When will California’s trucking industry feel the effects of AB5?

Not for a while, it seems. And perhaps the impact will be greatest in the port drayage sector. That’s the consensus in this article. Many firms seem to have made adjustments already.

AB5 is the law in California that sets up a series of tests to determine if a worker is an employee or independent contractor. A boatload of exceptions is granted, but the trucking industry, the main target, is right in the crosshairs because of the myriad employment arrangements trucking firms have made through the recent years. Trucking firms and trucking representatives have been tracking the progress closely. There were several lawsuits to overturn the law, but recently the Supreme Court of the US refused to hear a petition for another stay. The law thus goes into effect.

The purpose of the law is a good one; to prevent some of the egregious practices some trucking firms engaged in, such as modifying contracts at will with no recourse; changing routes and return points for chassis, which required many hours of unplanned and unpaid driving; requiring unpaid waits while warehouses opened for delivery; making drivers help unpaid with unloading and loading services; and forcing drivers to lease a truck through the company and deducting payments from their earnings, sometimes leaving the driver owing money for the period, harking back to the ‘company store of the mining and agricultural days in many states. Not all of these are strictly illegal; it depends on the exact nature of each individual contract. But a driver had no way to dispute or challenge the contract short of litigation. Another factor was benefits; employees must be offered them, independent contractors must pay their own.

There are several options for trucking firms. One is to start a freight brokerage, which can use independent owner-operators as contractors and not employees, while keeping their regular business with employee truckers. There are some costs associated with this, but they aren’t huge; the bigger problem is to keep the two lines of business separate enough to withstand an audit. Another option is to convert to employee status across the board, as some firms are doing.

The port drayage sector is perhaps the most vulnerable. Quite a few port drayage drivers are contractors, and there have been manifold abuses here. It’s compounded by shortages of chassis, parking, and chassis dropoff capacity at contract-mandated points. Much of this is the effect of major congestion at ports like LA and Long Beach.

Another complication is the feeling among trucking industry watchers that the bill’s primary goal was to help out the Teamsters and other trucker unions by making more employees they could organize. A rise in employee numbers may result; but I believe the bill would not have passed were that the main concern. Instead, mistreatment of truckers is at the root. And that happens most often in drayage.

A few years ago there was considerable study of ‘gig worker’ drivers’ feelings about their work. The study dealt with Uber and Lyft drivers and drivers for courier services and food delivery. It was done by a sociologist at Harvard, on behalf of a national organization representing truckers. The study found that these workers fell into three groups. The first group drove as their main job for survival, relying on their pay for most of their living expenses, with no other jobs. The second group did the driving as a second job, also working some other job, but not relying on driving for survival. The final group did the job for fun and because they liked it. The pay was not an object. The groups were approximately equal in size for those industries.

The third group clearly liked their ‘gig worker’ contractor status. They could accept or reject trips at will, and could work as much as they wanted.

The second group also liked the independent contractor status, to the extent that they did not feel mistreated by the concern they were driving for. Some of them felt as though there were sometimes unreasonable requests that they felt required to honor, fearing they might lose the extra income.

The first group, who depended on driving for subsistence, were the most critical of the independent status, though some felt favorable. The biggest concerns were not having control over pricing, and being forced to take unfavorable assignments, as well as not getting benefits, and not being paid for dead time on assigned waiting posts. These are similar to the concerns of drayage drivers. These workers are the type that the AB5 law is aimed at.

I feel that a similar survey of drayage drivers would find a similar division into three; but the group who rely on the work for subsistence would be the most vulnerable, and the least likely to be able to refuse a job. And that group in drayage would be much larger than one-third, perhaps up to 50%. The people doing it for fun or to keep occupied would be a very small group, perhaps 10%. The other 40% is the group that is most in favor of independent contractor status, perhaps because they have the wherewithal to simply refuse to work when they get assignments they feel are unfair. They might feel especially annoyed when a contract performance requirement changes after they have accepted, since they could not opt out then.

I won’t even get into the issue here of truck leasing and garnering trucker payments for lease and insurance fees. This is a highly complex realm, because lease terms can differ so much, and because at the major LA area ports the Clean Trucks rules are forcing more and more trucks to be updated to reduce pollution. The need for pollution-lowering trucks forces truckers in drayage there to upgrade their trucks more often and with more expensive mandated equipment. If they’re leasing through the drayage firms, it puts a lot of pressure on the contract operators to accept the unfair leases.

In the EU, on the other hand, most drayage truckers are employees of larger firms who own the trucks. And employees there are mostly unionized. That’s why the initial idea of the Clean Trucks plan was to force drivers to be employees, and force the drayage firms to buy the trucks. However, the independent contractors objected mightily to being forced into employment, and they have not changed their position through the years.

But how important a force are they in drayage? We are about to find out, as there will be some drayage trucker ‘actions’ (not showing up for work) over the next couple of weeks, protesting AB5. It will be interesting to see how many take part. I’m betting it is smaller than the press is speculating.

John Kingston Wednesday, July 13, 2022

When will California’s truckingindustry feel the effects of AB5? – FreightWaves