Port trucking companies wrestle with productivity, labor compliance challenges.
By Eric Kulisch
Trucking companies that service the ports of Los Angeles and Long Beach are trying to overcome impediments at marine terminal gates and intense government scrutiny of their employment practices that they say hurt business.
The top concerns for local motor carriers that shuttle international containers are terminal productivity and state and federal audits related to the use of independent contractors as truck drivers, according to Alex Cherin, executive director of the Harbor Trucking Association.
The drayage industry has frequently complained about turn times and queues to enter terminal facilities even after terminals tried to reduce congestion in 2005 by establishing night and weekend shifts, and a special-purpose entity called PierPass to collect fees for daytime pickup and delivery of containers. The traffic mitigation fee, technically used to pay for operating off-peak gates, is $61.50 per TEU moved during daytime hours and $123 for a 40-foot container. Almost 60 percent of containers are now moved during the night shift.
The problem, according to truckers, is that congestion has been pushed to the evening. Carriers, usually at the behest of customers that don’t want to incur the extra fees, are taking advantage of the night gates but tend to arrive all at once for the opening of the 6 p.m. night gate, with lines of trucks starting to form by 4 p.m., according to local logistics industry officials.
PierPass Inc. commissioned a study two years ago that claimed the median queue time to discharge or pick up a load in the late afternoon was 45 minutes, including waiting in line and moving through the terminal. Fifty-eight percent of truck visits were completed in less than an hour, with 12 percent taking one to two hours. The study involved about 250 trucks out of several thousand that operate in the port district.
It showed “that most truck visits are being handled in an efficient and timely manner,” as well as potential areas of improvement such as rescheduling terminal lunch hours and breaks to minimize waiting in the yard, PierPass President Bruce Wargo said at the time.
PierPass officials have met several times with trucking companies, local port authorities, and cargo owners since 2010, but have not yet taken any concrete steps to address the situation. In January, PierPass attributed some of the gate delays to troubled transactions for trucks that arrive before a container has been released, or with invalid or incomplete information about their container assignment. It is trying to educate drivers to come to the port more prepared, and said it would develop new procedures and technology this year to improve information sharing between shippers, truckers and terminal operators. But “trouble tickets” only involve 5 percent of trucks, by PierPass estimates, and don’t address the larger wait-time issue.
The Harbor Trucking Association (HTA), which represents about 100 licensed motor carriers that exclusively do business in the twin ports of Los Angeles and Long Beach, is scheduled at the end of March to release its own turn-time study to refute the efficiency claims of PierPass and the terminal operators.
“Anybody who does business here knows that’s not the case. We have wait times in excess of two hours on most nights,” which only allows drivers to make one or two roundtrips in a workday, instead of three or four, Cherin said.
“The real issue is, are the marine terminal operators putting enough labor at the gates to process all the trucks and how do we restructure PierPass so you don’t have this bunching at 6 p.m.,” the HTA chief said.
Time spent in the terminal dropping a box and picking up a loaded container is fairly minimal, he added.
HTA wants terminal operators to adopt a universal, dynamic appointment system that would act like an air traffic control tower for both ports, integrating real-time data from trucks, motor carrier dispatch systems, cargo owners, and regional traffic management authorities. Drivers would message via smart phone that they are headed to the port, allowing terminals to plan for their arrival. They could communicate back to the driver whether to come in or wait based on terminal capacity and container availability, or learn when a truck is running late so it can re-slot another truck in its appointment window, Cherin said. Currently, terminals use different software platforms for their appointment systems and there is no enforcement mechanism to hold carriers to their commitments.
Cherin, a local attorney, said he envisioned the adaptive appointment system being set up through the Los Angeles and Long Beach port authorities and operated by a third party.
The Federal Maritime Commission, which regulates service agreements among marine terminal operators, continues to monitor the PierPass program. One idea raised at an FMC public forum in Long Beach is for a sliding scale under which the PierPass fee gradually goes away during the night instead of all at once to create an incentive for later arrivals.
Cherin said some trucking companies and shippers might be willing to absorb a smaller fee at 8 p.m., for example, if they know they can double the productivity of their trucks during the shift.
There are some models of port-wide appointment systems already in existence. NTELX of Vienna, Va., has developed a system to control the flow of trucks at the Port of Aqaba in Jordan. The Web-based system reduces congestion by monitoring capacity utilization of roads and terminals and coordinates the arrival and release of trucks to and from waiting areas and private terminals. In addition to minimizing wait times and unnecessary trips, the information from trucks is shared with security authorities to ensure that only trucks with a valid business purpose enter port areas. However, Aqaba is a much smaller port with a single container terminal compared to the sprawling Los Angeles-Long Beach complex.
Advent Intermodal Solutions, which creates software to host virtual port communities, is working on an appointment system for terminals in Sydney, Australia. Advent last year acquired eModal, a provider of online terminal communication systems — including appointment modules — that serves several facilities in Southern California.
The Federal Highway Administration, in conjunction with local governments and ports, recently launched a prototype project in Los Angeles for an advanced freight information system designed to optimize shuttle-truck moves, and reduce traffic congestion, fuel consumption and diesel emissions. Researchers say they want to combine proprietary data such as load matching, truck status and location, terminal wait times, and shipper delivery requirements, with public information such as weather, accidents, work zones, weigh-in-motion truck scales and route restrictions for hazardous loads, in a single platform with an algorithm that can determine the best time and route for trucks to operate. The multi-source data would come from private systems, public databases, vehicles and road-based sensors.
One component of the pilot project is focused on improving the information flow between truckers and terminals. Yusen Terminals, a subsidiary of Japanese carrier NYK Line, in the Port of Los Angeles is participating in the project to receive electronic pre-notification from several trucking firms about a vehicle’s estimated time of arrival, while it transmits back data about the availability of specific containers, according to Gill Hicks, director of Southern California operations for transportation planning consultant Cambridge Systematics. The SSA Marine terminal in Long Beach already is doing some form of pre-notification with truckers, he added.
The advance data feeds are particularly valuable for grounded operations because they can help terminals avoid placing a box in a stack, or lift out a container from the pile and place it on a chassis, if they know a truck has been dispatched to the port to get it.
Terminals where containers are stored on wheeled chassis don’t find the advance data as helpful, Hicks said, but that will change as container volumes escalate.
And for terminals being redeveloped with semi-automated, container-handling equipment, such as Pier 500 and TraPac Terminal in Los Angeles and OOCL’s Middle Harbor Terminal in Long Beach, “this advanced information won’t just be valuable, it will be a requirement so they don’t have truckers waiting, and presumably improve turn times within the terminal,” he said.
Experts say grounded operations are a necessity to increase throughput when terminal capacity becomes tight, especially at the nation’s largest import gateway for ocean containers. But some terminals still store containers on chassis in large yards. The West Basin Container Terminal in Los Angeles is half wheeled and 70 percent of the containers moved through the APL Terminal there are pre-loaded on chassis, Hicks said.
In a phone interview, PierPass’ Wargo said terminals have discussed the idea of a neutral portal for appointments, but the fact that only four of 13 terminals in the San Pedro Bay ports have appointment systems of their own indicates there is not a lot of interest in a system for truckers to make appointments through a single window.
Interest among truckers is also mixed, Wargo insisted, because it would be difficult to commit to three or four appointments each day.
He questioned whether an adaptive appointment system would improve the current situation, saying that if appointments can be moved around they undermine the concept of scheduling arrivals.
There is still plenty of capacity in the ports and the backups for night gates are simply the result of drivers’ decisions not to use a less crowded time period, he said.
“We’re trying to educate the trucking community not to have their drivers line up, to convince them that’s not good use of their time,” Wargo said. He suggested lines outside the terminals could be reduced if the Los Angeles and Long Beach port authorities instructed their police forces to issue tickets for parking or safety violations, or provided some nearby parking lots where drivers could wait to enter a terminal.
“What’s to say if we had an appointment system they wouldn’t line up on the street anyway?” he added.
In mid-January, Cherin and members of his association met several members of Congress on the PORTS Caucus to lobby for funds for restructuring PierPass and implementing the dynamic appointment system. Cherin said HTA supports the RAMP (Realize America’s Maritime Promise) Act, which was reintroduced in January by Rep. Charles Boustany Jr., R-La., and would require all money collected through the Harbor Maintenance Tax on imports be used for its intended purpose of maintaining the authorized depths and widths of the nation’s waterways. Currently, only about half of the $1.5 billion placed in the Harbor Maintenance Trust Fund each year gets spent, with the balance being scored as a credit to the federal budget to make the deficit appear smaller. But HTA also wants Congress to broaden the types of projects for which Harbor Maintenance Tax receipts can be used because areas such as Southern California already have deep channels and don’t receive much benefit from the trust fund, Cherin said.
Labor Crackdown. On another front, drayage companies are being unfairly targeted by regulators as part of a broader campaign to turn owner-operators into employee drivers who could then be solicited to join a union, according to local trucking officials.
The International Brotherhood of Teamsters and other labor-rights activists have campaigned for many years to change employment rules for the trucking industry because under federal law unions cannot organize independent contractors into bargaining units. Critics of the current system say drivers who work long hours can’t make a decent living because their per-trip payments are barely enough to cover fuel, insurance, maintenance, equipment financing or leasing and other costs associated with operating a truck. And, drivers often aren’t compensated for time wasted waiting to enter a marine terminal.
Trip fees can vary by distance, time of day, and fuel surcharges.
The labor federation Change to Win estimates that fewer than 5 percent of Los Angeles-area trucking companies use employee drivers.
According to the Coalition for Clean and Safe Ports, 90 percent of port truck drivers are misclassified as independent contractors, so companies can deny them paid sick days, health insurance, overtime pay and other rights and benefits. Pro-labor and public interest groups have characterized independent truckers as “sharecroppers on wheels” because companies have shifted their expenses to workers who lack the legal protections — such health insurance, unemployment insurance, minimum wages — of employees.
In 2007, the Port of Los Angeles tried to mandate under its groundbreaking Clean Air Action Plan that all trucking companies serving its terminals use employee drivers, arguing that independent truckers could only afford to buy the oldest, most-polluting used trucks that had been retired by over-the-road motor carriers. The policy was supported by Mayor Antonio Villaraigosa, who spent 15 years as an organizer and lawyer for several unions. After years of litigation, a U.S. appeals court in 2011 overturned the employee-driver requirement.
In 2012, 65 Los Angeles-area employee drivers for the Australian logistics giant Toll Group joined the Teamsters union and after a bitter two-year battle signed the first union contract by port drivers since trucking was deregulated in 1980. The three-year contract includes a raise of $6 per hour with paid overtime, sick leave and holidays, less expensive health care contributions, guaranteed shift hours and a pension plan.
The Toll victory has emboldened drivers at American Logistics International and Green Fleet Systems to publicly declare their intention to organize, Coral Itzcalli, Change to Win’s director of communications, said in an interview.
Green Fleet has already hired several consultants to help bust the union effort, she said. Tactics include questioning individuals about their potential support of a union, discrediting unions as having the workers’ best interest at heart, suggesting that the company may be forced to shut down because of the costs associated with unionization and other threats to job security.
Green Fleet uses both company-owned and independent contractor trucks, according to the company’s Website. Two staff members declined to pass calls for comment to a senior official.
Companies tend to use employee drivers if they have clients, such as fashion retailers, that demand timely delivery of their goods from the port. Having employees enables motor carriers to operate day and night shifts and exert greater control over their workforce than independent drivers, Itzcalli said. Mistreatment of employee drivers is common and includes being forced to drive unsafe trucks and having their work schedules changed at a moment’s notice, she added.
With the vast majority of drivers working as contractors, the Coalition for Clean and Safe Ports has aggressively pushed regulators to examine the relationship between logistics companies and drivers. The coalition is a partnership between environmental, public health, community, faith, civil rights and labor groups, including Change to Win, which believes the cost of the truck replacement programs in the San Pedro Bay ports is being shifted onto the backs of low-wage truck drivers.
Misclassification of employees as independent contractors also reduces tax revenues for governments and undercuts companies that play by the rules, according to the 2010 study “Big Rig: Poverty, Pollution and the Misclassification of Truck Drivers at America’s Ports,” conducted by labor market experts at the National Employment Law Project, Change to Win and Rutgers University.
A surge of filings by drivers for alleged violation of fair labor, and wage and hour, standards in the past six months has coincided with a surge in random audits by the U.S. Department of Labor and the California Labor Commission (also known as the Division of Labor Standards Enforcement) looking into whether companies are misclassifying their drivers as independent contractors, according to Itzcalli and Cherin.
Unions are encouraging every worker to file complaints whenever they have proof of mistreatment, Itzcalli said.
At the heart of the classification dispute is how much control a company has over driver activities and whether wages can be withheld to cover equipment leases and services provided by the logistics company.
The Internal Revenue Service, for example, uses 20 factors to determine whether an individual is an employee. Someone who must comply with directions about when, where and how to work is generally considered an employee. A worker who can realize a profit or suffer a loss from rendering services, and who invests in facilities or equipment used to perform those services, is considered an independent contractor.
Opponents of efforts to legislate the relationship between motor carriers and drivers say that a strict definition of “control” would essentially make any instructions to a contractor, such as where to deliver a load, grounds for employee status.
The Obama administration, as part of an effort to bolster the middle class after the recession, made misclassification of employees as independent contractors an enforcement priority.
U.S. Labor Secretary Hilda Solis, who recently resigned, three years ago launched a Misclassification Initiative across all industry types. The Labor Department’s 2011 budget request included $12 million for increased enforcement of wage and overtime laws in cases where employees have been misclassified. Congress did not fund a request for $45 million in 2012 for misclassification inspectors. In 2011, the department collected more than $5 million in back wages for minimum wage and overtime violations of the Fair Labor Standards Act that it said resulted from employees being improperly classified as outside contractors. During the past two years, the Labor Department has increased information sharing and coordinated enforcement actions with the IRS and several states. In February 2012, California became the 12th state to partner with the Labor Department on efforts to end misclassification.
The Labor Department is primarily checking into violations of minimum wage laws, comparing a driver’s take-home pay versus what someone should make during an eight-hour day, Michael Stark, president of Pacer Distribution Services in Carson, Calif., said. The comparisons aren’t always valid, he said, because a driver may have worked fewer than eight hours some days or may waste time in long lines instead of picking more productive hours of the day to operate.
Drayage companies typically pay by the move, not the hour, and responsible ones usually cover reasonable wait times. Pacer pays $60 per hour for wait times up to two hours.
“We just say we have a container that needs to be picked up and they work those hours necessary to pick up those containers. The more they work, the more money they make,” Stark said.
“If there are delays at the port that are not the fault of the driver they’ll charge for it and then we charge our customers,” he added.
On Jan. 1, 2012, California Gov. Jerry Brown signed legislation that increases penalties for willful misclassification.
California investigators have a 25-part test they use to determine if a worker is an independent contractor and are looking at documents such as lease agreements and pay stubs to ascertain the level of control that a company has over the driver, Cherin said.
The Division of Labor Standards Enforcement (DSLE) is probing whether drivers are independent if truck-operating expenses are deducted from their settlement checks.
Many drivers, for example, authorize licensed motor carriers to make payments on their behalf to third party companies from which they lease their trucks because the carrier may receive more favorable rates than individuals or the driver doesn’t want to deal with the accounting hassle. Some motor carriers also offer fuel, maintenance, insurance, parking and other services to the drivers. Fuel, for example, may be cheaper than at a retail outlet because the carrier can purchase it in bulk. Motor carriers typically pool insurance and can obtain better rates.
Pacer Distribution, a warehousing and drayage specialist, offers those types of services (parking is $75 per month), but drivers are not required to use them, Stark explained. Drivers, for example, can get their own trucks as long as they meet the ports’ clean emission standards and own insurance if they provide the company with a copy of the insurance certificate. A service charge is usually involved if Pacer has to pay a third party, but not if the company is simply being reimbursed for an expense.
The gross earnings of independent owner-operators can run well into the six-figures, but Stark said their net income is often a function of how well they run their business.
Asset-intensive industries, such as airlines and trucking, have to operate frequently to generate the revenue necessary to cover fixed costs.
“It’s like having your own hardware store. If you work 12 to 14 hours a day does that mean you’re making minimum wage? They are the owner of their business” and profitability depends on factors such as amount of hours worked, cargo volumes, and managing expenses properly, Stark said.
Trucking industry officials say drivers who work a full week can earn $70,000 to $90,000 per year, have a path to ownership of their vehicle and often prefer to be in business for themselves so they control their own schedules.
Workers’ rights advocates say a driver’s take-home pay is under $29,000 a year.
Companies should have the flexibility to choose whatever labor model works best for them, Cherin said.
“We do it right at Pacer. We make sure we treat them like independent businessmen and we expect them to behave that way,” Stark said.
Labor forces scored a significant victory on Feb. 28 when a California court upheld a DSLE decision requiring Seacon Logix, a midsized trucking company in Gardena, to pay $105,089 for wage claims filed by four drivers. The drivers claimed unreimbursed business expenses and unlawful deductions, including weekly truck rental fees and liability insurance costs. DSLE also said the motor carrier didn’t reimburse the drivers promptly after termination.
“In this case, drivers had signed agreements labeling them independent contractors but the court saw the truth behind the label,” Labor Commissioner Julie Su said in a statement. “The court found that the company exerted sufficient control over the drivers such that the drivers were employees of the company and thus, enjoy all basic labor law protections.”
As a condition of working, each driver was required to enter into a written contractual agreement to lease a truck from Seacon and obtain insurance, DSLE spokesman Peter Melton said. The lease agreements were characterized as lease-to-own. Workers had a $450 lease payment deducted from their checks every week and at the end of five years they would own the trucks. Another $200 per week was deducted from drivers’ paychecks for insurance that was arranged, purchased and provided by Seacon.
Neither the truck rental, nor insurance, was negotiated with the drivers. “They set the lease and insurance rate and charged on a take-it-or-leave-it basis,” Melton said. Drivers also had to pay for gas and all repairs and registration fees were not reimbursed, he added.
The trucks were registered under Seacon’s name, its logo was on the trucks and the rates for loads were set by Seacon. Drivers also were not allowed to turn down a load and all loads were assigned by Seacon’s dispatcher, he said.
The extent of Seacon’s control included contractual requirements that drivers were expected to arrive at Seacon’s yard every weekday, essentially making it impossible for them to work for any other freight company, and prevented them from subcontracting any of their Seacon jobs. Each driver was required to park his truck on Seacon’s lot.
Melton said Seacon kept attendance records for each driver and fired one driver when he attended his mother’s funeral.
“So the drivers were basically absorbing the expenses and risk of the employer,” who avoided responsibility for income taxes, Social Security, unemployment insurance and workers compensation insurance, Melton said.
Wage claims by five other Seacon drivers are still in the pipeline. Seacon filed a retaliatory lawsuit against the drivers in December, according to a blog post from the Coalition for Clean and Safe Ports.
The court ordered Seacon Logix to pay $107,802, including interest. Seacon officials did not respond to multiple messages seeking a response.
“This case highlights the critical need for labor law enforcement, particularly where misclassification cheats hardworking men and women like these port truck drivers out of the full pay to which they were entitled,” Su said. “This is wage theft and we will do everything in our power to stop it.”
Itzcalli predicted many more complaints will be decided by DSLE in the near future.
On Feb. 22, a class action lawsuit was filed on behalf of 100 drivers in Los Angeles Superior Court against QTS Inc. and related shell companies alleging deliberate misclassification, failure to reimburse business expenses, failure to provide meal and rest periods, and delay paying wages due upon termination, according to a copy of the summons. The suit says workers are forced to work 15-to-20-hour days in violation of federal safety rules that limit drivers to 11 hours behind the wheel and a 14-hour workday. The suit seeks $6 million plus other damages.
Cherin said the enforcement campaign should be more targeted.
“Our position is very clear: If there are companies that are misclassifying their drivers, we think they should be fined. But the vast majority don’t do that. Unfortunately, they get thrown in with these bad actors and have to bear large costs defending themselves.
“We would like to see these agencies be a little more precise about who they go after, as opposed to this shotgun approach to go after every drayage company in Southern California,” he said.
Regulators should follow up on specific tips, Cherin added, “but what we don’t agree with is going into companies where they don’t have any information that this type of activity is going on.”
Legislative scrutiny is also adding to the besieged feeling of port trucking companies. Some lawmakers in the state of Washington want to require commercial truck drivers operating at ports to be employees. A committee in the Washington House of Representatives in February voted 5-4 for a bill that would force the ports of Seattle and Tacoma to employ drayage truck operators to move containerized cargo. Under the proposed law, the port authorities would provide trucking services and hire drivers rather than having private companies do the work. Workers would then be eligible to join unions that represent public employees.
The employee-driver effort in Washington has led to worries that California lawmakers may try to replicate the law. During the last session of the California General Assembly a similar bill never made it to the floor, but trucking industry officials fear that the bill will resurface now that a new Democratic supermajority exists in the state house.
Another bill pending in the Washington House would prohibit misclassification of employees and create a new test to determine whether an individual is an independent contractor.