Why Clean Air and Worker Justice Are in Peril at America's Ports

The air in Los Angeles is the cleanest it's been in decades, but it may be a matter of time before backsliding begins.

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Los Angeles has long had the worst air quality in the nation, and one major cause of that in recent decades has been the twin ports of Los Angeles and Long Beach. When the latest battle to improve the air at the ports reached the Supreme Court in mid-April, the Obama administration showed up with an amicus brief... on the side of dirty air. 

Here's how: The Obama administration backed a strict interpretation of federal law, preventing the Port of Los Angeles from enforcing rules on trucking companies as part of its “Clean Trucks Program.”

It's the very same Clean Trucks Program that candidate Obama praised in a letter to three California mayors of port cities when he was running for president in November 2007.

"I write to express my support for the efforts you are making to ensure that our ports are environmentally sound, secure, and supporting middle-class living standards for those working there," his letter to the mayors of Los Angeles, Long Beach and Oakland began. "In particular, the Clean Trucks Program recognizes trade, labor, and the environment are not separate, but linked issues. The program sets tough standards to clean up truck diesel emissions and provides generous subsidies for vehicle purchase and retrofit. And it also recognizes that responsibility for investing in higher standards is best borne by firms rather than the individual truck drivers fighting to make a living with little leverage to negotiate for better pay."

Running as a candidate, Obama was pitching a strong appeal to labor and environmental activists, whose work had been instrumental in shaping the Clean Trucks Program. But now he's taking a conventional big-business view favoring strictly uniform national laws—even though there's strong precedent for certain kinds of exceptions. The port argues that it's operating as a “market participant,” not a legislative body, and this allows it to act like a private business would, setting rules for people it does business with, which is qualitatively different than passing laws that apply to the general public. Airports routinely regulate taxis and limousines using a similar concession model and their representative organization, Airports Council International North America, has filed an amicus brief in support of the port.

“If our name was Walmart, you wouldn’t even be having this lawsuit. We’re operating like a private company,” said David S. Freeman, former president of the port's governing board.

Administration supporters might argue that the provisions involved would only have a minor impact on air quality. The employee mandate, requiring that trucking companies treat truckers as employees, rather than independent contractors, was already struck down by an appeals court panel. But if Obama really believed what he wrote in that 2007 letter, the earlier setback should have only increased his efforts on other fronts, such as direct labor law enforcement, which has not happened.

The employee mandate was the most prominent concern of Obama's one-page letter. He made the case for it over the course of two full paragraphs, in which he wrote, "Many of these truckers may be legally misclassified. Worker misclassification is an issue I have worked on at the federal level to remedy because it hurts workers and costs the taxpayer billions in uncollected taxes.... According to a recent survey of truckers at the ports, five out of six drivers only work for one trucking company at a time and nearly nine in ten own only one truck. They are dependent on the trucking companies for work."

Over the next three years, the argument Obama made in his letter was strengthened substantially on two fronts: First, within a few months of Obama's letter, two independent economic studies were released, both concluding that the employee mandate had a crucial role to play in ensuring the long-term success of the Clean Trucks Program, just as Obama argued in his letter. Second, in December 2010, a much more comprehensive study of port trucking across the country was released, which conclusively removed any uncertainty over port trucker misclassification.

The report, The Big Rig: Poverty, Pollution, and the Misclassification of Truck Drivers at America’s Ports, was so solid that there was virtually no public push-back against it. Together, these reports made it clear that possible administration action to enforce existing labor laws in the port trucking sector represented a rare, vital opportunity to advance both labor rights and environmental goals, even as the original vehicle for doing so—the Clean Trucks Program—became mired in industry threats and litigation. Unfortunately, instead of stepping in to fill the void, the Obama administration was missing in action, even though it did take some action to combat worker misclassification in general.

To fully appreciate the lost opportunity, we need to understand how the case for action that Obama's letter made had been strengthened by the reports cited above, first on the importance of the employee mandate, then on the pervasiveness of misclassification.

The first study, by lead author Jon Haveman of Beacon Economics, argued that consolidation of capital, rather than labor, was key to understanding why the employee mandate was so important. Addressing the issue of sustainability, it said, “[C]ommon ownership of the capital at use—the clean trucks—is key. These trucks will eventually depreciate and have to be replaced. Equivalently new technology will be found to reduce emissions, or further cuts in emissions will be demanded by the local community. Through consolidation of motor carriers, the CTP helps to establish the capacity of the drayage sector to keep up with increasing emissions standards.” 

The report also argued that capital consolidaiton would decrease the costs of the new system by increasing efficiency (which would also produce environmental benefits through reduced congestion, less duplicative truck trips, etc.).

“This consolidation also holds the promise of encouraging a significant increase in the overall efficiency of the system. This includes, for example, less wait time at the ports to pickup and drop off containers, better matching of inbound and outbound loads, and other cost reductions that come from economies of scale.”

The report described port pollution as "a classic externality problem." As Haveman explained to me at the time, "An externality occurs any time there is an economic activity which impacts people who aren't directly involved in that transaction." Area residents dying from diesel pollution were an extreme example, which I had written about repeatedly. But Beacon's report on the CTP added another wrinkle, as I then reported:

The trucking industry has a related problem -- those at the heart of the market, the truckers, are powerless to express their strong preference for increased efficiency.

The truckers' powerlessness "is part and parcel of the pollution problem," Haveman added. "Solving the efficiency problem is one important step for solving the pollution problem. If the pollution problem were internalized, there would be a much stronger movement toward reducing those inefficiencies."

In short, Haveman was arguing that properly pricing pollution and empowering truckers were both key to making the market work as advertized—something the major players had little or no interest in doing.

The second economic report, prepared for the Port of LA by Boston Consulting Group, reached similar conclusions via a different methodology. It compared three different possible models for the Clean Trucks Program, and concluded that option with the employee mandate had the following benefits compared to the other options:

• Creates reciprocal obligations

– Port provides concession and demands performance in return

– Truck companies invest in drayage capacity (trucks and employees) and obtain benefits from income generated through concession

• Creates aligned incentives – e.g. both parties benefit from improvements in operational

efficiency through better utilization of assets/trucks and employees

• Strongest basis for ensuring highest levels of accountability

– Environmental e.g. truck maintenance to keep up green performance

– Safety and security e.g. employer accountable for employee

In the long term—five years and beyond—BCG concluded that employee mandate plan was, “Most likely to guarantee sustainable environmental and operational improvements.”

Remarkably, even as these reports were being prepared, the city of Long Beach entered into secret backroom negotiations with the American Trucking Associations to abandon the concessions model entirely, including, of course, the employee mandate. 

The ATA was bitterly opposed to the prospect of unionization, as it had made clear in a series of large public meetings and smaller stakeholder meetings with the staff of both ports. Many of the small firms in the ATA would clearly not survive in a system based owning trucks and employing workers—they simply didn't have the capifal to survive. But the larger firms were equally hostile—after all, they were doing relatively well, so why change anything? In most cases, their very existence was a result of the mass de-unionization of the industry in the 1980s, and the replacement of regular employees with  “independent contractors” who are barred from collective bargaining under federal law. ATA's testimony as the Clean Trucks Plan was  being developed had repeatedly included the threat of lawsuits to block the plan.

It also had the implicit support of the shipping companies and terminal operators as well, since their demand for cheap trucking services had helped drive that earlier wave of de-unionization and the spread of the “independent contractor” model. Furthermore, a massive organizing effort by port truckers in 1996 had been defeated in part because shipping companies redirected cargo to other ports. But the ATA's hostility wasn't limited to unions. It extended to every aspect of the concession system, as has just been demonstrated by their willingness to go all the way to the Supreme Court, even after an appeals court struck down the employee mandate.

The backroom deal with Long Beach gave the ATA everything they wanted, scrapping the concession model in its entirety. There was not even the appearance of a public process, much less an empirical fact-finding one in reaching this decision. In contrast, the Los Angeles plan openly built on the findings above, along with extensive public comment.

A little over three years after Obama's letter, in December 2010, the Big Rig report was released. It came directly out of organizing efforts in the Seattle area, and combined the data from ten studies (including the one Obama cited) at seven major ports on the East, West and Gulf coasts. Then it added a totally new investigation, based on IRS employment law and extensive two two-hour interviews—plus reviews of employment documents such as paystrubs, time cards and the like. Altogether, it included data based on 2,183 workers. “Our in-depth interviews with drivers at major ports around the country and review of their employment documents reveal that drivers commonly lack the autonomy that is the hallmark of an independent businessperson under federal law,” the study stated, as I reported at the time. I went on to cite three key points in law made by the report:

  1. Port drivers are subject to strict behavioral controls. Trucking companies determine how, when, where and in what sequence drivers work. They impose truck inspections, drug tests and stringent reporting requirements. Drivers’behavior is regularly monitored, evaluated and disciplined.
  2. Port drivers are financially dependent on trucking companies that unilaterally control the rates that drivers are paid. Drivers work for one trucking company at a time, do not offer services to the general public and are entirely dependent on that company for work. Like other low-wage employees, drivers' only means for increasing their earnings is to work longer hours.
  3. Port drivers and their companies are tightly tied to each other. Drivers perform the essential (and most often sole) services of the trucking companies they work for. Drivers work for years for the same company; use company signs and permits; represent themselves to others as being from the company and rarely offer their work independently of the company.

I recently interviewed Paul Marvy, a lawyer and researcher with Change To Win and one of three co-authors of the report, to obtain his perspective on the impact of the report more than three years later. He said that the study was intended to provide an integrated picture of condition nationwide, and to document truckers' employment status conclusively. The study's resulting finding of pervasive misclassification had been genearlly accepted, without any of the expected industry push-back.

“We were very aware of how controversial the industry is and results and the fact that, at a minimum, the American Trucking Associations and likely a number of others, agencies would be hiring people whose job it would be to tear the report apart,” Marvy explained, so they were intent on building the strongest possible case. Surprisingly, “It has never really been publicly attacked,” he said.

But neither has it been pounced on by the Obama administration as an alternative way to achieve the goals Obama cited in his Novemer 2007 letter (a particularly vexing lack of development after an appeals court struck down the employee mandate in the Clean Trucks Plan in 2011). The result, Marvy admitted, had been “less than we had hoped.”

Although the Department of Labor, under Hilda Solis—who formerly represented a congressional district close to the ports—has embarked on a broad initiative to combat misclassification, there doesn't appear to be any specific focus on port truckers. There were no examples Marvy could cite, none were listed on the US Department of Labor website, nor did the department provide any examples when requested for this story. There had been an effort to strengthen the labor law in Congress before the 2010 election, but that effort died with Republican mid-term victories in 2010.

And yet, the report is the basis of port truckers' best hope, since the employee mandate was struck down. Some have criticized the organizing strategy as “too top-down” and lacking a “Plan B” to fall back on, after the mandate was eliminated. An earlier mass-organizing effort that peaked with a strike in May 1996 has been cited by way of contrast. But that effort—begun by unaffiliated truckers, and taken on the Communication Workers of America—did not succeed, and left truckers deeply demoralized, even moreso than after two previous strikes, in 1988 and 1993, which were undertaken without support from a pre-existing union.

A key part of the strategy in 1996 was the creation of a new firm, the Transport Maritime Association (TMA), which would hire the truckers as unionized employees and then lease their services to existing trucking companies, thus evading the labor law ban against organizing independent contractors. Conceptually, it was brilliant, and it built on a far-reaching mass mobilization model, with several shows of strength in the form of mass truck convoys to deliver political demands. But Donald Allen, the entrepreneur behind TMA did not turn out to have deep enough pockets to survive a much fiercer fight than he had originally anticipated. 

In contrast with that experience, organizers now are doing a much better job of surviving the loss of the employee mandate as their go-to strategy. The Obama administration may have failed to step up, but things are much more promising at the state level, starting with ongoing legislative efforts. “There has been legislation propsed and advanced in California, Washington, New Jersey, and potentially New York,” Marvy said. Unlike the federal level, the efforts have continued. “Last year in Washington we were two votes short in the senate, in actually getting a bill passed that would have categorically made all of the drivers employees. So, close but no cigar.”

There's also been siginificantly stepped-up enforcement of labor law violations by state labor departments, most notably in California and New Jersey, as well as the beginnings of private lawsuits, which can easily involve multi-million-dollar judgments.

Frederick Potter, a Teamsters Union vice president-at-large, and director of the Teamsters Port Division, provided a more detailed view of developments in New York and New Jersey. “There is legislation pending in New Jersey that would create a presumption of employment status for workers, unless the companies who wanted to use comtract worker could show that the status was legitimate.” he said.

Supporters were hopeful of passage, but would then face the challenge of persuading Governor Chris Christie not to veto it. For this, they intend to rely on a broader economic argument about money for the state and fairness for those who already paying their fair share.

“The current system of misclassification is depriving the state of revenue,” Potter pointed out. “When companies misclassify their workers, they don't pay temporary disability, they don't pay unemployment, the workers are responsible for their own income tax. So New Jersey is losing much needed revenue and companies that properly classify there workers are at a competitive disadvantage.

“It's a huge problem.” Potter said. “We estimate that the state's leaving about $7 million on the table annually in temporary disability and unemployment premiums alone, each year, from only the port trucking industry.”

As an example, just one company, Proud 2 Haul, was assessed back payments of $158,536.53 by New Jersey's Department of Labor.  But under existing law, it's a slow, painful process to bring companies into compliance, even though they're violating existing law.

“It's already the practice of the New Jersey Department of Labor that if you want to use independent contractors in your business, you have to be able to prove it,” Potter explained. “You have to be able to pass the IRS ABC test. We believe 85% of these so caled Independent contractors are misclassified by the trucking companies. They're not independent contractors.”

The ABC test means that workers are free from company control, that they don't perform a service that's intrinsic to the company business (like truckers, but not accountants, are for a trucking company) and that the allegedly independent business could survive without the relationship with the employer. As the Big Rig study clearly established, none of this describes port truckers.

“So, we want to see the law protect these workers,” Potter concluded.

Successful enforcement actions, like that against Proud 2 Haul, help to support the argument that new legislation is needed to streamline enforcement and bring the whole industry into compliance. So legislation and enforcement go hand in hand.

It turns out that Proud 2 Haul is an unwilling pathbreaker in more ways than one. In addition to the New Jersey finding, the National Labor Relations Board issued a decision in 2011 asserting its jurisdiction in a labor dispute—the first time it decided that it had jurisdiction over truckers misclassified as independent contractors.  hat's more, based on extensive documentation of employment specifics, such as those noted in the Big Rig study, an investigation explicitly determined that "there's an employment relationship between the firm and the truck drivers."

David Tykulsker is the attorney who represented the Teamsters and several Proud 2 Haul truckers before the NLRB. He's now representing six Proud 2 Haul truck drivers in a class action lawsuit to recover money improperly taken from them. "We've had a class certified, and we're in the process of discovery," Tykulsker said, but resolution is still a way off. “By the end of the year, I'll have it done,” he predicted.

“More generally, the points here [in the two cases] are that these drivers are employees, when one actually looks at the facts of their relationship with their employer. that is the reality of what's going on.... Both of these actions are meant to drive that proposition forward.”

Things are moving in California as well. On February 28, the California Labor Commissioner won a trial contesting an earlier administrative ruling against Seacon Logix over the misclassification of four drivers and resulting wage theft. In an administration action on Nov. 16, 2011, Seacon was ordered to pay $105,089.15 for violations including unlawful withholding of wages, interest and waiting time penalties. The superior court trial affirmed that the Labor Commissioner's ruling was justified under law.

“In this case, drivers had signed agreements labeling them independent contractors but the Court saw the truth behind the label,” Labor Commissioner Su stated in a press release. “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.” 

Meanwhile five more drivers filed similar claims against Seacon last year, with a hearing held in February, while another company, Green Fleet Systems, is appealing a similar ruling against it by the Labor Commissioner.

“The big picture is that over 260 port driver claims are pending just in the Long Beach Office [of the Labor Commissioner], with over 100 others in Southern California,” said Jon Zerolnick, who works for the Los Angeles Alliance for a New Economy (LAANE) as director of its Clean and Safe Ports Project. LAANE is a principle member of the Coalition For Clean & Safe Ports, the driving force behind the original employee mandate proposal.

“Drivers see that they're misclassified,” Zerolnick said. “They understand that the Labor Commissioner is a route to address the misclassification, and to getting back some of the money that has been stolen from them by the companies in recent years as companies have forced the costs onto them of truck leases, insurance payments, registration, taxes, parking fees, truck wash fees, fuel, maintenance and all the other core busienes costs of port trucking operations.”

“This is potentially going to be a long process, but as it is going on, the liability is just racking up,” Zerolnick said. “I did a quick back-of-the-envelope [calculation] myself this morning, and we're talking, the liabilty for the industry, if we're only looking at thse cases that are currently pending, that is in the tens of milions, assuming around $50,000 per driver.”

As in New Jersey, another front is opening up, with private litigation.  In this case, a relatively new non-profit, the Wage Justice Center, is taking the lead. Working together with LAANE, in late February, the Wage Justice Center filed a class-action lawsuit on behalf of an estimated 100 port truckers worker for cluster of intertwined companies operating under different names, including: “QTS, Inc.,” “WinWin Logistics Inc.” and “Laca Express Inc.” In addition to wage theft violations, the suit is the first to allege violation of a new California law prohibiting the willful misclassification of employees as independent contractors.

Plaintiff Cuahutemoc Cabuto explained, “I filed this lawsuit because I wanted to fight back against the injustices at this company. I work all the time, day and night, and have no money left to take home after all the deductions the company takes out of my paycheck.”

His plight was typical, according to attorney Matthew Sirolly, director of the Wage Justice Center. “After all the deductions from their checks, the take-home salary for the workers probably averages around $5 per hour. $4-5 an hour, so well below minimum wage,” Sirolly said. “Basically that happens because they pay them by the load, an amount that doesn't seem unreasonably low, it's like $200 per load, or somewhere around there, depending on where they're going.” But then, “The company deducts back out of their checks all the expenses, so including the rental expense for the truck, gas, insurance, mantenance costs, and all this kind of stuff.” The named defendants routinely work double shifts four or five days a week, but still can't make ends meet.

Sirolly is reluctant to criticize the Department of Labor. They're “vastly under-resourced” he says. And he's right. But given Obama's focus in that 2007 letter, and given that the Clean Trucks Program has been legally undercut in doing what it set out to do, it's difficult to see how the federal government has seemingly done nothing at all, while hundreds of cases are already in the pipeline of the state government counterpart.

For now, the air in Los Angeles is probably the cleanest it's been in decades. But if the studies done are correct, it's only a matter of time before backsliding begins, unless something is done about the fate of the lowest-paid workers at the ports.

Paul H. Rosenberg is senior editor at Random Lengths News, a biweekly serving the Los Angeles harbor area.