Carriers might decide to risk pushing AB5 enforcement limits

Concern over California’s AB5 law and its potential effects on trucking is at the point where one high-level official believes some carriers may decide to push the limits of enforcement in order to survive.

“In my opinion, there will be companies that take the risk and say we’ll run as owner-operators until someone decides to enforce AB5,” said Harold Sumerford, CEO of J&M Tank Lines and chairman of the American Trucking Associations. “I’m not willing to take the risk.”

Speaking Thursday at a Capitol Hill roundtable hosted by Republican members of the House Transportation & Infrastructure Committee, Sumerford said not only will the rule affect truck drivers currently working for companies as owner-operators — estimated at 70,000 by one lawmaker — it also is going to be difficult for anyone to now qualify as an independent owner-operator in California.

“I don’t think we need to make the independent contractor jobs any harder than we’re making [them], and California has stepped that up with AB5,” Sumerford said. “There’s a lot of people that will have to be reclassified as employees, or certain companies will pull out not knowing the certainty of the rules and regulations.”

U.S. Rep. Beth Van Duyne, R-Calif., pointed out that ramifications on trucking would not stop with AB5 if Congress approves the Protecting the Right to Organize Act of 2021 — known as the “Pro Act” — which the House passed last year. The bill, which includes restrictions for independent contractors similar to those written into AB5, would mean “350,000 truck drivers across the country will face a similar fate,” Van Duyne said.

“We need to make sure the Pro Act doesn’t get passed,” Sumerford responded. “[California should] relegislate so that federal preemption stands up, and California can’t push that out to other states.”

Infrastructure funding’s shrinking power

Republicans sought out industry officials who could discuss the effects that inflation is having on transportation infrastructure and funding provided under last year’s $1.2 billion Infrastructure Investment and Jobs Act (IIJA).

Luke Waddell, a councilman for the city of Wilmington, N.C., said five capital improvement projects have been affected by rising prices for building materials. One winning project bid came in 250% over budget, resulting in it being rejected and the plan put on hold.

“Wilmington is experiencing unprecedented growth, which is exacerbating the need for critical infrastructure projects and spotlighting the challenges that inflation is causing to them,” Waddell said. “Several local municipalities have to consider raising taxes on citizens that are already stretched thin or proposing bonds and sales tax referendums on upcoming ballots.”

George Palko, president and CEO of the Great Lakes Construction Company and a member of Associated General Contractors of America, said a $270 million state transportation project in Cincinnati had been originally budgeted at $180 million.

“If we’re going to continue to exceed budgets and estimates by up to 50%, how are we going to show the public that we’re actually putting additional projects into place?” Palko said. “That’s a major concern of ours.”

Looming labor strife?

Concerns over expiring labor pacts on the waterfront and along the railroads — and the potential that they could cause another round of supply chain disruptions — were also highlighted during the discussion.

“For those who are plant managers and supply chain leaders in the manufacturing sector, the West Coast ports are creating a situation where they don’t know if they can be relied upon,” said Robyn Boerstling, vice president for infrastructure at the National Association of Manufacturers (NAM), referring to ongoing negotiations between U.S. West Coast container terminal operators and the International Longshore and Warehouse Union.

“They need to have a contract extension if they don’t come to an agreement soon because manufacturers really need that certainty. To risk half a billion [dollars] a day if there’s a stoppage or slowdown is just too much to undertake.

Boerstling added that supply chain uncertainty among her NAM members extends to the Class I railroads, where negotiations with their unions also have stalled.

“We need [President Joe Biden] to form a Presidential Emergency Board with the right kinds of experienced people serving as advisers who can move the needle forward,” Boerstling said.

Related articles:

• California trucking prepares for shake-up under independent contractor law AB5
• Truckers plan LA/Long Beach work stoppage to protest AB5
• Teamsters see pro-labor proposal leveling playing field at XPO

Click for more FreightWaves articles by John Gallagher.

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