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There are more than 70,000 owner-operator truckers in the state of California and 350,000 nationally, according to statistics from the California Trucking Association (CTA). Photo credit: Shutterstock.com.
This story appeared in the print edition of the Jan. 6, 2020, Journal of Commerce Annual Review and Outlook.
After years of debate over the classification of owner-operator truck drivers as either independent contractors or employees, trucking companies in California anticipate that 2020 will produce clarity in this contentious issue.
With 70,000 owner-operator truckers in the state and 350,000 independent contractors nationally, according to statistics from the California Trucking Association (CTA), a decision this year by the US Southern District Court in a challenge filed by the CTA could have national implications. The trucking association is seeking declaratory and injunctive relief involving the so-called “employment test” for classifying owner-operators as independent contractors or employees.
Meanwhile, across the country in New Jersey, similar legislation is being advanced in the state legislature and could reach Gov. Phil Murphy’s desk by the end of 2019.
Last year was tumultuous for the trucking industry, especially for drayage companies, which have treated most of their drivers as independent contractors since the Motor Carrier Act of 1980 deregulated the industry. California Gov. Gavin Newsom on Sept. 11, 2019, signed into law Assembly Bill 5 (AB 5), which codified the employment test as the standard for classifying owner-operators.
The employment test is the second of three prongs laid out by the judgment in the 2018 case Dynamex Operations West vs. Superior Court, which states that a person is considered an independent contractor if that person performs work that is outside the usual course of the hiring entity’s business.
Trucking industry representatives who addressed the annual Intermodal Association of North America conference in Long Beach in September stated that of the three criteria for determining worker classification in what is known as the “ABC” test, prong B, the employment test, will be the most difficult to prove for motor carriers that for decades have operated under the independent contractor model.
‘Don’t panic’
Although AB 5 takes effect in California on Jan. 1, 2020, nothing has really changed as the industry awaits a decision by the court, which is anticipated by mid-year. David Libatique, deputy executive director of stakeholder engagement at the Port of Los Angeles, told JOC.com in November that beginning Jan. 1, drivers would not be denied entrance to the port based on compliance with AB 5. A Port of Long Beach spokesperson agreed.
Although the court determination in California will not set a national legal precedent, it has attracted widespread attention across the country.
New Jersey’s S-4204 bill likewise pits trucking companies, who say it could significantly weaken the port of New York and New Jersey’s drayage fleet because drivers would rather work elsewhere than become employees, against Democratic lawmakers and the Teamsters union, who say the bill offers important protections for worker rights.
The Teamsters, which for the past decade has been organizing and attempting to organize drivers in Southern California and other ports across the country, supports the employee model as providing drivers with solid middle-class wages and benefits. However, unions cannot organize independent contractors. Drivers must be classified as employees before they can be organized.
The vast majority of drayage drivers serving the Los Angeles–Long Beach port complex, the largest in the United States, are independent contractors and do not qualify for employee benefits, including medical insurance, worker’s compensation, or retirement benefits. The drayage companies charge a fee to beneficial cargo owners (BCOs) or shipping lines for harbor haulage. They take a commission and pass most of the payment on to the drivers.
The industry adamantly opposes restrictions to the independent contractor model. “The new test denies a significant segment of the trucking industry the ability to continue operating as independent owner-operators in California, forcing them to abandon $150,000 investments in clean trucks and the right to set their own schedule and become their own boss,” CTA stated in a Nov. 12 release.
Greg Stefflre, owner of Rail Delivery Services in Southern California and an attorney who has represented the California and American Trucking Associations, told JOC.com in late November he is optimistic CTA’s challenge to AB 5 will be upheld, due to court decisions dating back to 2010 involving an attempt by the Port of Los Angeles to use its clean-truck program as a vehicle for making the hiring of employee drivers a requirement for drayage companies serving the port.
Ultimately, the involvement of a state or local government was determined to be preempted by supremacy and commerce clauses in the US Constitution and in direct conflict with the Federal Motor Carrier Safety Act and the Federal Aviation Administration Authorization Act of 1994.
“Motor carriers have this statute. I feel, ultimately, they will win in court. They did in the Port of LA case,” he said.
If the court rules against the industry, trucking companies have multiple options, including hiring drivers as employees, further challenging the decision in court, or letting freight brokers serve as middlemen between the carriers and the owner-operators. Stefflre said he has studied the broker model extensively, and he does not think it will work in California, where state agencies and legislators have publicly stated they oppose independent contractor models in a number of industries.
“I think they would treat brokers the same as they treat LMCs [licensed motor carriers],” Stefflre said. On the other hand, the industry should not automatically declare defeat regardless of what decision is rendered, he said. “I’m telling them, ‘Just don’t panic.’”
Contact Bill Mongelluzzo at bill.mongelluzzo@ihsmarkit.com and follow him on Twitter: @billmongelluzzo.
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