California’s trucking sector kicked off the new year with an updated set of regulations and a visit from the secretary of labor, with the state’s AB5 independent contractor law as a regulatory backdrop.
The latest step that went into effect on the road to a fleet of zero-emissions vehicles by 2035 is that on Jan. 1, no vehicles with an engine prior to the 2010 year could be on the road. The vehicle itself can be older, as long as it has an upgraded engine.
There are no signals from the market of a squeeze in capacity as a result of the Jan. 1 changeover, which is the latest graduated step that started by taking pre-1994 vehicles off the road at the start of 2015.
The Outbound Tender Rejection Index (OTRI) for Los Angeles in the FreightWaves SONAR data dashboard dropped from a recent high of 4.34% in mid-July to 2.36% Wednesday. At that number, Los Angeles has a lower OTRI than the national OTRI of 4.69%, suggesting no capacity issues in that key freight market as a result of the latest engine requirements.
That weakness in the OTRI has come even as volume has increased, according to the Outbound Tender Volume Index for Los Angeles, which was 192.11 at the beginning of the year and 265.82 on Wednesday. For the first almost two weeks of the year, LA volume has increased alongside a weakening of capacity.
The gradual withdrawal of older engines, following the first move at the start of 2015, was extended to 1994-1995 vehicles a year later. That was followed by a series of restrictions that went into effect on New Year’s Day in each of the next four years that now has phased out vehicles from 2000 through 2009. California Air Resources Board (CARB) regulations hold vehicles that are 2010 or newer as “fully compliant” with existing emissions regulations.
A CARB spokesman said its estimate of the number of trucks that would fall under the regulation is approximately 36,900 for trucks registered in California and 192,400 for trucks registered in other states.
Joe Rajkovacz, of the Western States Trucking Association (WSTA), said the estimates last year of CARB were that 70,000 trucks would be impacted. He said that figure was supplied by CARB when WSTA sought a delay in the rule.
Labor secretary meets with companies, workers and Teamsters
A second development that kicked off the new trucking year in California came with the visit of Secretary of Labor Marty Walsh, on a trip presumably driven by the fact that AB5 will be in effect in the state’s trucking industry for a full year in 2023, barring a resolution or new injunction coming out of the ongoing litigation involving the independent contractor law.
AB5 went into effect statewide at the start of 2020. But a court injunction kept it at bay in trucking, a standoff that was resolved only when the U.S. Supreme Court in June chose not to review an appellate court decision to overturn the injunction. That meant AB5 was the law of the land in trucking. (Its fate for gig drivers remains uncertain.)
AB5 contains the ABC test for defining an independent contractor versus an employee. The B prong of the ABC test is particularly problematic for trucking, because it says a worker can be considered independent if he or she “performs work that is outside the usual course of the hiring entity’s business.” A trucking company hiring an independent owner-operator could be viewed as in violation of the B prong.
The Department of Labor released a statement about Walsh’s visit to Los Angeles for what was termed a “roundtable discussion” that focused on “the benefits of having a collective bargaining relationship between truck drivers and employers at the port.” It did not mention AB5 per se.
The statement also said the focus was on port trucking, an “industry with rampant misclassification of drivers as independent contractors, and the need for strong enforcement to ensure a level playing field.”
AB5 has been seen since its inception at the start of 2020 as being targeted at app-based drivers such as those with Uber, but also at the drayage sector of trucking. The labor backers of AB5 have viewed drayage as a fertile area to be unionized, given that it is a business that operates out of physical facilities, limited range and regular employee interaction, unlike long-haul trucking.
The pro-union forces have scored at least one significant AB5-related victory, at Universal Logistics (NASDAQ; ULH). Its drayage operations in Southern California, after battles within the National Labor Relations Board, will be offering full-time employment to drivers, which will likely end any lack of compliance with AB5.
At the meeting with Walsh, according to the DOL, were two drivers, representatives of Universal, as well as three other trucking companies (Sea-Logix, TTSI/Heavy Load Transfer and Pacific 9 Trucking), Teamsters representatives and officials from the Port of Los Angeles. Walsh deputy Julie Su also was at the roundtable.
The Harbor Trucking Association, which represents drayage companies in Southern California, was not invited to the meeting, according to its CEO, Matt Schrap.
“Not every good-paying driving job requires collective bargaining,” Schrap wrote in a LinkedIn post about the meeting and in reaction to the DOL statement on the roundtable. “It is unfortunate that when it comes to our labor department leaders there is a single focused, one sided discussion that dominates any dialogue regarding drayage drivers and what they do … there is more to the story than the ‘misclassification’ narrative.”
Asked in an interview with FreightWaves about the status of other companies following a policy similar to Universal, Schrap said that “many have looked at it. A lot of fleets already have employee drivers. It’s just a matter of expanding it.”
Some companies like Universal, Schrap said, may have been reacting to “their legal situation” in taking action, a reference to the NLRB actions against Universal, “while others are trying to get in front of this.”
Schrap said he was optimistic that there is “ideally a pathway for small business to remain as such,” referring to independent drayage drivers or smaller fleets that serve the ports and are trying to stay that way in an AB5 world.
But Schrap said the Walsh visit did not include “discussions outside of this focus on misclassification. Operational challenges should be the story.”
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