Michael Hiltzik Columnist
Column

Port truckers who carry your favorite goods to market are being cheated to save you money

Juan Lara was headed back to the Port of Los Angeles two weeks ago from his daily pickup in the Mojave Desert when his truck erupted with engine trouble. He managed to bring the truck and its 50,000-pound load of borax limping into the port.

There the 63-year-old driver says he faced a bill for $10,500 in repairs for a truck he doesn’t even own. That will take a big chunk out of his pretax pay of about $2,500 a week, which is reduced by more than half by his expenses for fuel, insurance and the truck lease itself. Subtract federal, payroll and state taxes, and Lara may be working for less than $18 an hour, with no benefits.

Lara is classified at his trucking company, California Cartage Express, as an “independent contractor,” not an employee, even though he says he drives exclusively for the company and operates under the control of its dispatchers.

The vast majority of the roughly 12,000 regular truck drivers at the Port of Los Angeles and Port of Long Beach are classified by their bosses as independent contractors. But as federal and state judges and labor regulators have consistently ruled, they’re employees in all but name. They just don’t get the benefits — access to employer-owned equipment, workers compensation and unemployment insurance, employer contributions to Social Security and minimum wage protection.

They don’t get retirement or healthcare coverage, or reimbursement for their work expenses. Typically, they work on 90-day renewable contracts, which means they can effectively be fired at will, with no recourse to the protection against arbitrary treatment enjoyed by employees.

The misclassification of workers as independent contractors is a national scandal. But the port may be the single most concentrated example of this race to the bottom in the American workplace. Port trucking “really is a case study in the bigger economic trends we have seen since the 1980s,” says Jessica Durrum, head of the clean & safe ports campaign for LAANE, the Los Angeles Alliance for a New Economy. “This is not about one or two bad apples.”

There’s no mystery why shipping firms at the port prefer the independent contractor model: It saves them about 30% compared to the cost of operating with employee drivers. That’s the estimate of Fred Potter, director of the port division of the Teamsters, which represents about 500 drivers at the port and is trying to expand its representation.

The Teamsters’ goal is to get the drivers as much as 30% more in pay over the average $28,000 that the union says the “independent contractors” can pull down after expenses, but resistance by the firms has been ferocious. As long as the misclassification continues, Potter says, “the employers who break the law have an advantage.”

The drivers haul not only industrial cargoes, but merchandise for leading retail chains, including Target, Home Depot, Lowe’s and Wal-Mart as well as merchandise bearing some of the world’s most familiar brand names. Those chains and brands are the customers that shipping companies try to please by undercutting each other’s rates, and they have the power to require the shippers to comply with the law.

We reached out to the four big retailers; Target said it expects all its vendors “to comply with our vendor standards and all applicable laws and regulations around labor, wages, overtime and more,” including “the appropriate classification of their workers.” Home Depot said, “we're investigating the issue and we're exploring ways to ensure drivers are aware of available channels to raise concerns with us.” Lowe’s said it had “no information to share” and Wal-Mart didn’t respond. We also reached out to California Cartage, Lara’s company, but they didn’t respond.

Shipping companies claim that truckers prefer to be independent contractors. “The market is telling us that independent contracting is where the talent pool is,” says a spokesperson for XPO Logistics, a big port shipping firm. “For them it’s about pay and flexibility, and that’s important for us, too.”

“Of drivers offered the opportunity to be employees or independent contractors,” says Weston LaBar, executive director of the Harbor Trucking Assn., “more than 90% choose to be independent contractors.” But that choice is really a sham because opportunities to be employees are limited; the few employee-only companies at the port face “a significant economic disadvantage,” says an industry insider who asked to remain unidentified because he serves in port management.

Legal rulings have almost uniformly found that the truckers meet all the markers of employees and almost none of independent business operators; LaBar concedes that “99% of the cases” have been ruled in favor of the drivers.

As a National Labor Relations Board judge found in 2015 in a case involving Green Fleet Systems, the company dictated each driver’s shifts, set payments unilaterally, effectively prevented them from working for other companies and required the drivers to park the trucks on company property between shifts — and charged them up to $15 a week for the parking.

“In every real sense, they were neither independent nor businesses,” ruled the judge, Jeffrey D. Wedekind. “Rather, they were dependent drivers.”

As the rulings pile up, so do the liabilities. The port firm Shippers Transport Express settled a federal court suit over the misclassification of more than 500 truck drivers for $11 million in 2015, while agreeing to convert the drivers to employee status. Of about 900 complaints filed with the California labor commissioner since 2011, rulings have been issued in more than 375 — every one finding that the drivers are employees and ordering back pay totaling nearly $40 million, according to Julie Gutman Dickinson, a Los Angeles-based lawyer for the Teamsters. About 350 cases have been settled or sent to arbitration, and 150 are pending.

In May, U.S. Judge William D. Keller of Los Angeles ordered Pacer Cartage, a unit of XPO, to pay five drivers a total of $958,657 in unlawfully deducted wages, lease payments, expenses and interest. XPO is appealing the order.

During the trial Keller warned Pacer that case law had moved inexorably toward the conclusion that the drivers had been improperly classified as independent contractors.“That isn’t a storm cloud for you,” he said. “That is an absolute tornado coming at you at about a hundred miles an hour. And you better scatter.”

The industry attributes its string of losses to “politically tilted” judges and regulators and the influence of “plaintiffs’ attorneys and organized labor,” as Greg M. Feary, the head of a law firm that represents the shippers, wrote in response to a recent USA Today investigation into lease abuses at the Port of Los Angeles.

The classification of drivers as independent contractors dates back to federal deregulation of the trucking industry in 1980. Companies that mostly employed Teamster members on fixed wages were soon supplanted by nonunion companies that sold their trucks to their drivers and paid them by the load. Established Teamster companies, including California Cartage, shifted to the new model. A vigorous trade in used trucks developed among drivers.

But the economics for drivers took a drastic turn for the worse in 2008, when the port instituted an initiative to get old, polluting diesel trucks scrapped and replaced with fuel-efficient, lower-emission — and much more expensive — new models. The goal was to quell local residents’ complaints about filthy air, paving the way for a port expansion to relieve congestion.

As a federal appeals court later observed, port officials believed that the conversion to clean trucks would be “prohibitively expensive” for independent drivers. The city of Los Angeles issued a mandate that all trucking firms at the port, which had better access to the capital needed to convert the fleet, would have to change back to the employee-only model. The shipping firms successfully sued to overturn the mandate in federal court.

“Every day I come to work knowing I’ll have to cover $60 for the lease that day, plus fuel and insurance,” says Daniel Seko, 39, a driver for Intermodal Bridge Transport who gets paid by the load. In a good week, Seko says, he might earn $900 before expenses. “If it’s not a good week, $500.”

There are signs that the industry is moving toward an employee-only model, but at a snail’s pace.

One reason may be that the companies are hoping that the advent of the Trump administration heralds a more indulgent approach at the NLRB.

A few weeks ago, XPO asked an NLRB judge to suspend two cases in which the Teamsters accuse the firm of illegally misclassifying drivers, to “see whether the new administration remains interested” in the cases. The judge rejected the motion and scheduled a hearing for July 24 in Los Angeles.

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UPDATES:

6:37 a.m., July 2: This column has been updated with a response from Home Depot.

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