Earlier this summer, the U.S. Supreme Court decided not to weigh in on two major issues that have roiled trucking for years.
And for those in the $800 billion trucking industry, the court’s silence has been deafening!
For those of you who were distracted by, ahem, other Supreme Court decisions, you may have missed the trucking angle. The court declined to hear two cases related to freight:
- California Trucking Association Inc. v. Bonta, in which the trade association said California’s employee classification law was preempted by federal law. The Supreme Court declined to hear this case on June 30.
- C.H. Robinson Worldwide Inc. v. Miller, in which C.H. Robinson argued federal law prevents a negligence claim from being filed against a broker. The Supreme Court turned down this case on June 27.
The court kicked both decisions back to the lower courts. In the state of California’s case, the 9th U.S. Circuit Court of Appeals deemed the employee classification law, known as AB5, to be hunky-dory under federal law. This put in jeopardy the livelihoods of the state’s estimated 70,000 owner-operators, whose work may no longer be lawful.
And in C.H. Robinson’s case, the 9th Circuit deemed it permissible for freight brokers to be named as defendants in a negligence claim. Much like a medical malpractice suit, victims of trucking accidents, or their families, have the option to sue trucking companies for punitive damages.
But in declining to hear these cases, the Supreme Court has baffled transportation executives and attorneys. It’s unclear what the law of the land is, because both cases may only apply to the nine Western states (and two territories) that make up the 9th Circuit.
“It would have been nice to get clarity from SCOTUS on these things,” said attorney Kristen Johnson, who represents transportation companies as managing partner at Taylor Johnson. “It just leaves the industry in a relative state of chaos when it comes to the application of laws on a state-by-state basis.”
“It’s dumbfounding to see both of those cases [at the Supreme Court] and nobody jumping in to weigh in on them,” said Chad Eichelberger, president of Reliance Partners, a top 100 commercial insurance agency.
Here is what both cases entailed and what the next steps may be.
But first, let’s talk about F4A
The federal law in both cases was the zestily named Federal Aviation Administration Authorization Act. Those who would rather get to the point call it “F4A.”
President Bill Clinton signed F4A into law in 1994. It was meant to enshrine the Motor Carrier Act of 1980, which deregulated the trucking industry and made it easier than ever to become a truck driver.
The sticking point for F4A is that individual states could not create laws that would conflict with that federal deregulation. No provision can alter the “price, route, or service of any motor carrier … or broker.”
Plenty of states have trucking laws that arguably violate F4A. Some of the most prominent involve paid meal and rest breaks. Washington and California, for example, have had laws on the books that say drivers must take 30-minute or 10-minute breaks for every few hours of driving — rules that go beyond what federal hours-of-service regulations require.
But no state law was as chilling to the industry as California’s AB5 …
California truckers appear to reject AB5, even though the current working scheme for port drivers is pretty rough
In 2019, lawmakers in California passed Assembly Bill 5. The law presumes that all workers are employees who can enjoy minimum wage protection, overtime pay, paid leave and other benefits — unless they pass a test that allows them to remain independent contractors.
A slew of industries scored exemptions from AB5, most notably rideshare companies like Uber and delivery operations like DoorDash. Trucking tried to secure its own exemption, but that was denied at the 9th Circuit last year. The Supreme Court, by refusing to hear the California Trucking Assocation’s case, enshrined that decision.
Some 70,000 owner-operators work in California, according to the CTA, who did not provide a comment for this piece. It’s unlikely that many of those drivers could pass the “ABC test” that, among other points, allows workers to remain independent contractors only if the central industry of the company they’re contracted at doesn’t overlap with the workers’ jobs. For instance, it might be OK for me as a writer to be an independent contractor at Big Rachel’s Trucking, because writing is not the company’s shtick. However, in California, a truck driver at Big Rachel’s Trucking must be an actual employee under AB5.
Trucking is generally a tough job, but it’s particularly challenging for drayage drivers at California’s ports. A 2017 USA Today investigation revealed the systemic labor issues at the massive port complex of Long Beach and Los Angeles, a nexus of global trade. Some port truck drivers claimed their bosses made them work up to 20 hours a day. Others revealed onerous details on lease-to-own equipment schemes, under which drivers pay hundreds out of their own paychecks on their truck leases and often end up owing money after a long workweek. But if they were to quit that gig, they would lose the truck entirely, even after making payments on it. Many of these drivers are low-income immigrants from Latin America.
According to the investigation, mega-retailers like Target, Costco and Home Depot all use drayage trucking companies with lengthy histories of labor violations.
“We are not human,” one truck driver told USA Today in an interview. “We are machines for making money for these people.”
Given all that, you may have expected joy at California’s ports after the industry lost its bid to be exempted from AB5. That was not the case. Up to 1,000 truck drivers shuttered incoming or outgoing traffic at the Port of Oakland for several days in July. Other trucker protests hampered operations at the ports of Los Angeles and Long Beach in July, as well.
“During the pandemic, we were too busy being essential to realize we were about to be screwed by AB5,” one California trucker, who didn’t want to be named for fear of retaliation, told FreightWaves’ Clarissa Hawes.
The University of Pennsylvania’s Steve Viscelli, who studies the trucking industry, spent some of his summer surveying truck drivers in California. He told FreightWaves in a July interview that some drivers don’t understand what being an employee means. Many fear they’ll make less money and won’t be able to take time off, neither of which are necessarily true, rather than focusing on what they could gain with health insurance or paid sick leave.
Running a trucking company in California is already challenging. But what’s spooking trucking executives on AB5 is the idea that similar laws could spread to other states. Massachusetts is one state considering an AB5-type law, while the attorney Johnson said Illinois and New Jersey already have clamped down on how trucking companies may approach independent contractors.
No one knows how to treat the workers in trucking
Federal courts have made many recent attempts to tackle the issue of worker classification in the trucking world, including a 2022 case regarding Schneider, a class-action suit concerning Prime Inc. that involved a $28 million payout to drivers, a 2020 ruling in which a California court told Walmart to pay its drivers for rest breaks, and a 2018 ruling in Arkansas where a judge told Pam Transport that truckers need to be paid even when they’re not driving.
The precedent from these cases seems to be that owner-operators should be treated as employees, and that drivers need to be paid for all hours spent in the cab. Still, drivers are paid per mile, rather than per hour, and are exempt from federal overtime pay protection.
The C.H. Robinson decision ups the ante for trucking ‘nuclear verdicts’
The threat of a negligence lawsuit has quietly become a top concern for trucking carriers nationwide over the past 10 years. But one sector of the trucking world has found itself mostly insulated from such a verdict: freight brokerages.
“Brokers thought they were Teflon five to 10 years ago,” said attorney Joseph Swift, who represents transportation companies at Baker Sterchi Cowden & Rice.
Not anymore. Over the past three to five years, Reliance’s Eichelberger said insurance rates for brokers have climbed around 10% to 20% year over year. For trucking companies themselves, the cost of insurance on a per-mile basis has increased even as the total cost of running a trucking company has decreased.
From 2011 to 2020, per the most recent data from the American Transportation Research Institute, truck insurance premiums increased by nearly 30%. But the overall cost per mile of running a trucking company decreased by 3.5%.
Insurance costs have increased in part because of so-called “nuclear verdicts,” in which juries award more than $10 million to plaintiffs — typically passenger vehicle drivers — after a semi-truck crash. A 2020 study from ATRI, which is affiliated with the American Trucking Associations, trucking’s largest lobbyist organization, found that the number of cases with jury awards over $1 million “increased dramatically” from 2006 to 2020. The payout has dramatically increased, too.
“The average size of verdict from 2010 to 2018 increased from $2,305,736 to $22,288,000 — an increase of 967 percent,” said the 2020 ATRI report.
On the other hand, plaintiff attorney Michael Leizerman, founder of The Law Firm for Truck Safety and a member of Miller’s legal team, said the real issue is nuclear injuries. According to federal data, the number of fatalities resulting from crashes that involve a large truck increased by 36% from 2010 to 2019.
Many of Leizerman’s cases involve spinal injuries, traumatic brain injuries and deaths — and trucking companies that refuse to accept liability. “If you want to avoid a big verdict, then stop denying liability when there’s clear liability,” Leizerman said. “Stop trying to keep an injured person from receiving money for their care.”
Plaintiff attorneys, until recently, did not look at freight brokers as potential defendants for such cases. But as trucking gets more and more fragmented, brokers have become crucial conduits in America’s freight transportation system.
That’s what led retail giant Costco to hire $23.1 billion freight broker C.H. Robinson to find a truck driver for a load of goods traveling from Sacramento to Salt Lake City in 2016. Robinson hired a federally licensed motor carrier that ended up driving unsafely in Nevada, crashing into 25-year-old Allen Miller. Miller was rendered a quadripelgic.
In November, a jury in Nevada will hear Miller’s case. Other cases concerning broker liability are pending in the 7th U.S. Circuit Court of Appeals and 11th U.S. Circuit Court of Appeals. Rena Leizerman, also of The Law Firm for Truck Safety and part of Miller’s legal team, is (understandably!) someone who says brokers ought to be held accountable. After all, brokers advertise on the basis of finding safe carriers for retailers, manufacturers and farmers.
However, in a statement emailed to FreightWaves, C.H. Robinson passed the buck to the federal government for licensing motor carriers who have no business being on the roadways. Chief Legal Officer Ben Campbell declined to comment on specifics of the case.
“The idea that the Federal Motor Carrier Safety Administration provides only a bare ‘minimum’ safety review of carriers and that shippers and brokers cannot rely on it defies common sense,” Campbell wrote. “This is a tacit admission that the FMCSA has knowingly issued operating authorities to unsafe motor carriers and that it is up to shippers and brokers and the motoring public to figure out which ones they are.”
Where, oh where is our federal government?
Few business leaders jump for joy at the idea of increased regulations, and I would bet that number is even smaller in the trucking industry.
Many facets of trucking used to be highly regulated. However, even as Americans become more and more reliant on truck drivers, Washington has kept mum on issues like worker classification in trucking. There are few guidelines on brokers, too, even though they’re a key node in the transportation system.
“In both of these cases, we are talking about where the line is drawn between a state’s laws governing interstate trucking companies and the federal regulation of these companies,” Johnson said. “There’s just a lot of conflict if you’re of the mind that transportation should move seamlessly among the states and that trucking companies shouldn’t be burdened by individual laws.”
Do you work in the trucking industry? Reach out to rpremack@freightwaves.com with your story and insight. And be sure to subscribe to MODES for your weekly dose of truck stop gossip.