Bankruptcies and amnesty fuel more changes to the LA/LB port trucking industry
Troubled major LA/LB port trucking firm lays ground for resurgence
One of the top 20 drayage firms at the Ports of Los Angeles and Long Beach has taken actions to end its troubles in order to make a resurgence and become an innovator. After a long process of litigation around claims filed by drivers at the California Division of Labor Standards enforcement as well as private litigation, Pacific 9 Transportation recently filed for Chapter 11 bankruptcy protection. While a costly process, it will ensure that all of its current claims will be settled. In order to prevent any future claims from being filed that could unravel any bankruptcy plan, Pac 9 agreed to convert to an employee-driver model within a five month period in a global settlement reached with the Teamsters Union. The global agreement effectively ends a protracted labor dispute with the Teamsters and a 10-month unfair labor practice strike by Pac 9 drivers.
The two parties released a joint statement describing the global agreement, which “allows the company to modernize operations by converting all owner-operators to employee drivers, providing a clear pathway for drivers to consider union representation in a neutral environment… It allows the company and its valued customers to move forward in confidence that there will be no further interruption in the movement of customer cargo.” It also states that “Pac 9 management and the drivers will work collaboratively to rebuild and stabilize the workforce to provide a high level of service to company customers.”
While Pac 9 joins the growing list of trucking firms that are converting to an employee driver business model, the company’s challenging experience begs the question why more companies have not come forward to resolve their labor problems before landing in bankruptcy proceedings. A new California state law may encourage more companies to do just that.
New California Amnesty Program could help drayage firms seeking an alternative to bankruptcy
A new amnesty program launched by California’s Labor Commissioner could assist drayage firms seeking to avoid filing for bankruptcy. The amnesty program established under state legislation enables port trucking companies to avoid paying statutory and civil penalties based on previous misclassification of drivers if the company settles all previous claims and agrees to reclassify all drivers as employees.
Driver misclassification claims have become a major challenge for the drayage industry in California. Since 2011, port truck drivers have filed 799 wage claims with the California labor commissioner’s office claiming misclassification and seeking reimbursement for unlawful deductions and expenses. The office has awarded more than $35 million to drivers in 302 cases.
“The sheer number of claims filed and wages awarded to misclassified port truck drivers over the last several years demonstrates a significant problem in the industry,” said California Labor Commissioner Julie A. Su in a press statement. “Worker misclassification is a form of wage theft as it denies workers all the rights and benefits of employee status. This amnesty program provides an opportunity for motor carriers to remedy these problems and correct past abuses.”
As recently reported in the Wall Street Journal, the alternative for a growing list of companies has been to seek bankruptcy protection. With the amnesty program ending December 31, 2016, it remains to be seen how many drayage firms will take advantage of this program.