Port trucking companies big and small changing their business strategy, convert to company driver model
Both big and small trucking companies are changing their business strategy to convert their drayage business to a company or employee driver model in order to avoid costly litigation and to improve service and reliability of a trucking sector that has been plagued by a poor reputation among the shipping community for on-time reliability.
On the relatively small end, TradeLink Transport Inc is the latest drayage company serving the Ports of Los Angeles and Long Beach to convert from an independent contractor to an employee model as part of a reorganization plan during Chapter 11 bankruptcy proceedings the company entered into on March 12, 2015.
On the opposite end of the spectrum, Old Dominion Freight Line is the latest large national trucking company to announce it is pursuing a new drayage strategy by converting from an “owner-operator” to a “company drayage driver” model. Last year, Hub Group Trucking converted contract drivers in California into company employees.
“The liberal administration that we’re under in Washington has a strong leaning toward trying to declare that independent contractors are really employees,” company CEO David Congdon said. “The court battles around that are not worth fighting in our opinion.”
Earlier this year, FedEx Ground agreed to pay $228 million to settle an independent contractor lawsuit in California, one of several lawsuits challenging its business model.
According to an interview in the Journal of Commerce, ODFL’s Congdon thinks those battles will get tougher, especially once electronic logging devices are mandated on all interstate trucks, including those run by owner-operators; if a carrier requires a contractor to install an electronic logging device, “that’s one more nail in the coffin.” The ELD requirement is one more element of control over an owner-operator that could redefine an independent as an employee, Congdon said. “We just see that battle getting tougher.”
And relying on owner-operators does take some control over quality of service out of ODFL’s hands, he said, a major point for a company that requires precise delivery service.
“We have never had a forced dispatch (for owner-operators), so a driver can refuse to haul a load,” said Congdon. “You can’t totally rely on your service product and deliver the very best service when you have that uncertainty of a driver being able to refuse a load.”
It sounds like this new strategy in the harbor trucking sector makes good business sense.