The ongoing trucker protests in recent days over the implementation of AB5 are taking a toll on operations at the Port of Oakland.
The protests are in response to the United States Supreme Court’s having denied review—or Certiorari—of the Circuit’s reversal against the injunction of AB5 (Assembly Bill 5) in California, a law governing owner-operators that potentially could be very disruptive to trucking operations in the nation’s most populous state.
As previously reported by LM, truck drivers are divided on AB5, which limits when workers can be contractors instead of employees. Some local port drayage operators supported the measure which would have limited owner-operators in that sector.
Port of Oakland officials said that these protests “have effectively shut down operations at shipping terminals,” adding that the shutdown will further exacerbate the congestion of containers dwelling at the Oakland Seaport as port officials urge terminal operations to resume.
“We understand the frustration expressed by the protestors at California ports,” said Danny Wan, Executive Director, Port of Oakland, in a statement. “But, prolonged stoppage of port operations in California for any reason will damage all the businesses operating at the ports and cause California ports to further suffer market share losses to competing ports. Truckers are vital to keeping goods moving. We trust that implementation of AB5 can be accomplished in a way that accommodates the needs of this vital part of the supply chain.”
The port also noted that State of California is now offering resources to help truckers comply with the law.
In an open letter to Port of Oakland trucking partners, Wan said he met with some representatives of the truckers protesting at the port, listening to their concerns and expressed objectives. And he added that they also discussed the impact of the protests on port jobs and operations, as well as a path forward to returning to full operations at the port.
“It is important to return the Port to full operations now!” wrote Wan. “Prolonged stoppage of port operations at Oakland for any reason interferes with commerce, increases congestion, and harms business for everyone. Disruptions in truck movements and moving cargo drive customers away and prompt them to consider taking their business to ports outside California. We do not want to see the loss of business and jobs here. The Port of Oakland is a major economic engine for Northern California, and we want to keep our jobs here.”
As for its commitment to work with the port’s independent trucking partners, Wan said the port is focused on various initiatives, including:
An analysis of the Supreme Court’s decision by Indianapolis-based Scopelitis LLC noted “the injunction that has been in place for roughly two years will be lifted quickly and complying with AB5 will be a reality for trucking companies in California. Motor carriers should immediately evaluate their California operations to determine what steps, if any, should be taken to respond to the changed backdrop for trucking.”
Scopelitis President and Managing Partner Greg Feary recently told LM that the Supreme Court’s denial of review against the injunction of AB5 sends it back to the 9th Circuit to issue a mandate in which the 9th Circuit will instruct a trial court to lift the stay and AB5 will be applied to the trucking industry, specifically owner-operator or independent contractor motor carriers, which will be retroactive to the effective date of the legislation, going back to January 1, 2020.
“The question then becomes if I am a motor carrier and have owner-operators under contract in the ‘conventional or traditional’ structure, which is the owner-operator operating under the motor carrier’s authority, whether or not that owner-operator should be deemed an employee rather than an independent contractor,” he said.
And under AB5, he said that that the “ABC test,” which Reuters reported was created by the California Supreme Court in the 2018 case Dynamex Operations West Inc v. Superior Court to determine whether workers are truly independent contractors, is comprised of three prongs, including:
Prong B is the most troubling, according to Feary, as that is where most industry stakeholders would predict that even if you can prove prong A and prong C, it would be difficult to prove prong B.
On a webcast earlier this week hosted by TranzAct Technologies, National Industrial Transportation League General Counsel Karyn Booth explained that there are a number of implications for motor carriers and their shipper customers, stemming from the Supreme Court’s decision not to take up AB5.
“Companies who hire independent truckers in California now must comply with AB5,” she said. “This creates a compliance risk for the hiring entity under California labor laws and tax laws, as independent drivers are now classified as employees. They have become subject to California wage, benefit, and tax laws. The motor carrier industry has relied on independent truckers to meet fluctuating service demands for decades, and many independent truckers prefer to be business owners and not employees. It seems clear motor carriers are facing a need to evaluate the structure of their operations. Are they now going to have to hire drivers as employees? What capital investments do they need to make if they were relying upon owner-operator equipment? They are now dealing with compliance risks. All of this translates to dollar signs and higher costs.”
What’s more, Booth explained if independent owner-operators choose to leave the California market or the industry altogether, it will lead to capacity problems that are only going to add to the serious supply chain disruptions already occurring, especially in California, if capacity if further reduced.
And she also pointed out the current situation has led to the question of if motor carriers are compliant and when do they have to comply?
“There are some questions around the effective date,” she said. “Some of this can be addressed contractually, but it is a bit of a mess. There is confusion around interstate moves. If you originate a move outside of California, where the driver is an independent contractor in another state, and then enters California and suddenly becomes an employee, what does that mean? How do you deal with that? There are also lots of questions around interstate commerce, because other states were considering adopting similar laws to AB5, [including] Massachusetts, New Jersey, and possibly New York, but they were waiting for the Supreme Court to make its decision. What we don’t know is if these states are going to move forward—and there could be others—to adopt similar laws. It is what we call in the legal world ‘a patchwork of regulations.’”
Matt Schrap, CEO of the Harbor Trucking Association, a non-profit coalition of intermodal carriers and drayage operators doing business on the West Coast, said on the webcast that in the leadup to the Supreme Court not taking up AB5 the prevalent theme was that independent drivers do not want to be employees.
“The only pathway to ensure you are not violating the AB5 ABC test, or even the business-to-business provision, is the fact that you have employee drivers,” he said. “And the challenge becomes convincing folks who have been operating under a business structure for the past 40 years, ever since deregulation basically, that these men and women are no longer able to operate in the way they have become accustomed to.”
A customer advisory from STG Logistics stated that the AB5 demonstration at the Oakland terminals has been extended through today, adding that the port terminals will be closed all day and next week they are estimated to re-open under heavy congestion.