AB5 independent contractor protests pick up steam at Port of Oakland
The Port of Oakland in California is experiencing a work stoppage and limited access to the container terminals as truckers escalate their protests against the state’s AB5 law. Originally targeted at gig-economy workers, the law has inflicted collateral damage to about 70,000 trucking owner-operators in the state not exempt from the new ABC test.
According to the statute, under the ABC test, a worker is considered an employee and not an independent contractor unless the hiring entity satisfies all three of the following conditions:
- The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract and in fact.
- The worker performs work outside the usual course of the hiring entity’s business.
- The worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed.
The problem lies in the B portion of the ABC test. Under the new rules, those performing work for the company — hauling freight on its behalf, for example — could be considered employees, since they are not performing “work that is outside the usual course of the hiring entity’s business.”
FreightWaves’ Clarissa Hawes reported, “Approximately 100 members of the International Longshore and Warehouse Union Local 10 refused to cross the protest line Tuesday as owner-operators blocked the gates of the SSA terminal, which is the largest operator at the Port of Oakland.”
Andrea Connoly, a spokeswoman for TraPac, noted protestors Tuesday blocked short-haul drivers from entering the facility and only allowed long-haul drivers access at a rate of around three trucks per half hour. According to Connolly, this reduced TracPac’s operations by 95%.
Regarding the possible duration of these protests, Bill Aboudi, president of trucking company Oakland Port Services Corp., said, “about 400 protesters gathered at the port Monday. … On Tuesday, the protesters’ ranks more than doubled to about 1,000 people. … Protesters are deep-frying food and feeding people on the picket line.”
The impact of the work stoppage should it persist into the weekend remains to be seen. Carriers entering or operating around major California West Coast ports should be ready to deal with the possibility of ongoing disruptions and longer wait times when attempting to enter or leave these facility locations.
Dangers of chameleon carriers
The use of multiple motor carrier numbers is a decades-old phenomenon. With the explosion of new technology and digital load boards, this opportunistic skirting of regulations has attracted greater attention.
In an email to FreightWaves, the Federal Motor Carrier Safety Administration defined a chameleon carrier as “a trucking company that attempts to skirt penalties by restarting with the same equipment and operation but under a different name. A chameleon carrier reincarnates to separate itself from negative past behavior, including FMCSA and/or state imposed citations or fines.”
A recent example reported by FreightWaves’ Noi Mahoney detailed the saga of Jaypur Logistics, a Houston-area-based company with 18 trucks that was shut down by the FMCSA but continued to operate under the name of JPL Logistics LLC. A possible reason for motor carriers to cycle through MC numbers is the relative ease at establishing them.
John Esparza, president of the Texas Trucking Association, said in Noi’s article, “Frankly, it used to be a lot easier to get away with — to the extent companies that would have their authority revoked and then effectively just use the same address, put a new name on the front door and refile [with the FMCSA] for your authority.”
I’ve experienced this firsthand as a freight broker, where you could put one carrier’s MC number on a “do not use” or DNU list, but the dispatcher would offer a second MC number that would pass carrier compliance. This becomes further muddied by the proliferation of dispatching services, which could work for multiple motor carriers and find it difficult to determine if the drivers or the motor carrier numbers are actually unique and not duplicates.
Rooting out chameleon carriers remains a high priority due to their increased safety risks. A 2012 report from the Government Accountability Office showed an increase in the number of freight carrier applications with chameleon attributes from 2005 to 2010 but also revealed that around 18% of those were involved in severe crashes, compared to 6% of new applications without those characteristics.
Market update: June used truck auction prices decline but remain elevated
The good news is used truck auction prices are starting to decline from record levels. The bad news is they still are significantly higher than a year ago.
FreightWaves’ Alan Adler writes, “Auction volumes in June reached an 18-month high, according to J.D. Power Valuation Services. Small fleet liquidations, large fleets dumping their oldest units and individuals either getting out of the industry or going to work for a fleet drove the jump.”
Chris Visser, a writer for J.D. Power’s monthly Commercial Vehicle Guidelines newsletter noted, “The sense of urgency is mostly gone, and potential buyers are cautious. However, contract freight activity is still healthy, fleets will probably keep some capacity in reserve due to the unpredictable nature of the ongoing supply chain mess and the new truck backlog is still substantial.”
These price declines should provide some relief for smaller carriers that may wish to upgrade older used equipment. I would expect greater used inventory entering the market as larger fleets sell off older equipment they held longer due to delays from OEM manufacturers still booking historically lower order volumes due to supply chain parts and materials disruptions.
Given the downward movement in prices, the next question will be to what extent they decline and what the bottom floor will look like in the coming months.
FreightWaves’ SONAR spotlight: Fuel spread jump could be a good sign for shippers and carriers.
Summary: The spread (FUELS) between the retail price of diesel (DTS) and wholesale (ULSDR), or rack price, has grown back to historic highs as the wholesale price has been falling much faster than the average retail price since mid-June. The takeaway for shippers is there may be some additional transportation cost relief on the way as retail catches up, but that remains dependent on the current trend continuing or stabilizing. Larger carriers that purchase on the rack may get a bit of a tailwind as retail prices stay high relative to the wholesale market. Fuel surcharges are generally based on the average retail price of diesel, and when the spread between the two increases, there is the potential for higher revenue with less cost. The inverse also is correct when the spread contracts as it did in March and April.
The Routing Guide: Links from around the web
ATA says 4 factors will fuel worsening driver shortage (Transport Dive)
DOT to advance container congestion/demand index (FreightWaves)
Biden Appoints Federal Panel to Intervene in Railroad Labor Dispute (The Wall Street Journal)
Refrigerated carrier Marten posts record results in Q2 (FreightWaves)
Weekly decline in DOE/EIA diesel price largest since 2014 (FreightWaves)