Commissioner's Office, the Department of Industrial Relations' enforcement arm, spokesperson Paola Laverde told FreightWaves.

Of those, she said, 448 decisions were issued for a total of $50,378,695 in unpaid wages.  

An expose published by USA Today in 2017 documented many of these claims. That investigation found that hundreds of workers based out of the Port of Long Beach and the Port of Los Angeles were indebted to their employers and were working up to 20 hours a day for far less than minimum wage.

Today, dozens of wage claim cases are still pending in local and state courts and with the city and county labor boards.

Port and rail drivers have consistently been proved to be employees under current laws, Potter said in his statement, "yet deep-pocketed companies like XPO Logistics (NYSE: XPO) have continued to flagrantly break employment, labor and tax laws by persistently misclassifying their truck drivers."

XPO subsidiary XPO Logistics Cartage is among the top trucking companies servicing the Ports of Los Angeles and Long Beach.

The Driver Experience

Domingo Avalos, a driver for XPO, was part of a recent Los Angeles County Superior Court decision awarding four XPO drivers $812,651 in unpaid meal and rest breaks, expenses and nonproductive time. XPO appealed the decision to the California Second District Court of  Appeal on Oct. 21, 2019. The case is pending.

Speaking through a translator, Avalos, 55, said he supported AB5. Among his grievances is that he is unable to negotiate rates and that he is not paid for "nonproductive time." He said his weekly take-home pay is $800, "but to hit that mark I have to work 12 to 14 hours per day."

Another driver, Juan Islas, has been working for XPO for two and a half years, moving cargo for large retailers including T.J.Maxx, Macy's and J.C. Penney Inc (NYSE: JCP). He said that after deductions for diesel and insurance, he earns less than minimum wage and that last year after taxes he earned between $25,000 and $30,000.

"Of course I support AB5," he told FreightWaves through an interpreter. "Right now we feel we are in limbo, neither true employees nor true independent contractors." If he were "truly an independent contractor," he would be able to price rates with customers directly.

XPO did not respond to FreightWaves' requests for comment.

The Teamsters And AB5

Avalos and Islas were referred to FreightWaves by the Justice for Port Truck Drivers campaign, an effort to organize drayage drivers. The group is backed by the Teamsters, whose membership could grow as a result of AB5.

Under federal law, workers can't organize unless they are classified as an employee under state law, explained Scott Cummings, a professor at the UCLA law school, where he focuses on public interest law and social movements. AB5, he said, gives the Teamsters "a potential claim for unionization."

Critics of AB5 have seized on that fact as ammunition.

"My question is: Is the bill to protect the worker or drive unionization?" said Weston LeBar, president of the Harbor Trucking Association, a coalition representing carriers serving the West Coast ports. The association supports efforts to create protections for workers, LeBar said, as long as it does not infringe on their ability to contract independently.

"Our goal is to create a floor, to make sure people aren't going to be the subject of exploitation, while at the same time providing them with the opportunity to go above and beyond. Forcing folks to become hourly employees following with different regulations is not what the majority of drivers want."

Before AB5 — Deregulation

Fifty years ago, the majority of truck drivers were salaried workers with benefits.

In the 1980s, deregulation transformed one of the most heavily unionized industries in the country into a fragmented network of independent contractors.

"The independent contractor model was never motivated by promoting entry into entrepreneurship," Cummings said. "It was just a mechanism to reduce costs of paying drivers that wanted to unionize. It was about eking out profit in the newly competitive industry."

Cummings was referring to a comment by Chris Shimoda, vice president of government affairs of CTA, who told FreightWaves in an earlier interview that "at the core of the trucking industry of this [AB5] fight is that 80% of our drivers don't have college educations, and so the pathway for them to become entrepreneurs and to become part of the middle and upper-middle class that has been an opportunity is to own multiple trucks and become part of the American dream."

Contrasting views of independent contractors and AB5 in some respects reflects the fact that work environments for truck drivers differ — sometimes dramatically.

Many independent contractors, also called owner-operators, run their businesses under the authority of a motor carrier. These leased owner-operators typically cannot work with customers, book loads or set rates, a spokesperson for the Owner-Operator Independent Drivers Association (OOIDA) told FreightWaves.

While many long-haul drivers flourish under this arrangement, port drivers are at the mercy of drayage business operations, where driving distances are short and cargo delays are frequent.

Another concern at the ports is the prevalence of lease purchase agreements, under which motor carriers lease a truck to the driver with the promise of future compensation and independence.

The reality, according to an OOIDA brief warning drivers against entering into these types of arrangements, is truckers have no ownership rights until the vehicle is paid off, and even then the truck must remain leased to the company that "owns it."

Bottom Of The System

Cummings described port and rail drivers as the "garment workers" of the trucking industry.

Under the classic independent contractor situation, contractors build up skills and capital. "But that can't happen [in the drayage model]," he said, "because the drivers themselves are not really independent. They are fundamentally under the control of big power actors; the shippers and big logistics companies set the price of transport. They are at the bottom of this massive system."

AB5, he added, aims to eliminate existing inequities by "aligning drivers' actual work context with a legal label."

Islas echoed that perspective.

"My co-workers and I, we filed claims, and we've seen them go through the City Attorney, Superior Court, and we have been found to be employees in every one."

Image by leestilltaolcom from Pixabay


Related Articles (XPO + JCP)

View Comments and Join the Discussion!

Posted-In: AB5Government News Regulations Politics Top Stories Markets General