CA Labor Commissioner ruling and China Shipping settlement could help ports get ready for mega-ships
According to maritime consulting experts Drewry, west coast ports are not yet ready to handle regular calls from 18,000 twenty-foot-equivalent unit capacity vessels. One of the reasons Drewry gives for ports being unprepared is the desperate need to improve the efficiency of the port trucking system. But on December 26, CMA CGM’s 18,000 TEU Benjamin Franklin became the largest containership – by one-third – to call at any U.S. port when it arrives at the Port of Los Angeles.
So how can the recent ruling by California’s Labor Commissioner awarding nearly $7 million in back pay to 38 port drivers improperly classified as independent contractors at Pacific 9 Transportation (Pac 9); and the failure of the Port of LA to have 70 percent of the trucks serving the China Shipping Terminal fueled by liquid natural gas as one of the key environmental mitigation measures agreed to in the legal settlement help spur a more efficient port drayage industry? Both of these problems are products of an atomized port trucking sector. Innovation and true entrepreneurship requires access to financial capital, but an estimated 90 percent of the trucking firms serving the ports are either unable or unwilling to make the investments required to meet the economies of scale necessary to achieve the efficiencies Drewry calls for to meet the demands presented by mega-ships.
Granted, the first generation of LNG trucks in 2008 were generally panned by the trucking industry and hated by drivers because the trucks were constantly breaking down and in need of expensive repairs. The port felt the need to secretly give China Shipping waivers from needing to meet the LNG truck requirement in the legal settlement. But things have gotten so out of hand that U.S. Congresswoman Janice Hahn has called for independent oversight of the port’s anti-pollution efforts.
Meanwhile, most trucking firms continue to misclassify their drivers as independent contractors as indicated by the Division of Labor Standards Enforcement’s (DLSE) latest ruling right before Christmas that awarded nearly $7 million in back pay and penalties to 38 Pac 9 drivers. The entire ruling can be viewed here . The common refrain from companies is they cannot afford to pay unemployment insurance and other taxes or workman’s compensation premiums and that everyone else is doing the same. But as we’ve already reported, dozens of port trucking companies converted to an employee driver model in 2015 and most have grown in size.
If the port trucking industry is going to be able to meet increasingly stringent environmental requirements and the demands of mega ships regularly calling at the terminals in Los Angeles and Long Beach, it will require an industry that has the financial capacity to invest in cutting edge technology, adhere to employment regulations, while getting a financial return on its investments. Some industry leaders have already called for industry consolidation to meet these demands for improved efficiencies. The latest challenges facing the drayage industry makes the call for consolidation ever more urgent.