Truck driver Dominic Oliveira’s last paycheck from Prime Inc., the 15th-largest trucking company in the U.S., was $712.
Oliveira needed that money during his job change to a new trucking company. But he said Prime refused to pay up, so he got lawyers involved to see if he could secure the cash.
The Massachusetts native soon encountered a batch of decades-old labor laws that treat truck drivers differently than other workers. Unlike most workers, truck drivers are excluded from laws that require employers to pay them minimum wage or overtime. (Prime did not provide a statement concerning Oliveira’s claims, which formed the basis of a lawsuit that eventually went to the US Supreme Court. The court ruled unanimously in Oliveira’s favor.)
“Drivers are completely vulnerable because no one protects us,” Oliveira told me recently. “There are all these other laws that we don’t have in trucking.”
The public likely doesn’t know that the 2 million drivers who transport their food, medical supplies and (of course) Amazon packages aren’t guaranteed minimum wage or overtime pay. Indeed, Oliveira said it was common at Prime for him to earn under minimum wage for a job that required up to 14 hours of work each day — not to mention weeks away from home.
That could change soon. U.S. Rep. Andy Levin from my very own home state of Michigan introduced legislation on April 14 called the Guaranteeing Overtime for Truckers Act.
Sociologist Steve Viscelli, who studies trucking at the University of Pennsylvania, told me the bill is the “first legislation that’s intended to help truck drivers” we’ve seen in decades.
The politicians of 1938 decided to exclude the humble trucker from overtime protection
The Fair Labor Standards Act of 1938 established that workers were entitled to minimum wage and “time-and-a-half” pay if they worked more than 40 hours in one week. Not all Americans were covered, though. The FLSA in its original state excluded, among others, truck drivers.
They were already protected by a beefy regulatory act passed just three years prior. The Motor Carrier Act of 1935 laid out how many hours a truck driver is allowed to work in a day and week.
That’s just the beginning of why the MCA of 1935 was so important.
This law directed the federal government to set the rates of each type of freight movement. It also banned new trucking companies from operating unless they applied for the authority to carry one type of freight in one route. (More commonly, new companies would just buy the authority.)
This shielded the 18,000 trucking companies that were around in 1935 from outside competitors. It also made prices much higher. To cite one example from public policy expert Dorothy Robyn’s book on trucking deregulation*, look to the noble frozen chicken. The federal government deregulated trucking routes for frozen chicken and other frosty goods in the 1950s. Right after deregulation, rates dropped by 19% to 36% … and they bounced back up years later when frozen chicken trucking was re-regulated.
Those costs were passed down to you and me, the foolhardy consumer. Free-market economists would seethe about this system for decades and managed to finally get rid of it in the 1980 Motor Carrier Act.
Deregulation hurt drivers
Upon signing the 1980 Motor Carrier Act, President Jimmy Carter declared that customers would save as much as $8 billion annually (nearly $30 billion today, adjusted for inflation) with the passing of the bill.
Inflation certainly eased due to deregulation, but truck drivers became collateral damage.
Drivers in the late 1970s earned salaries equivalent to six figures nowadays. The majority were unionized. Now, according to Wayne State University economics professor Michael Belzer, only about 10% of truck drivers are unionized, slashing benefits and making working conditions less desirable. Drivers earn around $48,310 a year, according to federal data.
What does this have to do with the Fair Labor Standards Act or the new bill, you ask?
When politicians excluded truck drivers from overtime protections in 1938, they were covered by the 1935 law that outlined their working hours. In 1966, an amendment to the FLSA again codified that truck drivers would be excluded. In both eras, drivers were among the best-paid blue-collar workers.
Legislators apparently haven’t considered in 56 years why truck drivers are still excluded from the overtime protection.
Guaranteeing overtime pay could fix a lot of issues in trucking…
Drivers are largely paid per mile. They aren’t paid for the hours they spend waiting to load or unload their trucks or any of the other nondriving activities truckers undertake — fueling, parking during inclement weather, maintenance and so on.
“If the wheels of the truck aren’t turning, drivers aren’t earning,” truck driver Alec Costerus told me recently, repeating a much-beloved trucker adage. “That’s a travesty and it needs to stop.”
What Belzer told me he envisions is a return to the pre-regulation standard of pay, under which drivers were paid for miles and hours working. Take Oliveira’s case. Had the FLSA been amended earlier to guarantee overtime for truck drivers, Oliveira would have been paid for each hour he was in the truck. His paycheck would have reflected his 14-hour days.
Most taxing for drivers is that time waiting around warehouses and shipping docks waiting for their loads to be loaded or unloaded, called “detention time.” The first two hours of that time is unpaid. A 2018 report by the Department of Transportation found that drivers lost out on more than $1 billion of wages annually thanks to detention time alone.
Paying drivers for their time could (shocker!) stymie that “truck driver shortage” we’ve been hearing so much about, Belzer and Viscelli said. At large truckload carriers like Prime, where Oliveira worked, the average annual turnover rate for truck drivers from 1995 to 2017 was a whopping 94%.
“There’s no labor shortage,” Belzer said. “There’s a retention problem. It’s simply because you don’t pay these people. After you’re paid for working 40 hours when you really worked 65, you get to be unhappy. And that’s why they quit.”
…but one law won’t be able to address the larger issue
It’s a good first step, but simply nixing the truck driver exemption from the FLSA won’t solve all the industries’ problems. Companies could choose to simply flout the law, Viscelli said, and many already do.
Beyond that, trucking companies large and small struggle to stay profitable – even if they pay employees less than minimum wage. An ongoing study of operating ratios by NYU Stern School of Business professor Aswath Damodaran shows that trucking companies maintain a net margin of a paltry 1.85%. The overall transportation sector sits at 5.97%.
It’s not because these companies are poorly run. It dates back to that 1980 deregulation act I was going on about up there. In the late 1970s, there were about 17,000 trucking companies. Now, there are more than 200,000. If a trucking company decided to jack up rates to pay its workers more, its clients can simply go work with any other trucking company.
Those trucking companies who pay employees less – even below minimum wage – win more business and can even set the price in a given route. “It wipes out everyone else in the market,” Costerus said.
It’s a windfall for consumers (and anyone with shares in Amazon). Not so good for people like Oliveira or Costerus.
If you work in the trucking industry and want to share your experience, email me at rpremack@freightwaves.com. And don’t forget to subscribe to MODES, your weekly newsletter on the trucking industry.