Existing law requires a client employer to share with a labor contractor all civil legal responsibility and civil liability for all workers supplied by that labor contractor for the payment of wages and the failure to obtain valid workers compensation coverage. Existing law also prohibits a client employer from shifting to the labor contractor legal duties or liabilities under workplace safety provisions with respect to workers provided by the labor contractor. Existing law defines terms for these purposes and authorizes the Labor Commissioner to adopt regulations and rules of practice and procedure necessary to administer and enforce these provisions. Existing law excludes certain types of employers from these provisions, including, but not limited to, a client employer that is not a motor carrier of property based solely on the employers use of a third-party motor carrier of property with interstate or intrastate operating authority to ship or receive freight, and a client employer that is a motor carrier of property subcontracting with, or otherwise engaging, another motor carrier of property to provide transportation services using its own employees and commercial motor vehicles.

This bill would require a customer that, as part of its business, engages or uses to perform port drayage services a port drayage motor carrier, as defined, that is on a list established by the Division of Labor Standards Enforcement and posted on its Internet Web site pursuant to the bill to share with the motor carrier all civil legal responsibility and civil liability for port drayage services obtained after the date the motor carrier appeared on the list, as specified. The bill would require the division to notify a port drayage motor carrier at least 15 business days before adding the port drayage motor carrier to its Internet Web site and would require a port drayage motor carrier who provides port drayage services to a customer, prior to providing those services, and within 30 business days of entry of the judgment, to furnish prescribed notice to the customer concerning unsatisfied judgments against the motor carrier for unpaid wages, damages, unreimbursed expenses, and penalties. The bill would define terms for its purposes, including defining customer, with certain exceptions, to mean a business entity, regardless of its form, that engages or uses a port drayage motor carrier to perform port drayage services on the customers behalf, as described. The bill would prohibit a customer and a port drayage motor carrier from taking any adverse action against a commercial driver for providing notification of violations or filing a claim or civil action. The bill would, with certain exceptions, not apply the joint and severable liability to customers who engage a drayage motor carrier whose employees are covered by a collective bargaining agreement or to a customer who wishes to terminate an existing contract until the termination date or until 90 business days following the listing of the drayage motor carrier on the divisions Internet Web site, whichever is shorter. The bill would require a customer or port drayage motor carrier to provide to the Labor Commissioner, and make available for copying, information within its possession, custody, or control required to verify compliance with applicable state laws. The bill would authorize the Labor Commissioner and the Employment Development Department to adopt necessary regulations and rules to administer and enforce the bills provisions. The bill would provide that waiver of its provisions is contrary to public policy, void, and unenforceable. The bill would provide that its provisions are severable.

Existing law requires a client employer to share with a labor contractor all civil legal responsibility and civil liability for all workers supplied by that labor contractor for the payment of wages and the failure to obtain valid workers compensation coverage. Existing law also prohibits a client employer from shifting to the labor contractor legal duties or liabilities under workplace safety provisions with respect to workers provided by the labor contractor. Existing law defines terms for these purposes and authorizes the Labor Commissioner to adopt regulations and rules of practice and procedure necessary to administer and enforce these provisions. Existing law excludes certain types of employers from these provisions, including, but not limited to, a client employer that is not a motor carrier of property based solely on the employers use of a third-party motor carrier of property with interstate or intrastate operating authority to ship or receive freight, and a client employer that is a motor carrier of property subcontracting with, or otherwise engaging, another motor carrier of property to provide transportation services using its own employees and commercial motor vehicles.

This bill would require a customer that, as part of its business, engages or uses to perform port drayage services a port drayage motor carrier, as defined, that is on a list established by the Division of Labor Standards Enforcement and posted on its Internet Web site pursuant to the bill to share with the motor carrier all civil legal responsibility and civil liability for port drayage services obtained after the date the motor carrier appeared on the list, as specified. The bill would require the division to notify a port drayage motor carrier at least 15 business days before adding the port drayage motor carrier to its Internet Web site and would require a port drayage motor carrier who provides port drayage services to a customer, prior to providing those services, and within 30 business days of entry of the judgment, to furnish prescribed notice to the customer concerning unsatisfied judgments against the motor carrier for unpaid wages, damages, unreimbursed expenses, and penalties. The bill would define terms for its purposes, including defining customer, with certain exceptions, to mean a business entity, regardless of its form, that engages or uses a port drayage motor carrier to perform port drayage services on the customers behalf, as described. The bill would prohibit a customer and a port drayage motor carrier from taking any adverse action against a commercial driver for providing notification of violations or filing a claim or civil action. The bill would, with certain exceptions, not apply the joint and severable liability to customers who engage a drayage motor carrier whose employees are covered by a collective bargaining agreement or to a customer who wishes to terminate an existing contract until the termination date or until 90 business days following the listing of the drayage motor carrier on the divisions Internet Web site, whichever is shorter. The bill would require a customer or port drayage motor carrier to provide to the Labor Commissioner, and make available for copying, information within its possession, custody, or control required to verify compliance with applicable state laws. The bill would authorize the Labor Commissioner and the Employment Development Department to adopt necessary regulations and rules to administer and enforce the bills provisions. The bill would provide that waiver of its provisions is contrary to public policy, void, and unenforceable. The bill would provide that its provisions are severable.

Existing law requires a client employer to share with a labor contractor all civil legal responsibility and civil liability for all workers supplied by that labor contractor for the payment of wages and the failure to obtain valid workers compensation coverage. Existing law also prohibits a client employer from shifting to the labor contractor legal duties or liabilities under workplace safety provisions with respect to workers provided by the labor contractor. Existing law defines terms for these purposes and authorizes the Labor Commissioner to adopt regulations and rules of practice and procedure necessary to administer and enforce these provisions. Existing law excludes certain types of employers from these provisions, including, but not limited to, a client employer that is not a motor carrier of property based solely on the employers use of a third-party motor carrier of property with interstate or intrastate operating authority to ship or receive freight, and a client employer that is a motor carrier of property subcontracting with, or otherwise engaging, another motor carrier of property to provide transportation services using its own employees and commercial motor vehicles.

This bill would require a customer that, as part of its business, engages or uses to perform port drayage services a port drayage motor carrier, as defined, that is on a list established by the Division of Labor Standards Enforcement and posted on its Internet Web site pursuant to the bill, to share with the motor carrier all civil legal responsibility and civil liability for port drayage services obtained after the date the motor carrier appeared on the list, as specified. The bill would require the division to notify a port drayage motor carrier at least 15 business days before adding the port drayage motor carrier to its Internet Web site and would require a port drayage motor carrier who provides port drayage services to a customer, prior to executing an agreement to provide transportation providing those services, and within 30 business days of entry of the judgment, to furnish prescribed notice to the customer concerning these provisions. unsatisfied judgments against the motor carrier for unpaid wages, damages, unreimbursed expenses, and penalties. The bill would define terms for its purposes, including defining customer, with certain exceptions, to mean a business entity, regardless of its form, that engages or uses a port drayage motor carrier to perform port drayage services on the customers behalf, as described. The bill would prohibit a customer and a port drayage motor carrier from taking any adverse action against a commercial driver for providing notification of violations or filing a claim or civil action. The bill would, with certain exceptions, not apply the joint and severable liability to customers who engage a drayage motor carrier whose employees are covered by a collective bargaining agreement or to a customer who wishes to terminate an existing contract until the termination date or until 90 business days following the listing of the drayage motor carrier on the divisions Internet Web site, whichever is shorter. The bill would require a customer or port drayage motor carrier to provide to the Labor Commissioner, and make available for copying, information within its possession, custody, or control required to verify compliance with applicable state laws. The bill would authorize the Labor Commissioner and the Employment Development Department to adopt necessary regulations and rules to administer and enforce the bills provisions. The bill would provide that waiver of its provisions is contrary to public policy, void, and unenforceable. The bill would provide that its provisions are severable.

Existing law requires a client employer to share with a labor contractor all civil legal responsibility and civil liability for all workers supplied by that labor contractor for the payment of wages and the failure to obtain valid workers compensation coverage. Existing law also prohibits a client employer from shifting to the labor contractor legal duties or liabilities under workplace safety provisions with respect to workers provided by the labor contractor. Existing law defines terms for these purposes and authorizes the Labor Commissioner to adopt regulations and rules of practice and procedure necessary to administer and enforce these provisions. Existing law excludes certain types of employers from these provisions, including, but not limited to, a client employer that is not a motor carrier of property based solely on the employers use of a third-party motor carrier of property with interstate or intrastate operating authority to ship or receive freight, and a client employer that is a motor carrier of property subcontracting with, or otherwise engaging, another motor carrier of property to provide transportation services using its own employees and commercial motor vehicles.

This bill would require a customer that, as part of its business, engages or uses to perform port drayage services a port drayage motor carrier, as defined, that is on a list established by the Division of Labor Standards Enforcement and posted on its Internet Web site pursuant to the bill, to share with the motor carrier all civil legal responsibility and civil liability for port drayage services obtained after the date the motor carrier appeared on the list, as specified. The bill would require the division to notify a port drayage motor carrier at least 15 days before adding the port drayage motor carrier to its Internet Web site and would require a port drayage motor carrier who provides port drayage services to a customer, prior to executing an agreement to provide transportation services, to furnish prescribed notice to the customer concerning these provisions. The bill would define terms for its purposes, including defining customer, with certain exceptions, to mean a business entity, regardless of its form, that engages or uses a port drayage motor carrier to perform port drayage services on the customers behalf, as described. The bill would prohibit a customer and a port drayage motor carrier from taking any adverse action against a commercial driver for providing notification of violations or filing a claim or civil action. The bill would, with certain exceptions, not apply the joint and severable liability to customers who engage a drayage motor carrier whose employees are covered by a collective bargaining agreement or to a customer who wishes to terminate an existing contract until the termination date or until 90 days following the listing of the drayage motor carrier on the divisions Internet Web site, whichever is shorter. The bill would require a customer or port drayage motor carrier to provide to the Labor Commissioner, and make available for copying, information within its possession, custody, or control required to verify compliance with applicable state laws. The bill would authorize the Labor Commissioner and the Employment Development Department to adopt necessary regulations and rules to administer and enforce the bills provisions. The bill would provide that waiver of its provisions is contrary to public policy, void, and unenforceable. The bill would provide that its provisions are severable.

Existing law requires a client employer to share with a labor contractor all civil legal responsibility and civil liability for all workers supplied by that labor contractor for the payment of wages and the failure to obtain valid workers compensation coverage. Existing law also prohibits a client employer from shifting to the labor contractor legal duties or liabilities under workplace safety provisions with respect to workers provided by the labor contractor. Existing law defines terms for these purposes and authorizes the Labor Commissioner to adopt regulations and rules of practice and procedure necessary to administer and enforce these provisions. Existing law excludes certain types of employers from these provisions, including, but not limited to, a client employer that is not a motor carrier of property based solely on the employers use of a third-party motor carrier of property with interstate or intrastate operating authority to ship or receive freight, and a client employer that is a motor carrier of property subcontracting with, or otherwise engaging, another motor carrier of property to provide transportation services using its own employees and commercial motor vehicles.

This bill would require a customer that, as part of its business, obtains port drayage services with a port drayage motor carrier on a list that the bill would require to be established by the Division of Labor Standards Enforcement and posted on its Internet Web site, be jointly and severally liable with the motor carrier for future unpaid wages, unreimbursed expenses, damages and penalties, including applicable interest, found due to any and all commercial drivers provided, directed, or used by the motor carrier to perform port drayage services for the customer, or that are found due as civil penalties to the state, as specified. engages or uses to perform port drayage services a port drayage motor carrier, as defined, that is on a list established by the Division of Labor Standards Enforcement and posted on its Internet Web site pursuant to the bill, to share with the motor carrier all civil legal responsibility and civil liability for port drayage services obtained after the date the motor carrier appeared on the list, as specified. The bill would require the division to notify a port drayage motor carrier at least 15 days before adding the port drayage motor carrier to its Internet Web site and would require a port drayage motor carrier who enters into an agreement to provide provides port drayage services to a customer, prior to executing an agreement to provide transportation services, to furnish prescribed notice to the customer concerning the list and the potential for joint and several liability. these provisions. The bill would define terms for its purposes, including defining a customer, customer, with certain exceptions, as to mean a business entity, regardless of its form, that enters into an agreement, either directly or through an agent, with engages or uses a port drayage motor carrier to transport freight containers or cargo to or from a port. perform port drayage services on the customers behalf, as described. The bill would prohibit a customer and a port drayage motor carrier from taking any adverse action against a commercial driver for providing notification of violations or filing a claim or civil action. The bill would require a customer or port drayage motor carrier to provide to the Labor Commissioner, and make available for copying, information within its possession, custody, or control required to verify compliance with applicable state laws. The bill would authorize the Labor Commissioner and the Employment Development Department to adopt necessary regulations and rules to administer and enforce the bills provisions. The bill would provide that waiver of its provisions is contrary to public policy, void, and unenforceable. The bill would provide that its provisions are severable.

Existing law prohibits an employer or agent from collecting, taking, or receiving any gratuity or a part thereof that is paid, given to, or left for an employee by a patron, or deducting any amount from wages due an employee on account of a gratuity, or requiring an employee to credit the amount, or any part thereof, of a gratuity against and as a part of the wages due the employee from the employer.

This bill would make nonsubstantive changes to that prohibition.

 UNFINISHED BUSINESS  

Bill No: SB 1402

Author:

:

Vote:

SENATE JUDICIARY COMMITTEE: 5-2, 4/24/18

AYES: Jackson, Hertzberg, Monning, Stern, Wieckowski

NOES: Moorlach, Anderson

SENATE LABOR & IND. REL. COMMITTEE: 4-1, 4/25/18

AYES: Pan, Jackson, Mitchell, Wieckowski

NOES: Stone

SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/25/18

AYES: Lara, Beall, Bradford, Hill, Wiener

NOES: Bates, Nielsen

SENATE FLOOR: 24-12, 5/30/18

AYES: Allen, Atkins, Beall, Bradford, Dodd, Glazer, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara, Leyva, McGuire, Mitchell, Monning, Newman, Pan, Portantino, Roth, Skinner, Stern, Wieckowski, Wiener

NOES: Anderson, Bates, Berryhill, Fuller, Gaines, Moorlach, Morrell, Nguyen, Nielsen, Stone, Vidak, Wilk

NO VOTE RECORDED: Cannella, De León, Galgiani

ASSEMBLY FLOOR: 53-26, 8/30/18 - See last page for vote

SUBJECT:

SOURCE: California Teamsters Public Affairs Council and

California Labor Federation, AFL-CIO

DIGEST:

This bill requires joint and several liability for customers who contract with port drayage services who have unpaid wage, tax and workers’ compensation liability.

Assembly Amendments

clarify the operation of the port drayage Web site list, provides that the timelines are business days (rather than calendar days), and provide a way for customers to not be held jointly and severally liable if the customers terminate their contracts, as specified.

ANALYSIS:

Existing law:

1. Extends liability to client employers who, in the usual course of business, utilize third-party labor contractors for unpaid wages and a lack of workers’ compensation coverage if the following are true:
   1. The employer has 25 or more employees, including the contracted employees;
   2. The employer has 5 or more employees from a third-party labor contractor; and
   3. The third-party labor contractor isn’t a non-profit or motion picture payroll company.
2. Defines “labor contractor” as means an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business.
3. Defines “usual course of business” as the regular and customary work of a business, performed within or upon the premises or worksite of the client employer.
4. Prohibits a client employer from shifting to the labor contractor any legal duties or liabilities under Cal-OSHA with respect to workers supplied by the labor contractor.
5. Provides that a waiver of the above-provisions is contrary to public policy, and is void and unenforceable.
6. Exempts from the liability provisions discussed above motor carriers of property, household goods carriers, cable operators, and motor clubs.
   (Labor Code §2810.3)

This bill:

1. Makes findings and declarations on the importance of California’s port drayage drivers, recent media coverage on the debt challenges port drayage workers face, and the history of illegal misclassification of port drayage drivers by some employers.
2. Defines a “customer” as an a business entity, regardless of its form, that has 25 or more employees, including temporary employees, and engages or uses a port drayage motor carrier to perform port drayage services on the customer’s behalf. This definition includes port drayage services that are contracted directly by a customer or indirectly by the customer through an agent. This includes, but is not limited to, a freight forwarder, motor transportation broker, ocean carrier, or other motor carrier.
3. Excludes from the definition of “customer” the state, any subdivision of the state, any employer with less than 25 employees, and any business entity, including but not limited to a marine terminal operator, who makes available or exchanges intermodal equipment, as specified.
4. Defines “port drayage motor carrier” as an individual or entity that hires or engages commercial drivers in the port drayage industry or a registered owner, lessee, licensee, or bailee of a commercial motor vehicle that operates or directs the operation of a commercial motor vehicle by a commercial driver on a for-hire or not-for-hire basis to perform port drayage services in the port drayage industry.
5. Includes in the definition of “port drayage motor carrier” an entity or individual who succeeds in the interest or operation of a predecessor operator.
6. Defines the “Port drayage industry,” “port trucking industry,” or “port drayage services” as the movement within California of cargo or intermodal equipment by a commercial motor vehicle whose point-to-point movement either has its origin or destination at a port, as defined. This bill excludes employees performing the intra-port or inter-port movement of cargo or cargo handling equipment under the control of their employers from the above definition.
7. Requires that the Division of Labor Standards Enforcement (DLSE) post on its Internet Web site the names, addresses, and essential information for any port drayage motor carrier with any unsatisfied final court judgment, tax assessment, or tax lien that may be released to the public under federal and state disclosure laws, including any order, decision, or award obtained by a public or private person or entity, assessment of the Employment Development Department, or any order, decision, or award finding that a port drayage motor carrier has engaged in illegal conduct including failure to pay wages, imposing unlawful expenses on employees, failure to remit payroll taxes, failure to provide workers’ compensation insurance, or misclassification of employees as independent contractors with regard to a port drayage commercial driver.
8. Requires that the DLSE shall not place the information on the Internet Web site until the period for all judicial court appeals has expired. This posting must be removed within 15 business days after the DLSE determines there has been full payment of the unsatisfied judgment or the port drayage motor carrier has entered into an approved settlement. The DLSE must also update the website monthly by the fifth day of each month.
9. Requires the DLSE to notify port drayage motor carriers of being listed on the Web site described above within 15 business days of being posted. The notice shall be delivered by certified mail and include, at a minimum, the contact information for a contact person as DLSE, the alleged conduct and a copy of the unsatisfied judgment, and a copy of the rules or regulations for removal of the posting.
10. Extends to a customer both shared civil legal and civil liability for all port drayage services obtained after the date the motor carrier appeared on the list, meaning joint and several liability for the full amount of unpaid wages, unreimbursed expenses, damages and penalties, including applicable interest, owed to a port drayage trucker for all of the following:
    1. Minimum, regular, or premium wages that are unpaid by the motor carrier, including rest and recovery periods.
    2. Unlawful deductions by the motor carrier from wages.
    3. Out-of-pocket business expenses incurred by the commercial driver that are not reimbursed by the motor carrier as required by law.
    4. Civil penalties for the failure to secure valid workers’ compensation coverage.
    5. Damages or penalties as provided for by law that are due to the commercial driver or the state based upon the failure of the motor carrier to pay wages owed, including failure to timely pay wages, provide an accurate pay stub, willfully misclassify an employee as an independent contractor, violate an Industrial Welfare Commission Wage Order, and liquidated damages and penalties due to paying less than the minimum wage.
    6. Applicable interest due for any sum described above.
11. Requires that each and every customer that receives port drayage services from a motor carrier in a given workweek shall be jointly and severally liable with the motor carrier for the full amount of all wages, expenses, damages, and penalties which are found owed by the motor carrier for that workweek.
12. Requires that a port drayage motor carrier that provides port drayage services to a customer in the port drayage industry must, prior to providing these services to the customer, furnish written notice to the customer of any unsatisfied final judgments against the motor carrier for unpaid wages, damages, unreimbursed expenses and penalties, including applicable interest. The notice shall also provide the text of this section.  The failure of the motor carrier to provide notice under this subdivision shall not be a defense to the joint and several liability provided by this section.
13. Requires that a port drayage motor carrier must provide, within 30 business days of entry of the judgment, written notice of any unsatisfied final judgments against the motor carrier for unpaid wages, damages, unreimbursed expenses and penalties, including applicable interest, to any customer to which the motor carrier is presently providing port drayage services in the port drayage industry. The failure of the motor carrier to provide notice under this subdivision shall not be a defense to the joint and several liability provided by this section.
14. Requires that a customer’s liability must be determined by either by the Labor Commissioner or by a court in a civil action brought by the Labor Commissioner, or by a commercial driver or his or her representative, where at least 30 business days prior to filing the civil action, the Labor Commissioner, or commercial driver or representative, notifies the customer of its potential joint and several liability for any of the wages, expenses, damages, or penalties.
15. Provides that the joint and several liability described above shall not apply:
    1. To employees covered by a bona fide collective bargaining agreement, if the agreement expressly provides for wages, hours of work, working conditions, a process to resolve disputes concerning nonpayment of wages, expenses, damages, and penalties, including applicable interest, and a waiver of the joint and several liability;
    2. To customers who terminate a port drayage contract after the contracted port drayage motor carrier is added to the list, as specified;
    3. To port drayage motor carriers not posted on the DLSE’s Web site; and
    4. To port drayage motor carriers who have satisfied the conditions for removal prior to the time period for which the joint and several liability is alleged.
16. Requires a customer or a port drayage motor carrier to provide to the Labor Commissioner any information within its possession, custody, or control required to verify compliance with applicable state laws. Upon request, the records that contain this information shall be made available promptly for inspection, and the Labor Commissioner must be permitted to copy them.
17. Prohibits a civil action for a violation or enforcement of this section shall be brought pursuant to the Private Attorneys General Act (PAGA).
18. Prohibits a customer or port drayage motor carrier from taking any adverse action against any commercial driver for providing notification of violations or filing a claim or civil action pertaining to unpaid wages, unreimbursed expenses, or the recovery of damages and penalties, including applicable interest.
19. Provides that the remedies provided by this section are in addition to, and shall be supplemental of, any other theories of liability or requirement established by statute or common law.
20. Provides that two or more parties who are held jointly and severally liable under this section after a final judgment is rendered by the court are not prohibited from establishing, exercising, or enforcing by contract a right of contribution and indemnity against each other for liability created by acts of a port drayage motor carrier.
21. Provides that the Labor Commissioner and Employment Development Department may adopt regulations and rules of practice and procedure necessary to administer and enforce the provisions of SB 1402.
22. Provides that a waiver of the above provisions is contrary to public policy, and is void and unenforceable.
23. Provides that the provisions of this bill are severable, and that if any of the provisions are found to be invalid, that invalidity shall not affect other provisions that can be given effect without the invalid provision or application.

Comments

Background on Ports and Port Drayage: California is home to the two busiest ports in the United States: the Port of Los Angeles and the Port of Long Beach. Combined, these ports would be the 10th busiest port in the world, making it the busiest port in the world outside of China, Singapore, South Korea and Dubai. Both ports serve as an important economic driver for all of California, but they also pose unique policy challenges: both ports combined are the largest source of air pollution in the Los Angeles metropolitan area.

To address this issue, the California Air Resources Board requires that port drayage trucks must have an engine from 2007 or later. Port drayage is the short-haul transportation of cargo (generally containers) within the same urban area. It came be from one port to another or from the port to a nearby warehouse or factory. The Port of Long Beach alone reports 17,000 active drayage trucks serving the Port.

These newer, cleaner burning engines have significantly reduced pollution at the Ports. Unfortunately, it also encourages misclassification of drivers as independent contractors, rather than employees, as this allowed port drayage companies to shift the costs of new engines and truck to the workers. According to USA Today, at least 1,150 labor complaints have been filed by port drayage workers with the DLSE since 2010. The DLSE’s administrative law judges have sided with the complainants 97% of the time – and USA Today reports that these complaints involved 140 trucking companies. Complaints from workers focused on being misclassified as an independent contractor and not being paid at least the minimum wage, but also included workers being charged for using office materials, including toilet paper.

The same USA Today series also noted that large retailers which utilize port drayage companies continued to use the same port drayage contractors, despite the fact that the contractors were facing labor law charges. This stood in marked contrast with many of these same companies pledging to monitor their international supply chains for labor law violations from contractors and vendors. The USA Today articles did not discuss why these companies did not provide the same level of scrutiny to their port drayage contractors.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Assembly Appropriations Committee:

“One-time special fund costs of up to $2.1 million and annual costs of up to $1.8 million for DLSE to implement enforcing the provisions of this bill. Major cost drivers include the development of a web portal, the ongoing administration of the list of relevant port drayage carriers, and the additional review of wage claims as a result of the customer liability provisions. The ongoing costs associated with this bill are likely to decrease in future years.”

SUPPORT: (Verified 8/30/18)

California Labor Federation (co-source)

California Teamsters Public Affairs Council (co-source)

CARECEN – Central American Resource Center

City of Long Beach

City of Los Angeles

Clergy and Laity for Economic Justice

East Area Progressive Democrats

EcoFlow Transportation

Historic Highland Park Neighborhood Council

Los Angeles Alliance for a New Economy

Mayor Eric Garcetti of Los Angeles

Mayor Robert Garcia of Long Beach

Mayor Libby Schaaf of Oakland

Natural Resources Defense Council

Our People Our Port Coalition

Shippers Transport Express

South Bay Los Angeles 350

Southern California Coalition for Occupational Safety and Health

Toll Global Forwarding

Warehouse Worker Resource Center

OPPOSITION: (Verified 8/30/18)

Agricultural Council of California

Almond Alliance of California

American Apparel and Footwear Association

Association of CA Egg Farmers

CA Association of Wheat Growers

CA Bean Shippers Association

CA Chamber of Commerce

CA Grain and Feed Association

CA Manufacturers & Technology Association

CA Pear Growers Association

CA Seed Association

CA State Floral Association

CA Warehouse Association

Family Business Association of California

Los Angeles Customs Brokers and Freight Forwarder’s Association

National Federation of Independent Businesses

Pacific Egg & Poultry Association

Western States Trucking Association

ARGUMENTS IN SUPPORT: The California Teamsters Public Affairs Council, a sponsor of SB 1402, writes the following:

“SB 1402 will attempt to address the well documented swamp of illegality that exists in the port motor carrier industry, where drivers are regularly subjected to misclassification, fraud, and wage theft, and where large shippers who hire the trucking companies just look the other way. Currently, there is over $40 million in unsatisfied judgments against port trucking companies for illegal treatment of their drivers. There is perhaps no workforce in California where abuse of workers is more commonplace or more out of control….

SB 1402 will address the issue by having the State Labor Commissioner create a list of trucking companies that have unsatisfied judgments for labor law violations and employer tax fraud. If a shipper hires one of the trucking companies on the list and that trucking company subsequently commits violations with respect to drivers hauling freight for that shipper, then the shipper may be held jointly liable for the violation.

Under this bill, shippers can completely avoid joint liability by simply not hiring trucking companies with outstanding judgments and trucking companies can remove themselves from the list by satisfying judgments against them…. We believe SB 1402 will help drain the labor law swamp in California’s port drayage industry by creating a simple, inexpensive and easily followed system that encourages accountability by all market participants.”

ARGUMENTS IN OPPOSITION: The California Chamber of Commerce and other business organizations oppose SB 1402, arguing:

“SB 1402 imposes liability upon a third-party customer for the wage and hour obligations of a motor carrier even though there is absolutely no evidence or proof that the customer exerted any control over the working conditions of the motor carrier’s employees. There is simply no basis for a business that contracts for motor carrier services to be deemed statutorily liable for wages and other expenses when there is no way in which a customer can engage or force the motor carrier to comply with provisions of the Labor Code.

Further, SB 1402 does not require that the customer be in direct contract with the motor carrier or even have knowledge of who the motor carrier is that delivered its freight for liability to attach. Often times, a broker is used to manage a customer’s shipments. The broker does not inform the customer of who the motor carrier is in order to prevent the carrier and the customer from contracting directly and cutting out the middle person (in this case, the broker)….

Current law already provides an adequate pathway for civil liability for a business that is actually controlling the employees of another…. SB 1402 completely ignores this long-standing common law analysis and imposes liability despite the lack of any control exerted by the third party. Even though the third party did not control the wages owed, did not control the hours the employee worked, and did not control the work environment of the employee, the third party will be held liable for all such obligations.

By imposing third-party liability, SB 1402 will create significant amounts of litigation... For the reasons stated, we respectfully OPPOSE SB 1402.”

ASSEMBLY FLOOR: 53-26, 8/30/18

AYES: Aguiar-Curry, Arambula, Berman, Bloom, Bonta, Burke, Caballero, Calderon, Carrillo, Cervantes, Chau, Chiu, Chu, Cooper, Daly, Eggman, Friedman, Gabriel, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez Fletcher, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Levine, Limón, Low, McCarty, Medina, Mullin, Muratsuchi, Nazarian, O'Donnell, Quirk, Quirk-Silva, Reyes, Rivas, Rodriguez, Rubio, Salas, Santiago, Mark Stone, Thurmond, Ting, Weber, Wood, Rendon

NOES: Acosta, Travis Allen, Baker, Bigelow, Brough, Chávez, Chen, Choi, Cunningham, Dahle, Flora, Fong, Frazier, Gallagher, Harper, Kiley, Lackey, Maienschein, Mathis, Mayes, Melendez, Obernolte, Patterson, Steinorth, Voepel, Waldron

NO VOTE RECORDED: Cooley

Prepared by:

8/30/18 20:05:34

**** END ****

SENATE THIRD READING

STR Bill Id:

Author:(Lara)

As Amended Ver:August 20, 2018

Majority vote

SENATE VOTE: 24-12

SUMMARY: Requires joint and several liability for customers who contract with port drayage motor carriers who have unsatisfied judgments regarding unpaid wages, damages, expenses, penalties, and workers' compensation liability. Specifically, this bill:

1. Defines a "port drayage motor carrier" as an individual or entity that hires or engages commercial drivers in the port drayage industry, as defined.
2. Defines "customer" as a business entity, regardless of its form, that engages or uses a port drayage motor carrier to perform port drayage services on the customer's behalf, as specified.
3. Requires the Division of Labor Standards Enforcement (DLSE) to post on its Internet Web site essential information for any port drayage motor carrier with any unsatisfied final court judgment, order, decision, or award finding that a port drayage motor carrier has engaged in illegal conduct including failure to pay wages, imposing unlawful expenses on employees, failure to remit payroll taxes, failure to provide workers' compensation insurance, or misclassification of employees as independent contractors.
4. Provides that the DLSE shall not place the information on the Internet Web site until the period for all judicial appeals has expired and that the posting shall be removed within 15 business days after the DLSE determines there has been full payment of the unsatisfied judgment or that the port drayage motor carrier has entered into an approved settlement.
5. Provides, with certain exceptions, that a customer utilizing a port drayage motor carrier that is on the list shall be jointly and severally liable with the motor carrier for the full amount of unpaid wages, unreimbursed expenses, damages and penalties, including applicable interest.
6. Provides that joint and several liability shall not apply to a customer who wishes to terminate an existing contract with a port drayage motor carrier that is on the list until the expiration of the contract or a period of 90 business days following the listing, whichever is shorter.
7. Requires a port drayage motor carrier, prior to providing services to a customer, to furnish written notice to the customer of any unsatisfied final judgments against the motor carrier, as specified.
8. Requires that a port drayage motor carrier providing services to a customer shall provide, within 30 business days of entry of the judgment, written notice of any unsatisfied final judgments against the motor carrier, as specified, to any customer to which the motor carrier is presently providing services.

EXISTING LAW:

1. Provides that client employers that obtain workers from a labor contractor, with certain exceptions, shall share with the labor contractor all civil legal responsibility and civil liability for the payment of wages and the failure to secure workers' compensation coverage.
2. Defines labor contractor as an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer's usual course of business with certain exceptions.
3. Prohibits a client employer from shifting to the labor contractor any legal duties or liabilities under workplace safety provisions with respect to workers supplied by the labor contractor.
4. Exempts certain client employers from liability, such as motor carriers of property engaged in subcontracting, household goods carriers engaged in subcontracting, and certain cable operators and motor clubs.

FISCAL EFFECT: According to the Assembly Appropriations Committee, one-time special fund costs of up to $2.1 million and annual costs of up to $1.8 million for DLSE to implement enforcing the provisions of this bill. Major cost drivers include the development of a web portal, the ongoing administration of the list of relevant port drayage carriers, and the additional review of wage claims.

COMMENTS: According to a recent report by the National Employment Law Project, approximately 25,000 truck drivers move goods between California's 11 ports and various inland distribution centers. Research on the port drayage services industry in Southern California has focused on the susceptibility of this workforce to labor abuses and poor working conditions. In particular, an investigative report by USA Today in 2017 listed the following as common abusive practices: 1) drivers being forced to work against their will, 2) employers physically barring drivers from going home, 3) employers charging not just for the truck lease but for a host of other expenses including insurance and fuel, and 4) companies forcing workers to work such long hours so as to violate federal safety laws.

Analysis Prepared by: Megan Lane / L. & E. / (916) 319-2091 FN: 0004208

Date of Hearing: August 8, 2018

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

SBPCA Bill Id:SB 1402

Author:(Lara) – As Amended Ver:June 21, 2018

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill requires joint and several liability for customers who contract with port drayage motor carriers who have unsatisfied judgments regarding unpaid wages, damages, expenses, penalties, and workers’ compensation liability. Specifically, this bill:

1. Requires the Division of Labor Standards Enforcement (DLSE) to post on its website a list of port drayage carriers, or their successors, with outstanding judgments for wage violations and other labor law violations.
2. Makes any customer using the service of a carrier on the DLSE list jointly and severally liable for unpaid wages and other damages or penalties, as specified. The customer’s liability will be determined either by DLSE or by a court in a civil action brought by DLSE or a commercial driver.
3. Provides exceptions for when a customer is jointly and severally liable, such as when employees are covered by a collective bargaining agreement or when a customer and a carrier have an existing contract at the time the carrier is listed on the DLSE website and the customer wishes to terminate the agreement within 90 days of the listing.

FISCAL EFFECT:

One-time special fund costs of up to $2.1 million and annual costs of up to $1.8 million for DLSE to implement enforcing the provisions of this bill. Major cost drivers include the development of a web portal, the ongoing administration of the list of relevant port drayage carriers, and the additional review of wage claims as a result of the customer liability provisions. The ongoing costs associated with this bill are likely to decrease in future years.

COMMENTS:

1. Background. Recent investigative reports have highlighted ongoing labor violations within the port drayage industry. A 2017 investigation by USA Today found that port trucking companies in southern California have routinely engaged in tactics such as forcing employees to finance their own trucks and misclassifying truckers as independent contractors instead of employees. Between 2010 and 2017, approximately 1,150 port truck drivers filed claims in civil court or with DLSE. DLSE has awarded more than $45 million to more than 400 drivers, but thus far drivers have rarely seen any of this money because violating companies often go out of business and resurface under new names.
2. Purpose. According to the author, SB 1402 will allow businesses that use port drayage services to use their market power to bring about needed change in the industry. The California Labor Federation, another sponsor, argues that SB 1402 will bring meaningful change to the industry by holding shippers and retailers liable if they contract with companies that have unpaid wage judgments.
3. Comparable policies. As the Assembly Judiciary Committee’s analysis notes, there is precedent for holding business entities liable for labor law violations committed by other companies. For example, Labor Code Section 2810.3 makes a client employer that uses the services of a labor contractor jointly liable for wage and withholding violations committee by the labor contractor.
4. SB 1402’s costs. SB 1402 proposes a new solution to the ongoing challenge of persistent wage and labor law violations in the port drayage industry. The need for DLSE to compile, and post, a list of those companies with outstanding judgments is likely to result in significant upfront costs. However, if SB 1402 works as intended and curbs the use of these known bad-actor companies, the costs associated with maintaining this list are likely to be more modest in future years. Nevertheless, there will be costs associated with monitoring the industry and ensuring that successor companies to listed companies are also included.

Enforcement costs are also likely to quite significant in the initial years of implementation and more modest in future years. SB 1402 may result in additional claims that require significantly more staffing resources because of the provisions around customer liability.

Analysis Prepared by: Luke Reidenbach / APPR. / (916) 319-2081

Date of Hearing: June 26, 2018

ASSEMBLY COMMITTEE ON JUDICIARY

Mark Stone, Chair

SBPCA Bill Id:SB 1402

Author:(Lara) – As Amended Ver:June 21, 2018

SENATE VOTE: 24-12

SUBJECT: Labor contracting: customer liability

KEY ISSUES:

1. should the Division of Labor Standards Enforcement (DLSE) post on its internet website the names of port drayage motor CARRIERS WITH outstanding judgments for certain labor law violations?
2. should a business entity that uses the services of a port drayage carrier that appears on the DLSE list be jointly and severally liable with the carrier FOR UNPAID wages and other damages or penalties for violations that occur after the carrier is placed on the list and while engaged by the business entity?

SYNOPSIS

Unpaid wages and misclassification of employees as independent contractors is a problem throughout the California economy, but it is especially problematic in the port drayage industry – that is, the trucking companies that move goods from California ports to inland distribution centers and large retailers. Although the California Labor Commissioner has issued awards totaling tens of millions of dollars to hundreds of drivers who have been cheated by these companies, the drivers often do not see these awards because the cited carriers are often fly-by-night operations that go out of business only to resurface under other business names. These carriers not only harm the employee drivers, but also undercut responsible carriers that follow the law and provide drivers with decent wages, benefits, and working conditions. This bill would require the Department of Labor Standards Enforcement (DLSE) to maintain and post a list of port drayage carriers who have outstanding judgments for labor law violations. The bill would make any customer that uses a carrier who is on the list jointly and severally liable for any violation that occurs while the carrier is providing services to that customer. The bill provides ample opportunity for a customer to avoid joint and several liability by simply checking the DLSE list. As recently amended, the bill also provides customers with 90-day grace period during which they may terminate a contract with a listed carrier. Joint and several liability would only attach to a business with 25 or more employees. According to the author and sponsor, this bill will allow business entities that use port drayage services to use their market power to bring about needed change in the port drayage industry. While the recent amendments have apparently removed much of the opposition to this bill, the Committee is not, at the time of this writing, entirely certain which groups have removed their opposition. The bill is co-sponsored by the California Labor Federation and the Teamsters Public Affairs Council. It is supported by several other groups, including some trucking companies that abide by the law and must compete with those companies that do not. The bill recently passed the Assembly Committee on Labor and Employment on a vote of 5-2.

SUMMARY: Requires the Division of Labor Standards Enforcement (DLSE) to post on its Internet Web site a list of port drayage carriers with outstanding judgments for wage and other labor law violations and makes any customer using the services of a carrier on the DLSE list jointly and severally liable for unpaid wages and other damages or penalties, as specified. Specifically, this bill:

1. Makes findings and declarations relating to wage violations and misclassification of workers in the drayage industry, including findings that, nationally, about $485 million in compensation and $60 million in federal taxes go unpaid in the industry each year. Finds further that after a decade of media and other reports of widespread labor violations the customers of port drayage services, including some of the world's largest retail and manufacturing companies, are well aware of the problem. Finds and declares that holding customers liable for future labor law violations by port drayage carriers will exert pressure across the supply chain to protect drivers from further exploitation.
2. Requires DLSE to post on its Internet Web site the names, addresses, and essential information for any port drayage motor carrier, as defined, with an unsatisfied court judgment, tax assessment, tax lien, or any order or decision of award finding that the carrier has engaged in illegal conduct, including failure to pay wages, imposing unlawful expenses on employees, failure to remit payroll taxes, failure to provide workers' compensation insurance, or misclassification of employees as independent contractors. Specifies that DLSE shall not post the information until all judicial appeals have expired; shall remove the information within 15 days after the judgment has been satisfied; and shall update the Web site on the first day of each month. Requires DLSE to notify the port drayage motor carrier, as specified, not less than 15 days prior to posting information about the carrier.
3. Makes a customer that, as part of its business, uses a port drayage motor carrier that is on the DLSE list described above jointly and severally liable with the carrier for the full amount of unpaid wages, unreimbursed expenses, damages, and penalties, including, applicable interest, which are found due for all of the following:
   1. Minimum, regular, or premium wages that are unpaid by the carrier, as specified.
   2. Unlawful deductions from wages, as specified.
   3. Out-of-pocket expenses incurred by the driver that are not reimbursed as required by statute.
   4. Civil penalties for failure to secure valid workers' compensation coverage as required by statute.
   5. Damages or penalties as provided for by law that are due to the commercial driver or the state based upon the failure of the carrier to pay wages owed, as set forth in specified statutes.
   6. Applicable interest due for any sum described above.
4. Specifies that pursuant to 3) above, each and every customer that receives port drayage services from a motor carrier in a given workweek shall be jointly and severally liable with the carrier for the full amount of all wages, expenses, damages, and penalties which are found owed by the carrier for that workweek. Specifies that the customer shall be jointly and severally liable for violations from the time the driver is dispatched to the return to the point of origin, as specified.
5. Provides that a customer's liability for the above provisions shall be determined by the Labor Commissioner in an administrative proceeding or by a court in a civil action brought by either the Labor Commissioner or by a commercial driver, where at least 30 days prior to filing the civil action, the Labor Commissioner or the commercial driver notifies the customer of its joint and several liability.
6. Provides that joint and several liability for the above provisions shall not apply as follows:
   1. To employees covered by a bona fide collective bargaining agreement that expressly provides wages, hours, and working conditions, and provides a process for resolving disputes concerning nonpayment of wages, expenses, damages, or penalties.
   2. Where the customer and port drayage motor carrier has an existing contract at the time the carrier is listed on the DLSE Web site and the customer wishes to terminate the agreement, joint and several liability shall not apply until the expiration of the existing contract or a period of 90 days after the listing, whichever is shorter. However, this provision does not apply to contracts entered into, renegotiated, or extend after the date that the carrier is listed.
   3. Where a port drayage motor carrier is not listed in the DLSE Internet Web site.
   4. Where a port drayage motor carrier satisfied conditions for removal from the Internet Web site.
7. Requires a port drayage motor carrier to provide notice, as specified, to the customer of any unsatisfied judgments against the carrier for unpaid wages, damages, unreimbursed expenses, penalties, and applicable interest. However, the carrier's failure to provide this notice shall not be a defense to the joint and several liability of the customer.
8. Prohibits a customer or port drayage motor carrier from taking any adverse action against a driver for providing notification of violations or filing a claim or civil action.
9. Sets forth remedies and authorizes the Labor Commissioner and the Employment Development Department to adopt rules and regulations necessary to administer and enforce the provisions of this bill.

EXISTING LAW:

1. Requires a client employer, as defined, to share with a labor contractor all legal responsibility and civil liability for payment of wages provided by the labor contractor; failure to report and pay all required employer contributions and tax withholdings; and failure to secur valid worker's compenation coverage. Exempts, however, certain client employers from liablity, inluding a client employer that is a motor carrier of property subcontracting with another motor carrier of property to provide transportation services using its own employees and commercial motor vehicles, among others. (Labor Code Section 2810.3.)
2. Establishes the Motor Carrier Employer Amnesty Program which relieves a motor carrier performing drayage services of liability for statutory or civil penalties associated with misclassification of commercial drivers as independent contractors, if the motor carrier enters into a settlement agreement with the Labor Commissioner prior to January 1, 2017, whereby the motor carrier agrees, among other things, to convert all of its commercial drivers to employees. (Labor Code Section 2750.8.)
3. Prohibits employers from willfully misclassifying employees as independent contractors or charging individuals who have been mischaracterized as independent contractors a fee or making deductions from compensation, as specified, where those acts would have violated the law if the individuals had not been misclassified as independent contractors. Authorizes the Labor and Workforce Development Agency to assess specified civil penalties and take specified disciplinary actions against persons or employers violating these prohibitions. (Labor Code Section 226.8.)

FISCAL EFFECT: As currently in print this bill is keyed fiscal.

COMMENTS: This bill addresses a dismal record of abuse and exploitation of workers by some actors in the port drayage industry – that is, the trucking companies that haul goods from California ports to inland distribution centers and large retailers, thereby driving (both literally and figuratively) a vital part of the state's economy. The author's background material cites to several studies that document the scope of the problem, including a USA Today investigation last year showing that, largely because drivers were misclassified as "independent contractors" instead of employees, showing that workers were denied the benefit and protections of wage and hour laws, unemployment insurance, or worker's compensation. The misclassification also meant that drivers were subjected to deductions and out-of-pocket expenses that brought their wages below minimum wage. Indeed, the USA Today investigation concluded that "port trucking companies in Southern California have spent the past decade forcing drivers to finance their own trucks by taking on debt they could not afford," finding that in some cases drivers "end up owing money to their employers – essentially working for free." (Brett Murphey, "Rigged: Forced into Debt, Worked Past Exhaustion, Left with Nothing," USA Today, June 16, 2017.)

Existing law already prohibits willful misclassification and many of the other tactics used by the less responsible trucking companies. While the courts, Labor Commissioner, and state enforcement agencies have often sided with drivers where actions have arisen, the drivers have not reaped much benefit from this. As the author's background material demonstrates, the Labor Commission's Division of Labor Standards Enforcement (DLSE) has awarded, in theory, more than $45 million to more than 400 drivers. However, drivers rarely see any of this money, because the violating trucking companies often go out of business only to resurface under new names. Given the failure of existing remedies to eradicate the problem or bring justice (even to drivers who prevail in an action), the purpose of this bill is to use the market power of customers of the port drayage operators to pressure bad actors to comply with the law and pay judgments that have been issued against them.

SB 1402 consists of two principle and related components. First, the bill requires DLSE to post on its Internet Web the names, addresses, and other relevant information of port drayage motor carriers who have outstanding judgments against them for labor law violations, including wage theft and misclassification of employees as independent contractors. In other words, to be placed on this list, the carrier must have violated the law and failed to make good on any judgment rendered against it. The bill requires DLSE to notify the carrier that it will be placed on the list (thereby providing an opportunity to challenge a wrongful placement) and the bill would prevent DLSE from placing a carrier on the list until any appeals have been exhausted. Second, SB 1402 makes any "customer" (i.e. a business entity that contracts for port drayage services) jointly and severally liable with the carrier for the full amount of unpaid wages, unreimbursed expenses, damages, or penalties that result from the carrier's labor law violations. As the author and co-sponsors point out, the customer will have ample opportunity to avoid sharing liability with port drayage customers. That is, the customer will be liable only if the carrier is on the DLSE list at the time a contract is entered into, and the customer is only liable for violations committed after placement on the list and while the carrier was engaged in services on behalf of the customer. If the customer is already in contract with the carrier at the time of placement on the list, the customer shall not be jointly liable for 90 days, or until the contract expires, whichever is shorter. Few if any customers enter into drayage contracts that exceed 90 days because rates can change almost daily depending upon market conditions. In short, a customer can easily avoid liability by choosing port drayage carriers that are not on the list or by not renewing an agreement with a carrier who is. According to one of the drayage companies that support this bill, port drayage is a very competitive industry, so customers have many companies to choose from.

The bill makes a number of exceptions to the general rule of customer liability. For example, joint and several liability does not attach to any customer with fewer than 25 employees; a customer who is a government entity; or a customer whose employees are subject to a collective bargaining agreement (CBA) that provides a process for resolving disputes over wages and working conditions. (In addition to the fact that employees subject to a CBA have a dispute resolution process, this exception also reflects the fact that violators almost always willfully misclassify employees as independent contractors; by definition, employees subject to a CBA will always be classified as "employees," because independent contractors cannot engage in collective bargaining.)

Extending Joint and Several Liability Not Unprecedented. Although some opponents suggest that it is inappropriate or unusual to make business entities liable for labor law violations committed by other companies with whom they happen to contract, the Legislature has already created shared legal liability in other, similar contexts. For example, Labor Code Section 2810.3 makes a "client employer" that uses the services of a labor contractor jointly liable for wage and withholding violations committed by the labor contractor, just as Labor Code Section 218.7 makes general contractors liable for wage theft committed by labor contractors. In addition, Labor Code Section 2810 prohibits a person or entity from entering into a contract or agreement for labor or services with a construction, farm labor, garment, janitorial, security guard, or warehouse contractor, where the person or entity knows or should know that the contract or agreement does not include funds sufficient to allow the contractor to comply with all applicable local, state, and federal laws or regulations. An employee harmed by the contractor's failure to comply with all laws or regulations may bring an action against the business or entity that entered into the agreement. The premise behind these existing provisions – like the premise behind this bill – is that companies that benefit from lower prices offered by business partners that violate labor laws should share some of the legal responsibility for those violations or stop working with those partners.

Bill Does Not Appear to Affect Independent Owner Operators. Some opponents of this bill maintain that this bill will adversely affect owner-operators who genuinely operate as independent contractors. For example, the Western States Trucking Association (WSTA) opposes this bill because it believes that "SB 1402 will have a chilling effect on the use of small trucking companies." The independent contractor model, WSTA maintains, offers many advantage to drivers of owner-operator vehicles, such "being your own boss," earning more money, and maintaining a flexible schedule. "In one fell swoop," WSTA contends, "SB 1402 would decimate this industry by imposing potential liability on customers utilizing owner- operators, which would certainly have the effect of discouraging the use of owner-operators." However, there is nothing in this bill that targets owner-operators who operate as independent contractors. The bill does not make customers liable if they use independent contractors; rather, it makes customers jointly liable if they use truck companies that are on the DLSE list because they have committed labor law violations and have failed to satisfy judgments against them and have committed subsequent violations while performing drayage services for the customer. A true owner-operator will not likely be on the DLSE list because it does not have any employee drivers to underpay, misclassify, or otherwise exploit. If the owner-operator hires drivers, it will only be placed on the DLSE list if it violates labor laws and refuses to satisfy any judgments against it. WSTA appears to wrongly assume that customers will be jointly and severally liable if they contract with independent contractors, but if this is their assumption, it is a false assumption.

ARGUMENTS IN SUPPORT: According to the Teamsters, a co-sponsor of this bill, "SB 1402 will attempt to address the well-documented swamp of illegality that exists in the port motor carrier industry, where drivers are regularly subjected to misclassification, fraud, and wage theft, and where larger shippers who hire the trucking companies just look the other way." The Teamsters also note that currently "there is over $40 million in unsatisfied judgments against port trucking companies for illegal treatment of their drivers," which means that even workers who have prevailed in administrative or judicial proceeding have still not been properly compensated. The Teamsters believe that SB 1402 will address this problem "by having the State Labor Commissioner create a list of trucking companies that have unsatisfied judgments for labor law violations and employer fraud. If a shipper hires one of the trucking companies on the list and that trucking company subsequently commits [more] violations . . . then the shipper may be held jointly liable for the violation." The Teamsters add that drayage customers "can completely avoid joint liability by simply not hiring trucking companies with outstanding judgments and trucking companies can remove themselves from the list by satisfying the judgments made against them."

The California Labor Federation (CLF), also a co-sponsor of this bill, contends that "industry-wide labor law violations at the ports have been well-documented for decades" and that thousands of drivers have been misclassified as "independent contractors," even though those drivers "have little control over any aspect of their work." When these drivers are classified as independent contractors instead of employees, they are "denied all rights and benefits of employment." CLF believes it is "long overdue to bring some justice to port truck drivers" and that "SB 1402 will bring meaningful change by holding shippers and retailers liable if they contract with trucking companies that have unpaid wage judgments." CLF adds that this bill creates "a very limited form of joint liability that applies only where a company chooses a contractor" on the DLSE list. Finally, CLF notes several other examples in existing law that hold companies liable for violations by employers within a supply chain, noting in particular that existing law makes companies jointly liable for wage theft committed by a temporary agency or labor contractor that provides them with workers, or where the companies enter into financially insufficient contracts in certain industries, including the garment, agricultural, construction, security, janitorial, and warehouse industries. "Until the powerful companies at the top are held accountable," CLF concludes, "workers will be trapped in this exploitative system."

This bill is also supported by companies that compete with the bad actors in the trucking industry. For example, Toll Global, which employs 80 drivers and provides transportation and logistics services at the Ports of Los Angeles and Long Beach, writes that the "drayage market is extremely competitive, as there are an estimated 800 trucking companies operating at the LA/Long Beach ports, making it a challenging environment under normal circumstances." Toll Global claims that these competitive challenges are made "even more difficult when Toll must compete with a vast array of trucking companies that do not abide by the same rules." Specifically, Toll Global contends that many of the companies that it competes against "operate under an independent contractor business model that runs afoul of California labor laws, resulting in unacceptable working conditions for many port drivers who cannot earn a living wage." Toll Global believes that SB 1402 will "create additional incentives for trucking companies to come into full compliance with California's labor laws and improve competition in the drayage market."

ARGUMENTS IN OPPOSITION: It is not clear at the time of this writing how recent amendments in this bill will address opposition concerns. Based upon prior letters of opposition and testimony in the prior Committee, it appears that much of the opposition centered upon the failure to provide customers with adequate notice and providing customers with a grace period to get out of existing contracts (e.g. where the carrier is placed on the list after the customer contracts for its services.) The most recent amendments appear to address many of these concerns by requiring DLSE to more regularly update the list and delaying the imposition of liability for up to 90 days after the carrier is placed on the DLSE list or after expiration of an existing contract, whichever is shorter.

Recent amendments have apparently not removed all opposition however. For example, the Western States Trucking Association (WSTA) opposes this bill because it believes that "SB 1402 will have a chilling effect on the use of small trucking companies," and more generally WSTA believes that the bill is "anti-small business and anti-free enterprise." WSTA apparently sees the bill as an effort to limit the use of independent owner-operators who are genuinely independent contractors. The independent contractor model, WSTA maintains, offers many advantages to drivers, such "being your own boss," earning more money, and maintaining a flexible schedule.

REGISTERED SUPPORT / OPPOSITION:

Support

California Labor Federation (co-sponsor)

California Teamsters Public Affairs Council (co-sponsor)

CARECEN – Central American Resource Center

City of Long Beach

Clergy and Laity for Economic Justice

East Area Progressive Democrats

EcoFlow Transportation

Historic Highland Park Neighborhood Council

Los Angeles Alliance for a New Economy

Natural Resources Defense Council

Our People Our Port Coalition

Shippers Transport Express

South Bay Los Angeles 350

Southern California Coalition for Occupational Safety and Health

Toll Global Forwarding

Warehouse Worker Resource Center

Opposition (to May 25, 2018 version of the bill)

Almond Alliance of California

Association of CA Egg Farmers

Building Owners and Managers Association of California

CA Association of Wheat Growers

CA Bean Shippers Association

CA Business Properties Association

CA Chamber of Commerce

CA Farm Bureau Federation

CA Grain and Feed Association

CA Manufacturers & Technology Association

CA Pear Growers Association

CA Retailers Association CA Seed Association

CA State Floral Association

CA Warehouse Association

Family Business Association of California

International Council of Shopping Centers

L.A. Area Chamber of Commerce

NAIOP of California, the Commercial Real Estate Development Association

National Federation of Independent Businesses

Pacific Egg & Poultry Association

Retail Industry Leaders Association

Western States Trucking Association

Analysis Prepared by: Thomas Clark / JUD. / (916) 319-2334

Date of Hearing: June 20, 2018

ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT

Tony Thurmond, Chair

SBPCA Bill Id:SB 1402

Author:(Lara) – As Amended Ver:May 25, 2018

SENATE VOTE: 24-12

SUBJECT: Labor contracting: customer liability

SUMMARY: Requires joint and several liability for customers who contract with port drayage motor carriers who have unsatisfied judgments regarding unpaid wages, damages, expenses, penalties, and workers’ compensation liability. Specifically, this bill:

1. Makes findings and declarations regarding the contribution of the port drayage industry to the economy, the subpar pay conditions of port drayage drivers, and the frequent misclassification of these drivers as independent contractors.
2. Defines “commercial driver” as a person who holds a valid commercial driver’s license who is hired or contracted to provide port drayage services either as an independent contractor or an employee driver.
3. Defines “customer” as a business entity, regardless of its form, that engages or uses a port drayage motor carrier to perform port drayage services on the customer’s behalf, whether the customer directly engages or uses a port drayage motor carrier or indirectly engages or uses a port drayage motor carrier through the use of an agent, as specified.
4. Excludes from the definition of “customer” the following entities:
5. A business entity with a workforce of fewer than 25 workers, including those hired directly by the customer or through a temporary employer or labor contractor.
6. The state or any political subdivision of the state, including any city, county, city and county or special district.
7. A business entity, including, but not limited to, a marine terminal operator, who is not a customer, and who, incidental to the transportation of the freight for the customer, receives, makes available, or exchanges intermodal equipment or conducts any other transaction of equipment subject to an equipment interchange agreement.
8. Defines a “port drayage motor carrier” as an individual or entity that hires or engages commercial drivers in the port drayage industry including a registered owner, lessee, licensee, or bailee of a commercial motor vehicle who operates the vehicle using a for-hire or not-for-hire driver, and an entity or individual who is a successor in interest for a prior port drayage motor carrier.
9. Defines “port drayage services” as the movement within California of cargo or intermodal equipment by a commercial motor vehicle whose point-to-point movement has either its origin or destination at a port, excluding employees performing the intra-port or inter-port movement of cargo or cargo handling equipment under the control of their employers.
10. Requires the Division of Labor Standards Enforcement (DLSE) to post on its Internet Web site the names, addresses, and essential information for any port drayage motor carrier with any unsatisfied final court judgment, including one obtained by a public or private person or entity, assessment of the Employment Development Department (EDD), or any order, decision, or award finding that a port drayage motor carrier has engaged in illegal conduct including failure to pay wages, imposing unlawful expenses on employees, failure to remit payroll taxes, failure to provide workers’ compensation insurance, or misclassification of employees as independent contractors.
11. Provides that the DLSE shall not place the information on the Internet Web site until the period for all judicial appeals has expired and that the posting shall be removed within 15 days after the DLSE determines there has been full payment of the unsatisfied judgment or that the port drayage motor carrier has entered into an approved settlement.
12. Requires that no less than 15 days prior to posting on its Internet Web site identifying information for any port drayage motor carrier with unsatisfied judgments, the DLSE shall provide notification by certified mail to the port drayage motor carrier which, at a minimum, shall include the following:
13. The name, email address, and telephone number of a contact person at the DLSE.
14. The alleged conduct and a copy of the unsatisfied court judgment, assessment, order, decision, or award.
15. A copy of the regulations or rules of practice or procedure adopted for removal of the posting.
16. Provides that a customer utilizing port drayage services that is on the list shall be jointly

and severally liable with the motor carrier for the full amount of unpaid wages,

unreimbursed expenses, damages and penalties, including applicable interest, as

specified.

1. Provides that a customer’s liability shall be determined by either the authority of the

Labor Commissioner (LC), as specified, or by a court in a civil action brought by the

LC, or by a commercial driver or his or her representative, as specified.

1. Exempts from joint and several liability the following circumstances:
2. Where employees are covered by a bona fide collective bargaining agreement that expressly provides for wages, hours of work, working conditions, a process to resolve disputes concerning nonpayment of wages, expenses, damages, and the above-penalties, including applicable interest, and a waiver of the joint and several liability.
3. Where a port drayage motor carrier is not listed on the DLSE’s Internet Web site for unsatisfied judgments.
4. Where a port drayage motor carrier satisfied the conditions for removal from the

Internet Web site prior to the time period for which the joint and several liability is

alleged.

1. Requires a port drayage motor carrier, prior to providing services to a customer, to furnish written notice to the customer of any unsatisfied final judgments against the motor carrier for unpaid wages, damages, expenses, and penalties, including applicable interest and the full text of this provision.
2. Provides that the failure of the motor carrier to provide this notice shall not be a defense to joint and several liability.
3. Requires that a port drayage motor carrier providing services to a customer shall provide, within 30 days of entry of the judgment, written notice of any unsatisfied final judgments against the motor carrier for unpaid wages, damages, expenses, and penalties, including applicable interest, to any customer to which the motor carrier is presently providing services.
4. Provides that the failure of the motor carrier to provide notice to an existing customer of such judgments shall not be a defense to joint and several liability.
5. Prohibits a customer or port drayage motor carrier from taking adverse action against any commercial driver for providing notification of violations or filing a claim or civil action pertaining to unpaid wages, expenses, and damages, as specified.
6. Provides that the above-remedies are in addition to, and shall be supplemental of, any other theories of liability or requirement established by statute or common law.
7. Permits two or more parties who are held jointly and severally liable, after a final judgment is rendered by the court, to establish or enforce by contract or otherwise, any lawful remedies, including, but not limited to, a right of contribution and indemnity against each other for liability.
8. Requires, pursuant to the LC’s citation authority, that a customer or a port drayage motor carrier provide promptly to the LC and make available for inspection, any information within its possession, custody, or control required to verify compliance with applicable state laws.
9. Provides that the LC may adopt regulations and rules of practice and procedure necessary to administer and enforce the above-provisions that are under his or her jurisdiction.
10. Provides that the EDD may adopt regulations and rules of practice and procedure necessary to administer and enforce the provisions that are under its jurisdiction.
11. Declares that a waiver of these provisions is contrary to public policy, and is void and unenforceable.
12. Provides that the bill’s provisions are severable.

EXISTING LAW:

1. Provides that client employers that obtain workers from a labor contractor shall share with the labor contractor all civil legal responsibility and civil liability for the payment of wages and the failure to secure workers’ compensation coverage.
2. Excludes from the definition of client employer the following entities:
3. A business entity with a workforce of fewer than 25 workers, including those hired directly by the client employer and those obtained from, or provided by, any labor contractor.
4. A business entity with five or fewer workers supplied by a labor contractor or labor contractors to the client employer at any given time.
5. The state or any political subdivision of the state, including any city, county, city and county, or special district.
6. Defines labor contractor as an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business with exemptions for specified entities such as a bona fide nonprofit organization, a labor organization or apprenticeship program, and a motion picture payroll services company as defined by the Unemployment Insurance Code.
7. Prohibits a client employer from shifting to the labor contractor any legal duties or liabilities under workplace safety provisions with respect to workers supplied by the labor contractor.
8. Prohibits a client employer or labor contractor from taking adverse action against any worker for providing notification of violations or filing a claim or civil action.
9. Provides that the LC may adopt regulations and rules of practice and procedure necessary to administer and enforce the provisions under his or her jurisdiction.
10. Declares that any waiver of the above provisions is contrary to public policy, and is void and unenforceable.
11. Exempts certain client employers from liability, such as motor carriers of property engaged in subcontracting, household goods carriers engaged in subcontracting, and certain cable operators and motor clubs.

FISCAL EFFECT: According to the Senate Appropriations Committee, DIR indicates that it would incur first-year costs of $1.3 million, and ongoing annual costs of $1 million to implement the provisions of the bill (special fund). The Employment Development Department‘s (EDD) costs resulting from the bill would be minor.

COMMENTS: Note: This bill is double referred to Assembly Judiciary Committee, upon passage from this Committee.

According to a recent report by the National Employment Law Project, approximately 25,000 truck drivers move goods between California’s 11 ports and various inland distribution centers. Research on the port drayage services industry in Southern California has focused on the susceptibility of this workforce to labor abuses and poor working conditions. In particular, an investigative report by USA Today in 2017 listed the following as common abusive practices: 1) drivers being forced to work against their will, 2) employers physically barring drivers from going home, 3) employers charging not just for the truck lease but for a host of other expenses including insurance and fuel, and 4) companies forcing workers to work such long hours so as to violate federal safety laws.

The USA Today report also highlights the misclassification of drivers as independent contractors as another tactic to keep workers indebted to their employers and without financial recourse when subject to wage theft. Port drivers who are misclassified as independent contractors lose essential rights enjoyed by “employees,” such as the ability to file wage and benefit claims and to be covered by workers’ compensation insurance. Port truck drivers have responded to misclassification by filing claims in civil court or with the LC, and have prevailed in 97% of cases that go to hearing.^[1] In addition, misclassification cases filed in the future will be decided under a more worker-friendly test due to the California Supreme Court’s recent decision in Dynamex Operations West, Inc. v. Superior Court (April 30, 2018).^[2]

According to the author, this bill brings relief to the “many port truck drivers (who) are held in debt servitude and work dangerously long hours for little pay. Trucking companies that misclassify workers also fail to withhold taxes and provide worker’s compensation insurance. The California Labor Commissioner’s Office, Division of Labor Standards Enforcement, has awarded in excess of $45 million in unlawful deductions from wages and out of pocket expenses to more than 400 drivers. No higher court has overturned any of these awards on appeal.”

The California Labor Federation, a sponsor of the bill, argues “it is long overdue to bring some justice to port truck drivers and bring some compliance to this industry. SB 1402 will bring meaningful change by holding shippers and retailers liable if they contract with trucking companies that have unpaid wage judgments.”

A coalition of employer representatives, including the California Chamber of Commerce and the California Trucking Association, argues in opposition, “Not only will this bill affect jobs, it will also affect any company who is a customer of a motor carrier and utilizes the motor carrier to transport goods from a port. This bill would require customers to be jointly and severally liable with the motor carrier for unpaid wages, unreimbursed expenses, damages and penalties, including applicable interest. There is no basis that a business who contracts for motor carrier services should be deemed statutorily liable for wages and other expenses when there is absolutely no way in which that contractor can engage or force the motor carrier to comply with provisions of the Labor Code.”

The California Trucking Association, in a separate opposition, argues that port customers need time to cancel contracts if they discover a motor carrier has outstanding judgments. They state, “Allowing cargo-owners a 90 day window to exit a contract, find a new vendor, dissolve existing contracts and begin new service will allow for continued smooth operation for moving goods in and out of the port while also ensuring bad-actors are not rewarded for skirting the law.”

The author, in response to concerns raised by the opposition and for clarification purposes, is planning to further amend the bill. In general, the amendments will address the frequency by which the DLSE will update its Web site with listings of unsatisfied judgments and allow for a specified grace period for customers to terminate an existing contract with a port drayage carrier that is listed on the Web site.

Prior Legislation

AB 1897 (Hernandez) Chapter 728, Statutes of 2014 requires client employers who

obtain workers from third party labor contractors to share liability for certain labor violations

such as failure to pay wages and workers’ compensation.

SB 459 (Corbett) Chapter 706, Statutes of 2011 prohibits willful misclassification of individuals as independent contractors, prohibits charging individuals who have been mischaracterized as independent contractors a fee or making deductions from compensation, where those acts would have violated the law if the individuals had not been mischaracterized, and authorizes the Labor and Workforce Development Agency to assess civil damages and take disciplinary action against persons or employers violating these prohibitions.

REGISTERED SUPPORT / OPPOSITION:

Support

Americas for Toll Global Logistics

California Labor Federation, AFL-CIO (cosponsor)

California Teamsters Public Affairs Council (cosponsor)

Eco Flow Transportation

Los Angeles Alliance for a New Economy

Mayor Eric Garcetti, City of Los Angeles

Mayor Robert Garcia, City of Long Beach

Natural Resources Defense Council

Our People Our Port Coalition

Shippers Transport Express

Opposition

Almond Alliance of California

Association of CA Egg Farmers

Auto Care Association

Building Owners and Managers Association of California

CA Association of Wheat Growers

CA Bean Shippers Association

CA Business Properties Association

CA Chamber of Commerce

CA Farm Bureau Federation

CA Grain and Feed Association

CA Manufacturers & Technology Association

CA Pear Growers Association

CA Retailers Association

CA Seed Association

CA State Floral Association

CA Warehouse Association

California Trucking Association

CAWA-Representing the Automotive Parts Industry

Family Business Association of California

Gemini Shippers Group

Harbor Trucking Association

International Council of Shopping Centers

L.A. Area Chamber of Commerce

NAIOP of California, the Commercial Real Estate Development Association

National Federation of Independent Businesses

Pacific Egg & Poultry Association

Retail Industry Leaders Association

Analysis Prepared by: Megan Lane / L. & E. /

1. “Rigged: Forced into Debt: Worked Past Exhaustion: Left with Nothing,” USA Today Investigative Report, June 16, 2017. ↑

2. Cal.No. S222732. The Dynamex decision adopted the New Jersey Supreme Court’s “ABC test” for determining a worker’s classification as an employee versus an independent contractor. This test, which applies to California’s wage orders, provides that an individual is an employee unless the employer proves the following elements: A) That the worker is free from the control and direction of the hirer in connection with the performance of the work, both under contract and in fact; B) That the worker performs work that is outside the usual course of the hiring entity’s business; and C) That the worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity. ↑

 THIRD READING  

Bill No: SB 1402

Author:

:

Vote:

SENATE JUDICIARY COMMITTEE: 5-2, 4/24/18

AYES: Jackson, Hertzberg, Monning, Stern, Wieckowski

NOES: Moorlach, Anderson

SENATE LABOR & IND. REL. COMMITTEE: 4-1, 4/25/18

AYES: Pan, Jackson, Mitchell, Wieckowski

NOES: Stone

SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/25/18

AYES: Lara, Beall, Bradford, Hill, Wiener

NOES: Bates, Nielsen

SUBJECT:

SOURCE: California Teamsters Public Affairs Council and

California Labor Federation, AFL-CIO

DIGEST:

This bill requires joint and several liability for customers who contract with port drayage services who have unpaid wage, tax and workers’ compensation liability.

ANALYSIS:

Existing law:

1. Extends liability to client employers who, in the usual course of business, utilize third-party labor contractors for unpaid wages and a lack of workers’ compensation coverage if the following are true:
   1. The employer has 25 or more employees, including the contracted employees;
   2. The employer has 5 or more employees from a third-party labor contractor; and
   3. The third-party labor contractor isn’t a non-profit or motion picture payroll company.
2. Defines “labor contractor” as means an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business.
3. Defines “usual course of business” as the regular and customary work of a business, performed within or upon the premises or worksite of the client employer.
4. Prohibits a client employer from shifting to the labor contractor any legal duties or liabilities under Cal-OSHA with respect to workers supplied by the labor contractor.
5. Provides that a waiver of the above-provisions is contrary to public policy, and is void and unenforceable.
6. Exempts from the liability provisions discussed above motor carriers of property, household goods carriers, cable operators, and motor clubs. (Labor Code §2810.3)

This bill:

1. Makes findings and declarations on the importance of California’s port drayage drivers, recent media coverage on the debt challenges port drayage workers face, and the history of illegal misclassification of port drayage drivers by some employers.
2. Defines a “customer” as an a business entity, regardless of its form, that has 25 or more employees, including temporary employees, and engages or uses a port drayage motor carrier to perform port drayage services on the customer’s behalf. This definition includes port drayage services that are contracted directly by a customer or indirectly by the customer through an agent. This includes, but is not limited to, a freight forwarder, motor transportation broker, ocean carrier, or other motor carrier.
3. Excludes from the definition of “customer” the state, any subdivision of the state, any employer with less than 25 employees, and any business entity, including but not limited to a marine terminal operator, who makes available or exchanges intermodal equipment, as specified.
4. Defines “port drayage motor carrier” as an individual or entity that hires or engages commercial drivers in the port drayage industry or a registered owner, lessee, licensee, or bailee of a commercial motor vehicle that operates or directs the operation of a commercial motor vehicle by a commercial driver on a for-hire or not-for-hire basis to perform port drayage services in the port drayage industry.
5. Includes in the definition of “port drayage motor carrier” an entity or individual who succeeds in the interest or operation of a predecessor operator.
6. Defines the “Port drayage industry,” “port trucking industry,” or “port drayage services” as the movement within California of cargo or intermodal equipment by a commercial motor vehicle whose point-to-point movement either has its origin or destination at a port, as defined. This bill excludes employees performing the intra-port or inter-port movement of cargo or cargo handling equipment under the control of their employers from the above definition.
7. Requires that the Division of Labor Standards Enforcement (DLSE) post on its Internet Web site the names, addresses, and essential information for any port drayage motor carrier with any unsatisfied final court judgment, including court judgements obtained through either a public or private entity, assessment of the Employment Development Department, or any order, decision, or award finding that a port drayage motor carrier has engaged in illegal conduct including failure to pay wages, imposing unlawful expenses on employees, failure to remit payroll taxes, failure to provide workers’ compensation insurance, or misclassification of employees as independent contractors with regard to a port drayage commercial driver.
8. Requires that the DLSE shall not place the information on the Internet Web site until the period for all judicial court appeals has expired. This posting must be removed within 15 days after the DLSE determines there has been full payment of the unsatisfied judgment or the port drayage motor carrier has entered into an approved settlement.
9. Requires the DLSE to notify port drayage motor carriers of being listed on the Web site described above within 15 days of being posted. The notice shall be delivered by certified mail and include, at a minimum, the contact information for a contact person as DLSE, the alleged conduct and a copy of the unsatisfied judgment, and a copy of the rules or regulations for removal of the posting.
10. Extends to a customer both shared civil legal and civil liability for all port drayage services obtained after the date the motor carrier appeared on the list, meaning joint and several liability for the full amount of unpaid wages, unreimbursed expenses, damages and penalties, including applicable interest, for all of the following:
    1. Minimum, regular, or premium wages that are unpaid by the motor carrier, including rest and recovery periods.
    2. Unlawful deductions by the motor carrier from wages.
    3. Out-of-pocket business expenses incurred by the commercial driver that are not reimbursed by the motor carrier as required by law.
    4. Civil penalties for the failure to secure valid workers’ compensation coverage.
    5. Damages or penalties as provided for by law that are due to the commercial driver or the state based upon the failure of the motor carrier to pay wages owed, including failure to timely pay wages, provide an accurate pay stub, willfully misclassify an employee as an independent contractor, violate an Industrial Welfare Commission Wage Order, and liquidated damages and penalties due to paying less than the minimum wage.
    6. Applicable interest due for any sum described above.
11. Requires that each and every customer that receives port drayage services from a motor carrier in a given workweek shall be jointly and severally liable with the motor carrier for the full amount of all wages, expenses, damages, and penalties which are found owed by the motor carrier for that workweek.
12. Requires that a port drayage motor carrier that provides port drayage services to a customer in the port drayage industry must, prior to providing these services to the customer, furnish written notice to the customer of any unsatisfied final judgments against the motor carrier for unpaid wages, damages, unreimbursed expenses and penalties, including applicable interest. The notice shall also provide the text of this section.  The failure of the motor carrier to provide notice under this subdivision shall not be a defense to the joint and several liability provided by this section.
13. Requires that a port drayage motor carrier must provide, within 30 days of entry of the judgment, written notice of any unsatisfied final judgments against the motor carrier for unpaid wages, damages, unreimbursed expenses and penalties, including applicable interest, to any customer to which the motor carrier is presently providing port drayage services in the port drayage industry. The failure of the motor carrier to provide notice under this subdivision shall not be a defense to the joint and several liability provided by this section.
14. Requires that a customer’s liability must be determined by either by the Labor Commissioner or by a court in a civil action brought by the Labor Commissioner, or by a commercial driver or his or her representative, where at least 30 days prior to filing the civil action, the Labor Commissioner, or commercial driver or representative, notifies the customer of its potential joint and several liability for any of the wages, expenses, damages, or penalties.
15. Provides that the joint and several liability described above shall not apply:
    1. To employees covered by a bona fide collective bargaining agreement, if the agreement expressly provides for wages, hours of work, working conditions, a process to resolve disputes concerning nonpayment of wages, expenses, damages, and penalties, including applicable interest, and a waiver of the joint and several liability;
    2. To port drayage motor carriers not posted on the DLSE’s Web site; and
    3. To port drayage motor carriers who have satisfied the conditions for removal prior to the time period for which the joint and several liability is alleged.
16. Requires a customer or a port drayage motor carrier to provide to the Labor Commissioner any information within its possession, custody, or control required to verify compliance with applicable state laws. Upon request, the records that contain this information shall be made available promptly for inspection, and the Labor Commissioner must be permitted to copy them.
17. Prohibits a civil action for a violation or enforcement of this section shall be brought pursuant to the Private Attorneys General Act (PAGA).
18. Prohibits a customer or port drayage motor carrier from taking any adverse action against any commercial driver for providing notification of violations or filing a claim or civil action pertaining to unpaid wages, unreimbursed expenses, or the recovery of damages and penalties, including applicable interest.
19. Provides that the remedies provided by this section are in addition to, and shall be supplemental of, any other theories of liability or requirement established by statute or common law.
20. Provides that two or more parties who are held jointly and severally liable under this section after a final judgment is rendered by the court are not prohibited from establishing, exercising, or enforcing by contract a right of contribution and indemnity against each other for liability created by acts of a port drayage motor carrier.
21. Provides that the Labor Commissioner and Employment Development Department may adopt regulations and rules of practice and procedure necessary to administer and enforce the provisions of SB 1402.
22. Provides that a waiver of the above provisions is contrary to public policy, and is void and unenforceable.
23. Provides that the provisions of this bill are severable, and that if any of the provisions are found to be invalid, that invalidity shall not affect other provisions that can be given effect without the invalid provision or application.

Comments

Background on Ports and Port Drayage: California is home to the two busiest ports in the United States: the Port of Los Angeles and the Port of Long Beach. Combined, these ports would be the 10th busiest port in the world, making it the busiest port in the world outside of China, Singapore, South Korea and Dubai. Both ports serve as an important economic driver for all of California, but they also pose unique policy challenges: both ports combined are the largest source of air pollution in the Los Angeles metropolitan area.

To address this issue, the California Air Resources Board requires that port drayage trucks must have an engine from 2007 or later. Port drayage is the short-haul transportation of cargo (generally containers) within the same urban area. It came be from one port to another or from the port to a nearby warehouse or factory. The Port of Long Beach alone reports 17,000 active drayage trucks serving the Port.

These newer, cleaner burning engines have significantly reduced pollution at the Ports. Unfortunately, it also encourages misclassification of drivers as independent contractors, rather than employees, as this allowed port drayage companies to shift the costs of new engines and truck to the workers. According to USA Today, at least 1,150 labor complaints have been filed by port drayage workers with the DLSE since 2010. The DLSE’s administrative law judges have sided with the complainants 97% of the time – and USA Today reports that these complaints involved 140 trucking companies. Complaints from workers focused on being misclassified as an independent contractor and not being paid at least the minimum wage, but also included workers being charged for using office materials, including toilet paper.

The same USA Today series also noted that large retailers which utilize port drayage companies continued to use the same port drayage contractors, despite the fact that the contractors were facing labor law charges. This stood in marked contrast with many of these same companies pledging to monitor their international supply chains for labor law violations from contractors and vendors. The USA Today articles did not discuss why these companies did not provide the same level of scrutiny to their port drayage contractors.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Senate Appropriations Committee, the Department of Industrial Relations indicates that it would incur first-year costs of $1.3 million, and ongoing annual costs of $1 million to implement the provisions of the bill (special fund). The Employment Development Department‘s (EDD) costs resulting from the bill would be minor.

SUPPORT: (Verified 5/25/18)

California Teamsters Public Affairs Council (co-source)

California Labor Federation, AFL-CIO (co-source)

Americas for Toll Global Forwarding

Central American Resource Center

City of Long Beach

Clergy & Laity United foe Economic Justice

East Area Progressive Democrats

EcoFlow Transportation

Highland Park Neighborhood Council

Long Beach Mayor Robert Garcia

Los Angeles Alliance for a New Economy

Los Angeles Mayor Eric Garcetti

Natural Resources Defense Council

Oakland Mayor Libby Schaaf

Shippers Transport Express

South Bay 350 Los Angeles

Southern California Coalition for Occupational Safety & Health

Warehouse Worker Resource Center

OPPOSITION: (Verified 5/25/18)

Almond Alliance of California

Association of CA Egg Farmers

Building Owners and Managers Association of California

California Association of Wheat Growers

California Bean Shippers Association

California Business Properties Association

California Chamber of Commerce

California Farm Bureau Federation

California Grain and Feed Association

California Manufacturers & Technology Association

California Pear Growers Association

California Retailers Association

California Seed Association

California State Floral Association

California Trucking Association

California Warehouse Association

Family Business Association of California

International Council of Shopping Centers

L.A. Area Chamber of Commerce

NAIOP of California, the Commercial Real Estate Development Association

National Federation of Independent Businesses

Pacific Egg & Poultry Association

Retail Industry Leaders Association

Western States Trucking Association

ARGUMENTS IN SUPPORT: The California Teamsters Public Affairs Council, a sponsor of SB 1402, writes the following:

“SB 1402 will attempt to address the well documented swamp of illegality that exists in the port motor carrier industry, where drivers are regularly subjected to misclassification, fraud, and wage theft, and where large shippers who hire the trucking companies just look the other way. Currently, there is over $40 million in unsatisfied judgments against port trucking companies for illegal treatment of their drivers. There is perhaps no workforce in California where abuse of workers is more commonplace or more out of control….

SB 1402 will address the issue by having the State Labor Commissioner create a list of trucking companies that have unsatisfied judgments for labor law violations and employer tax fraud. If a shipper hires one of the trucking companies on the list and that trucking company subsequently commits violations with respect to drivers hauling freight for that shipper, then the shipper may be held jointly liable for the violation.

Under this bill, shippers can completely avoid joint liability by simply not hiring trucking companies with outstanding judgments and trucking companies can remove themselves from the list by satisfying judgments against them…. We believe SB 1402 will help drain the labor law swamp in California’s port drayage industry by creating a simple, inexpensive and easily followed system that encourages accountability by all market participants.”

ARGUMENTS IN OPPOSITION: The California Trucking Association opposes SB 1402, arguing:

“For decades, the trucking industry has operated under a variety of lawful labor models including collectively bargained employees, non-collectively bargained employees, and independent owner-operators….

For more than four years, port drayage motor carriers have been subjected to a coordinated campaign by this bill’s sponsor that enlists the State in an attempt to transform the relationship between thousands of independent owner-operators from a business-to-business transaction into an employer-employee relationship….

Finally, we urge you to consider the jobs impact of SB 1402. Your bill seeks to leverage cargo owners, whose choice to utilize California ports drives this incredible economic engine, to influence the labor and employment model of trucking companies.

A shift of cargo away from California’s ports because of your bill will cause undue economic harm to the thousands of port drayage owner-operators who choose to operate independently and the thousands more port drayage drivers who choose full-time employment, to say nothing of the domino effect loss of cargo creates for other workers dependent on the port.

We hope to continue a dialogue with your office about reasonable steps which may be taken to protect drivers who feel they are misclassified employees without co-opting this process in a third attempt to push independent owner-operators out of the port.”

Prepared by:

5/29/18 10:17:08

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2017 - 2018 Regular Session

SB 1402 (Lara) - Labor contracting: customer liability

Bill Summary:

SB 1402 would require (1) joint and several liability for customers who contract with port drayage services who have unpaid wage, tax and workers’ compensation liability, and (2) the Division of Labor Standards Enforcement (DLSE) within the Department of Industrial Relations (DIR) to post a list on its Internet site of the names of port drayage motor carriers with any unsatisfied final court judgments or other outstanding debts resulting from labor violations.

*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********

The following information is revised to reflect amendments

adopted by the committee on May 25, 2018

Fiscal Impact:

DIR indicates that it would incur first-year costs of $1.3 million, and ongoing annual costs of $1 million to implement the provisions of the bill (special fund, see Staff Comments). The Employment Development Department‘s (EDD) costs resulting from the bill would be minor.

Author Amendments:

• Intent language to indicate this is a remedial measure to better enable labor law enforcement.
• Definition of customer to be one that engages or uses a port drayage motor carrier either directly or indirectly to move cargo or intermodal equipment.
• Exempt an equipment interchange arrangement between marine terminals and port drayage motor carriers from the definition of customer.
• Definition of port drayage motor carrier to include a successor entity consistent with Labor Code Section 2684.
• Definition of port drayage services to include all intermodal transportation.
• Timeline and conditions for removal from a list of port drayage motor carriers.
• Indicate that final judgments obtained by other private or public persons can also be included on a public list.
• Require notice before a port drayage motor carrier can be placed on a public list, as specified.
• Delete the port drayage motor carrier notice of the public list to a customer.
• Clarify that joint liability applies to services obtained by a customer after the port drayage motor carrier appears on the list.
• Reference Labor Code sections for paid sick days and vacation and enforcement of those sections.
• Port drayage services subject to joint liability include the return to the point of origin.
• Exemption from joint liability includes a company not on the list or that has met conditions for removal.
• The provisions of this bill are severable.

-- END --

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2017 - 2018 Regular Session

SB 1402 (Lara) - Labor contracting: customer liability

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

SB 1402 would require (1) joint and several liability for customers who contract with port drayage services who have unpaid wage, tax and workers’ compensation liability, and (2) the Division of Labor Standards Enforcement (DLSE) within the Department of Industrial Relations (DIR) to post a list on its Internet site of the names of port drayage motor carriers with any unsatisfied final court judgments or other outstanding debts resulting from labor violations.

Fiscal Impact:

DIR indicates that it would incur first-year costs of $1.3 million, and ongoing annual costs of $1 million to implement the provisions of the bill (special fund, see Staff Comments). The Employment Development Department‘s (EDD) costs resulting from the bill would be minor.

Background:

California contains three of the five busiest ports in the nation: the Port of Los Angeles, the Port of Long Beach, and the Port of Oakland. Drayage services involve transporting goods (generally containers) a short distance via ground freight or the charge for such a transport. In freight forwarding, drayage is typically used to describe the trucking service from an ocean port to a rail ramp, warehouse, or other destination. There are an estimated 25,000 port truck drivers in California, or one-third of the nation’s total. Drayage can be from one port to another or from the port to a nearby warehouse or factory. The Port of Long Beach alone reports 17,000 active drayage trucks serving the Port. Thus, California’s port truck drivers provide critical drayage services, which enable stores to stock their shelves with consumer goods all over California, with additional freight moving across the United States. They are an integral part of the supply chain for many of the big-box stores that are found in nearly every community.

Thus, the ports serve as important economic drivers for the State; at the same time however, they are significant sources of air pollution. Consequently, the California Air Resources Board (CARB) requires that port drayage trucks must have an engine from 2007 or later. These newer, cleaner burning engines have significantly reduced pollution at the Ports. However, they also encourage misclassification of drivers as independent contractors, rather than employees, as this allowed port drayage companies to shift the costs of new engines and trucks to the workers. Over 1,150 labor complaints have been reportedly filed by port drayage workers with DLSE since 2010. DLSE’s administrative law judges (in cases involving a total of 140 trucking companies) have sided with the complainants 97 percent of the time. Complaints from workers focused on being misclassified as an independent contractor and not being paid at least the minimum wage, but also included workers being charged for using office materials, including toilet paper.

In addition, large retailers which utilize port drayage companies continued to use the same port drayage contractors, despite the fact that the contractors were facing labor law charges. This contrasts with many of these same companies pledging to monitor their international supply chains for labor law violations from contractors and vendors.

Proposed Law:

This bill would, among other things, do the following:

• Define a “customer” as an a business entity, regardless of its form, that (1) has 25 or more employees, including temporary employees, and (2) enters into an agreement, either directly or through an agent, with a port drayage motor carrier to transport freight containers or cargo to or from a port.
• Define the “Port drayage industry,” “port trucking industry,” or “port drayage services” as the movement within California of freight containers or cargo by a commercial motor vehicle to or from the port terminals and intermodal terminals, railways, border points, warehouses, retail establishments, and other distribution centers. This bill would exclude employees performing the intra-port or inter-port movement of cargo or cargo handling equipment under the control of their employers from the above definition.
• Require that DLSE post on its Internet site the names, addresses, and essential information for any port drayage motor carrier with any unsatisfied final court judgment, assessment of EDD, or any order, decision, or award finding that a port drayage motor carrier has engaged in illegal conduct including, but not limited to, failure to pay wages, imposing unlawful expenses on employees, failure to remit payroll taxes, failure to provide workers’ compensation insurance, or misclassification of employees as independent contractors with regard to a port drayage commercial driver. Where an administrative determination has been appealed to superior court, DLSE shall not place the information on the Internet site until the superior court has rendered its judgment.
• Extend joint and several liability to customers who, as part of its business, obtains, either directly or indirectly, port drayage services with a port drayage motor carrier on the list established above for future unpaid wages, unreimbursed expenses, damages and penalties, including applicable interest, which are found due to any and all commercial drivers provided, directed, or used by the motor carrier to perform port drayage services for the customer, or that are found due as civil penalties to the State for all of the following:
  • Minimum, regular, or premium wages that are unpaid by the motor carrier, including rest and recovery periods
  • Unlawful deductions by the motor carrier from wages.
  • Out-of-pocket business expenses incurred by the commercial driver that are not reimbursed by the motor carrier as required by law.
  • Civil penalties for the failure to secure valid workers’ compensation coverage.
  • Damages or penalties as provided for by law that are due to the commercial driver or the state based upon the failure of the motor carrier to pay wages owed, including failure to timely pay wages, provide an accurate pay stub, willfully misclassify an employee as an independent contractor, violate an Industrial Welfare Commission Wage Order, and liquidated damages and penalties due to paying less than the minimum wage.
  • Applicable interest due for any sum described above.
• Require that each and every customer that receives port drayage services from a motor carrier in a given workweek shall be jointly and severally liable with the motor carrier for the full amount of all wages, expenses, damages, and penalties which are found owed by the motor carrier for that workweek.
• Require that a port drayage motor carrier that provides port drayage services to a customer in the port drayage industry must, prior to providing these services to the customer, furnish written notice to the customer of any unsatisfied final judgments against the motor carrier for unpaid wages, damages, expenses and penalties, including applicable interest. The notice shall also provide the text of this section. The failure of the motor carrier to provide notice under this subdivision shall not be a defense to the joint and several liability provided by this section.
• Require that a port drayage motor carrier must provide, within 30 days of entry of the judgment, written notice of any unsatisfied final judgments against the motor carrier for unpaid wages, damages, expenses and penalties, including applicable interest, to any customer to which the motor carrier is presently providing port drayage services in the port drayage industry. The failure of the motor carrier to provide notice under this subdivision shall not be a defense to the joint and several liability provided by this section.
• Require that a customer’s liability must be determined by either by the Labor Commissioner or by a court in a civil action brought by the Labor Commissioner, or by a commercial driver or his or her representative, where at least 30 days prior to filing the civil action, the Labor Commissioner, or commercial driver or representative, notifies the customer of its potential joint and several liability for any of the wages, expenses, damages, or penalties.
• Require a customer or a port drayage motor carrier to provide to the Labor Commissioner any information within its possession, custody, or control required to verify compliance with applicable state laws. Upon request, the records that contain this information shall be made available promptly for inspection, and the Labor Commissioner must be permitted to copy them.
• Prohibit a civil action for a violation or enforcement of this section shall be brought pursuant to the Private Attorneys General Act (PAGA).
• Prohibit a customer or port drayage motor carrier from taking any adverse action against any commercial driver for providing notification of violations or filing a claim or civil action pertaining to unpaid wages, unreimbursed expenses, or the recovery of damages and penalties, including applicable interest.
• Provide that the remedies provided by this section are in addition to, and shall be supplemental of, any other theories of liability or requirement established by statute or common law.
• Provide that two or more parties who are held jointly and severally liable under this section after a final judgment is rendered by the court are not prohibited from establishing, exercising, or enforcing by contract a right of contribution and indemnity against each other for liability created by acts of a port drayage motor carrier.
• Provide that the Labor Commissioner and EDDmay adopt regulations and rules of practice and procedure necessary to administer and enforce the provisions of the bill.
• Provide that a waiver of the above provisions is contrary to public policy, and is void and unenforceable.
• Provide that the joint and several liability described above shall not apply to employees covered by a bona fide collective bargaining agreement, if the agreement expressly provides for wages, hours of work, working conditions, a process to resolve disputes concerning nonpayment of wages, expenses, damages, and penalties, including applicable interest, and a waiver of the joint and several liability.

Related Legislation:

• AB 621 (Roger Hernández, Ch. 741, Stats. 2015) relieves a motor carrier performing drayage services at one or more ports in California from liability for statutory or civil penalties associated with misclassification of commercial drivers as independent contractors if the motor carrier enters into a settlement agreement before January 1, 2017, with the Labor Commissioner whereby the motor carrier agrees to convert all of its commercial drivers to employees.
• AB 1897 (Roger Hernández, Ch. 728, Stats. 2014) requires a client employer, as defined, to share with a labor contractor, as defined, all civil legal responsibility and civil liability for: (1) payment of wages to workers provided by a labor contractor; (2) failure to report and pay all required employer contributions, worker contributions, and personal income tax withholdings as required by the Unemployment Insurance Code; and (3) failure to secure valid workers’ compensation coverage.

Staff Comments:

This bill would hold companies that contract with port drayage contractors jointly and severally liable for future unpaid wages if they contract with a port drayage contractor that owes workers back wages or has otherwise violated California labor law and not paid what they owe due to a DLSE or court ruling. This joint and several liability would only apply to customers of port drayage contractors with 25 or more employees. The bill would require that DLSE makes a list of port drayage companies who have outstanding labor law violations available to the public on their website, and it would also require that the port drayage companies with outstanding liabilities must notify their customers within 30 days on a final notice of unsatisfied final judgements that could trigger liability. However, the bill does permit any customer of a port drayage company to address joint liability through a contract.

DIR’s increased costs reflect (1) developing the internet database required by the bill, and (2) resources for additional staff to handle the increased complexity generated by this bill and the anticipated additional workload generated in administrative hearings and field enforcement investigations.

EDD indicates that any data sharing costs would be reimbursed by DLSE. Federal law prohibits the use of federal funds for non-Unemployment Insurance purposes. The final costs of this effort would depend on many factors, such as the amount of data, frequency of data, and method being used to transmit the data. Being a new initiative, the EDD may incur one-time costs to develop procedures to transmit information to DSLE. EDD may also incur ongoing costs to monitor and review the payment status of any determination or assessment shared with DLSE.

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SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS

Senator Richard Pan, Chair

2017 - 2018 Regular

Bill No: SB 1402 Hearing Date: April 25, 2018

Subject: Labor contracting: customer liability.

KEY ISSUE

Should the Legislature require joint and several liability for customers who contract with port drayage services who have unpaid wage, tax and workers’ compensation liability?

ANALYSIS

Existing law:

1. Extends liability to client employers who, in the usual course of business, utilize third-party labor contractors for unpaid wages and a lack of workers’ compensation coverage if the following are true:
2. The employer has 25 or more employees, including the contracted employees;
3. The employer has 5 or more employees from a third-party labor contractor; and
4. The third-party labor contractor isn’t a non-profit or motion picture payroll company.
5. Defines “labor contractor” as means an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business.
6. Defines “usual course of business” as the regular and customary work of a business, performed within or upon the premises or worksite of the client employer.
7. A client employer shall not shift to the labor contractor any legal duties or liabilities under Cal-OSHA with respect to workers supplied by the labor contractor.
8. Provides that a waiver of the above-provisions is contrary to public policy, and is void and unenforceable.
9. Exempts from the liability provisions discussed above motor carriers of property, household goods carriers, cable operators, and motor clubs.

(Labor Code §2810.3)

This bill:

1. Makes findings and declarations on the importance of California’s port drayage drivers, recent media coverage on the debt challenges port drayage workers face, and the history of illegal misclassification of port drayage drivers by some employers.
2. Defines a “customer” as an a business entity, regardless of its form, that has 25 or more employees, including temporary employees, and enters into an agreement, either directly or through an agent, with a port drayage motor carrier to transport freight containers or cargo to or from a port.
3. Defines the “Port drayage industry,” “port trucking industry,” or “port drayage services” as the movement within California of freight containers or cargo by a commercial motor vehicle to or from the port terminals and intermodal terminals, railways, border points, warehouses, retail establishments, and other distribution centers. This bill excludes employees performing the intra-port or inter-port movement of cargo or cargo handling equipment under the control of their employers from the above definition.
4. Requires that the Division of Labor Standards Enforcement (DLSE) post on its Internet Web site the names, addresses, and essential information for any port drayage motor carrier with any unsatisfied final court judgment, assessment of the Employment Development Department, or any order, decision, or award finding that a port drayage motor carrier has engaged in illegal conduct including, but not limited to, failure to pay wages, imposing unlawful expenses on employees, failure to remit payroll taxes, failure to provide workers’ compensation insurance, or misclassification of employees as independent contractors with regard to a port drayage commercial driver.
5. Requires that, where an administrative determination has been appealed to superior court, the DLSE shall not place the information on the Internet Web site until the superior court has rendered its judgment.
6. Extends joint and several liability to customers who, as part of its business, obtains, either directly or indirectly, port drayage services with a port drayage motor carrier on the list established above for future unpaid wages, unreimbursed expenses, damages and penalties, including applicable interest, which are found due to any and all commercial drivers provided, directed, or used by the motor carrier to perform port drayage services for the customer, or that are found due as civil penalties to the state for all of the following:
7. Minimum, regular, or premium wages that are unpaid by the motor carrier, including rest and recovery periods
8. Unlawful deductions by the motor carrier from wages.
9. Out-of-pocket business expenses incurred by the commercial driver that are not reimbursed by the motor carrier as required by law.
10. Civil penalties for the failure to secure valid workers’ compensation coverage.
11. Damages or penalties as provided for by law that are due to the commercial driver or the state based upon the failure of the motor carrier to pay wages owed, including failure to timely pay wages, provide an accurate pay stub, willfully misclassify an employee as an independent contractor, violate an Industrial Welfare Commission Wage Order, and liquidated damages and penalties due to paying less than the minimum wage.
12. Applicable interest due for any sum described above.
13. Requires that each and every customer that receives port drayage services from a motor carrier in a given workweek shall be jointly and severally liable with the motor carrier for the full amount of all wages, expenses, damages, and penalties which are found owed by the motor carrier for that workweek.
14. Requires that a port drayage motor carrier that provides port drayage services to a customer in the port drayage industry must, prior to providing these services to the customer, furnish written notice to the customer of any unsatisfied final judgments against the motor carrier for unpaid wages, damages, expenses and penalties, including applicable interest. The notice shall also provide the text of this section.  The failure of the motor carrier to provide notice under this subdivision shall not be a defense to the joint and several liability provided by this section.
15. Requires that a port drayage motor carrier must provide, within 30 days of entry of the judgment, written notice of any unsatisfied final judgments against the motor carrier for unpaid wages, damages, expenses and penalties, including applicable interest, to any customer to which the motor carrier is presently providing port drayage services in the port drayage industry. The failure of the motor carrier to provide notice under this subdivision shall not be a defense to the joint and several liability provided by this section.
16. Requires that a customer’s liability must be determined by either by the Labor Commissioner or by a court in a civil action brought by the Labor Commissioner, or by a commercial driver or his or her representative, where at least 30 days prior to filing the civil action, the Labor Commissioner, or commercial driver or representative, notifies the customer of its potential joint and several liability for any of the wages, expenses, damages, or penalties.
17. Requires a customer or a port drayage motor carrier to provide to the Labor Commissioner any information within its possession, custody, or control required to verify compliance with applicable state laws. Upon request, the records that contain this information shall be made available promptly for inspection, and the Labor Commissioner must be permitted to copy them.
18. Prohibits a civil action for a violation or enforcement of this section shall be brought pursuant to the Private Attorneys General Act (PAGA).
19. Prohibits a customer or port drayage motor carrier from taking any adverse action against any commercial driver for providing notification of violations or filing a claim or civil action pertaining to unpaid wages, unreimbursed expenses, or the recovery of damages and penalties, including applicable interest.
20. Provides that the remedies provided by this section are in addition to, and shall be supplemental of, any other theories of liability or requirement established by statute or common law.
21. Provides that two or more parties who are held jointly and severally liable under this section after a final judgment is rendered by the court are not prohibited from establishing, exercising, or enforcing by contract a right of contribution and indemnity against each other for liability created by acts of a port drayage motor carrier.
22. Provides that the Labor Commissioner and Employment Development Department may adopt regulations and rules of practice and procedure necessary to administer and enforce the provisions of SB 1402.
23. Provides that a waiver of the above provisions is contrary to public policy, and is void and unenforceable.
24. Provides that the joint and several liability described above shall not apply to employees covered by a bona fide collective bargaining agreement, if the agreement expressly provides for wages, hours of work, working conditions, a process to resolve disputes concerning nonpayment of wages, expenses, damages, and penalties, including applicable interest, and a waiver of the joint and several liability.

COMMENTS

1. Background on Ports and Port Drayage:

California is home to the two busiest ports in the United States: the Port of Los Angeles and the Port of Long Beach. Combined, these ports would be the 10^th busiest port in the world, making it the busiest port in the world outside of China, Singapore, South Korea and Dubai. Both ports serve as an important economic driver for all of California, but they also pose unique policy challenges: both ports combined are the largest source of air pollution in the Los Angeles metropolitan area.

To address this issue, the California Air Resources Board (CARB) requires that port drayage trucks must have an engine from 2007 or later. Port drayage is the short-haul transportation of cargo (generally containers) within the same urban area. It came be from one port to another or from the port to a nearby warehouse or factory. The Port of Long Beach alone reports 17,000 active drayage trucks serving the Port.

These newer, cleaner burning engines have significantly reduced pollution at the Ports. Unfortunately, it also encourages misclassification of drivers as independent contractors, rather than employees, as this allowed port drayage companies to shift the costs of new engines and truck to the workers. According to USA Today, at least 1,150 labor complaints have been filed by port drayage workers with the Division of Labor Standards Enforcement (DLSE) since 2010. The DLSE’s administrative law judges have sided with the complainants 97% of the time – and USA Today reports that these complaints involved 140 trucking companies. Complaints from workers focused on being misclassified as an independent contractor and not being paid at least the minimum wage, but also included workers being charged for using office materials, including toilet paper.

The same USA Today series also noted that large retailers which utilize port drayage companies continued to use the same port drayage contractors, despite the fact that the contractors were facing labor law charges. This stood in marked contrast with many of these same companies pledging to monitor their international supply chains for labor law violations from contractors and vendors. The USA Today articles did not discuss why these companies did not provide the same level of scrutiny to their port drayage contractors.

SB 1402 hopes to address this by holding companies that contract with port drayage contractors jointly and severally liable for future unpaid wages if they contract with a port drayage contractor that owes workers back wages or has otherwise violated California labor law and not paid what they owe due to a DLSE or court ruling. This joint and several liability would only apply to customers of port drayage contractors with 25 or more employees. SB 1402 would require that the DLSE makes a list of port drayage companies who have outstanding labor law violations available to the public on their website, and it would also require that the port drayage companies with outstanding liabilities must notify their customers within 30 days on a final notice of unsatisfied final judgements that could trigger liability. However, SB 1402 does permit any customer of a port drayage company to address joint liability through a contract.

2. Technical Amendments:

As noted above, SB 1402 prohibits any waiver of joint liability waivers discussed above. However, the collective bargaining agreement provisions of SB 1402 require a waiver in direct conflict of such a prohibition. The Committee may wish to consider the following amendment to resolve this conflict:

On page 8, strike lines 26 after “interest” and strike line 27.

3. Proponent Arguments:

The California Teamsters Public Affairs Council, a sponsor of SB 1402, writes the following:

“SB 1402 will attempt to address the well documented swamp of illegality that exists in the port motor carrier industry, where drivers are regularly subjected to misclassification, fraud, and wage theft, and where large shippers who hire the trucking companies just look the other way. Currently, there is over $40 million in unsatisfied judgments against port trucking companies for illegal treatment of their drivers. There is perhaps no workforce in California where abuse of workers is more commonplace or more out of control.

It is time to fix this problem.

SB 1402 will address the issue by having the State Labor Commissioner create a list of trucking companies that have unsatisfied judgments for labor law violations and employer tax fraud. If a shipper hires one of the trucking companies on the list and that trucking company subsequently commits violations with respect to drivers hauling freight for that shipper, then the shipper may be held jointly liable for the violation.

Under this bill, shippers can completely avoid joint liability by simply not hiring trucking companies with outstanding judgments and trucking companies can remove themselves from the list by satisfying judgments against them. There are many law abiding trucking companies that are not persistent labor law violators for shippers to choose from.

We believe SB 1402 will help drain the labor law swamp in California’s port drayage industry by creating a simple, inexpensive and easily followed system that encourages accountability by all market participants.

Let’s reward the good trucking companies that operate in port drayage while helping drivers receive the pay they are legally entitled to.

On behalf of the Teamsters, we urge your “aye” vote on SB 1402.”

4. Opponent Arguments:

The California Trucking Association opposes SB 1402, arguing:

“For decades, the trucking industry has operated under a variety of lawful labor models including collectively bargained employees, non-collectively bargained employees, and independent owner-operators.

According to the Owner-Operator Independent Drivers Association, there are approximately 350,000 owner-operators registered in the United States. The average owner-operator has been independent for 18 years. This is in comparison to an estimated 3.5 million total commercial drivers. A survey performed by the American Trucking Associations of motor carriers with port drayage operations found that 62% had full-time employee drivers in 2013.

Independent owner-operators choose to be independent. They are typically experienced drivers who would have little difficulty obtaining company driving jobs, especially in the midst of a historic driver shortage where driver wages have increased by 15-18% between 2013-2017.

In 2014-2015, the California Trucking Association (CTA) partnered with the Inland Empire Economic Partnership (IEEP) to develop a study that would quantify the net earnings of California independent owner-operators and compare their earning power to the broader workforce.

Our analysis found that:

• In 2013, the independent owner-operators studied earned a median net income of $59,478 compared to $42,078 median pay of employee drivers in California.
• Three-quarters independent owner-operators earned more than drivers in employer-based models.
• The top 20 percent of independent owner-operators earn more than workers in 156 of the 158 logistics occupations in Los Angeles County and the Inland Empire, including those with Bachelor’s degrees.

While we understand your intent to strengthen existing labor protections for independent owner-operators, we must highlight the fact that, on two other occasions, this bill’s sponsors have tried to simply ban independent owner-operators from the ports, including in 2011 with AB 950 (Perez) and the Port of Los Angeles employee mandate which was overturned by the 9th Circuit Court of Appeals.

For more than four years, port drayage motor carriers have been subjected to a coordinated campaign by this bill’s sponsor that enlists the State in an attempt to transform the relationship between thousands of independent owner-operators from a business-to-business transaction into an employer-employee relationship.

Since 2013, the Division of Labor Standards Enforcement (DLSE) concluded in all port drayage driver claims, in which it made a substantive classification determination, that owner-operators were employees even where:

• An owner-operator driver hired their own employees to drive their truck;
• An owner-operator testified that he viewed himself as an independent contractor because he paid his own taxes;
• An owner-operator driver testified that he had complete autonomy to work for other motor carriers and did so on three occasions before choosing to return to the port drayage motor carrier he alleges misclassified him. The DLSE had, previous to 2013, found independent contractor status under the same arrangement and operations.

In response to the DLSE’s abuse of its authority and exploitation of the Berman Hearing process, the CTA filed litigation against the Labor Commissioner for issues related to their hearing process as well as their repeated violations of the Public Records Act.

Beyond the flawed Berman Hearings, we respectfully request you consider other issues with your bill:

1. Pursuant to proposed Sec. 2810.4(b)(1), the DLSE should not post the name of any company who is pursuing administrative appeals or judicial review available to them under the law. For instance, employers may appeal EDD assessments and then seek judicial review (see Unemployment Insurance Code 1241(a)). A port drayage motor carrier may also appeal a superior court judgment of a de novo review.
2. The bill should outline a process for being removed from the DLSE list.
3. Given the immense financial harm any company on the DLSE list will experience, mistakes or delays by the State in posting and maintaining the proposed list should constitute grounds for voiding joint and several liability. And should the State mistakenly post or delay in removing a carrier from the posted list, what remedies will be available to the company should they be financially damaged?
4. Proposed Sec. 2810(d) should be struck. Given that all port drayage motor carriers are subject to claims under California law, including wage claims and resulting judgments, there is no sound policy purpose for including a collective bargaining exclusion. If, as the bill’s sponsors claim, there are not similar wage claim issues for collectively bargained employers, then there is no reason to exclude them from this process.

Finally, we urge you to consider the jobs impact of SB 1402. Your bill seeks to leverage cargo owners, whose choice to utilize California ports drives this incredible economic engine, to influence the labor and employment model of trucking companies.

A shift of cargo away from California’s ports because of your bill will cause undue economic harm to the thousands of port drayage owner-operators who choose to operate independently and the thousands more port drayage drivers who choose full-time employment, to say nothing of the domino effect loss of cargo creates for other workers dependent on the port.

We hope to continue a dialogue with your office about reasonable steps which may be taken to protect drivers who feel they are misclassified employees without co-opting this process in a third attempt to push independent owner-operators out of the port.”

5. Double Referral:

This bill is scheduled to be heard by the Senate Judiciary Committee on April 24, 2018.

6. Prior Legislation:

AB 1897 (Hernandez), Chapter 728, Statutes of 2014, requires client employers that obtain workers from third party labor contractors to share liability for certain labor violations such as failure to pay wages and workers’ compensation.

SUPPORT

California Teamsters Public Affairs Council (Co-sponsor)

California Labor Federation, AFL-CIO (Co-sponsor)

Americas for Toll Global Logistics

Central American Resource Center

Clergy & Laity United foe Economic Justice

East Area Progressive Democrats

Highland Park Neighborhood Council

Los Angeles Alliance for a New Economy

Shippers Transport Express

South Bay 350 Los Angeles

Southern California Coalition for Occupational Safety & Health

Warehouse Worker Resource Center

OPPOSITION

California Trucking Association

Western States Trucking Association

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SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2017-2018 Regular Session

Bill No: SB 1402 (Author:Lara)

Version: April 9, 2018

Hearing Date: April 24, 2018

Fiscal: Yes

Urgency: No

Consultant: CK, TSG, MEC

SUBJECT

Labor contracting: customer liability

DESCRIPTION

This bill would require the Division of Labor Standards Enforcement to post a list on its Internet Web site of the names of port drayage motor carriers with any unsatisfied final court judgments or other outstanding debts resulting from labor violations. This bill would require a customer that, as part of its business, obtains services with a port drayage motor carrier on that list, be jointly and severally liable with the motor carrier for future unpaid wages, unreimbursed expenses, damages and penalties, including applicable interest, found due to any and all commercial drivers provided, directed, or used by the motor carrier to perform port drayage services for the customer, or that are found due as civil penalties to the state, as specified.

BACKGROUND

Drayage services involve transporting goods a short distance via ground freight or the charge for such a transport. In freight forwarding, drayage is typically used to describe the trucking service from an ocean port to a rail ramp, warehouse, or other destination. A study performed by the National Employment Law Project (NELP) noted that the Los Angeles port is the largest container port in the United States, Long Beach the second largest, and Oakland the fifth largest container port. (R. Smith, P. A. Marvy, J. Zerolnick, The Big Rig Overhaul – Restoring Middle-Class Jobs at America’s Ports Through Labor Law Enforcement (Feb. 2014) NELP <http://nelp.org/content/uploads/2015/03/ Big-Rig-Overhaul-Misclassification-Port-Truck-Drivers-Labor-Law-Enforcement.pdf> [as of Apr. 12, 2018]^[1].) The port-trucking industry is a $12-billion-per-year business. (Erica Phillips, Port-Trucking Firms Run Into Labor Dispute (May 11, 2016) Wall Street Journal <https://www.wsj.com/articles/port-trucking-firms-run-into-labor-dispute-1462959003>.) There are an estimated 25,000 port truck drivers in California, accounting for about one third of the nation’s drayage-industry drivers. California’s port truck drivers provide critical drayage services, which enables stores to stock their shelves with consumer goods all over California, with additional freight moving across the United States. They are an integral part of the supply chain for many of the big-box stores that are found in nearly every community. However, over the last several decades, these drivers have been subjected to an industry-wide campaign to undercut their wages, their rights, and their livelihoods.

It is well-documented that these drivers have been systematically misclassified as independent contractors rather than employees. (See Karen Meeks, Most U.S. port truck drivers are misclassified as independent contractors, according to new report (Sept. 1, 2017) Press-Telegram < https://www.presstelegram.com/2014/02/19/most-us-port-truck-drivers-are-misclassified-as-independent-contractors-according-to-new-report/>; Michael Hiltzik, Port truckers who carry your favorite goods to market are being cheated to save you money (Jun. 29, 2017) Los Angeles Times <http://www.latimes.com/business/ hiltzik/la-fi-hiltzik-port-truckers-20170702-story.html>; Brett Murphy, Rigged: Forced into debt. Worked past exhaustion. Left with nothing. (Jun. 16, 2017) USA Today <https:// www.usatoday.com/pages/interactives/news/rigged-forced-into-debt-worked-past-exhaustion-left-with-nothing/>.) This has resulted in drivers being denied fair wages and forced to work unsustainable hours in order to make a living. Over the last decade, there have been hundreds of wage-theft complaints brought before the California Department of Labor.

Drayage carriers committing these violations are not the exception, and many well-known companies have utilized the services of port drayage carriers that have mistreated their employees. Investigations of the industry have revealed that companies threaten drivers with discipline or termination if they do not agree to work nearly around the clock. (Brett Murphy, Rigged: Forced into debt. Worked past exhaustion. Left with nothing. (Jun. 16, 2017) USA Today <https://www.usatoday.com/pages/ interactives/news/rigged-forced-into-debt-worked-past-exhaustion-left-with-nothing/>.) Drivers have reported that they have been ordered to doctor their driving logs to hide overtime from regulators. In one proceeding before the Labor Commission, drivers testified that they had to work up to 19 hours a day, violating federal fatigue laws for truckers. In that case, the Commission ruled that 40 drivers were inaccurately classified as independent contractors and awarded a combined $6.8 million for lost wages.

Despite these large awards and settlements against the offending port drayage carriers, drivers are often still never paid. Investigations and media coverage indicate that these carriers use “legal loopholes, shell companies, and bankruptcy protection to dodge the punishment labor court judges have handed down.” (Brett Murphy, Shell games: How trucking companies that cheat drivers dodge penalties (Oct. 26, 2017) USA Today <https:// www.usatoday.com/pages/interactives/news/rigged-shell-games-how-trucking-companies-that-cheat-drivers-dodge-penalties/>.)

This bill would respond to the gaps in existing law and attempt to hold these port drayage carriers accountable when they run afoul of labor laws. It would require the Division of Labor Standards Enforcement to post on its Web site the names and other information of port drayage motor carriers, as defined, who have unsatisfied judgments, assessments, and other awards against them based on illegal conduct, including failure to pay wages and misclassification of employees. Any customer that uses the services of a listed company would be jointly and severally liable with the company for future unpaid wages, unreimbursed expenses, and any damages and penalties, which are found due to the company’s drivers, or any civil penalties due the state for various labor law violations. The port drayage carriers would be required to notify all customers of the list and the possibility of joint and severable liability.

CHANGES TO EXISTING LAW

Existing law provides that any person rendering service for another, other than as an independent contractor, or unless expressly excluded herein, is presumed to be an employee. (Lab. Code Sec. 3357.) Existing law creates a rebuttable presumption affecting the burden of proof that a worker performing services for which a specified license is required, or who is performing such services for a person who is required to obtain such a license is an employee rather than an independent contractor. (Lab. Code Sec. 2750.5.)

Existing law defines “independent contractor” to mean any person who renders service for a specified recompense for a specified result, under the control of his principal as to the result of his work only and not as to the means by which such result is accomplished. (Lab. Code Sec. 3353.)

Existing law makes it unlawful for any person or employer to engage in any of the following activities:

• willful misclassification of an individual as an independent contractor. “Willful misclassification” means avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor;
• charging an individual who has been willfully misclassified as an independent contractor a fee, or making any deductions from compensation, for any purpose, including for goods, materials, space rental, services, government licenses, repairs, equipment maintenance, or fines arising from the individual’s employment where any of the acts described in this provision would have violated the law if the individual had not been misclassified. (Lab. Code Sec. 226.8(a).)

Existing law provides that if violations of the above provision are established, the person or employer responsible shall be subject to a civil penalty of not less than $5,000 and not more than $15,000 for each violation, in addition to any other penalties or fines permitted by law. If that person or employer has engaged in a pattern or practice of these violations, the person or employer shall be subject to a civil penalty of not less than $10,000 and not more than $25,000 for each violation, in addition to any other penalties or fines permitted by law. (Lab. Code Sec. 226.8(b)-(c).) Such penalties shall remain in effect against any successor corporation, owner, or business entity that has one or more of the same principals or officers as the person or employer subject to the penalty or action and is engaged in the same or a similar business as the person or employer subject to the penalty or action. (Lab. Code Sec. 226.8(h).)

Existing law provides that if the Labor and Workforce Development Agency or a court issues a determination that a person or employer has misclassified an individual, the agency or court, in addition to any other remedy that has been ordered, is required to order the person or employer to display prominently on its Internet Web site, in an area which is accessible to all employees and the general public, or, if the person or employer does not have an Internet Web site, to display prominently in an area that is accessible to all employees and the general public at each location where the violation occurred, a notice that sets forth all of the following:

• that the Labor and Workforce Development Agency or a court, as applicable, has found that the person or employer has committed a serious violation of the law by engaging in the willful misclassification of employees;
• that the person or employer has changed its business practices in order to avoid committing further violations of this section;
• that any employee who believes that he or she is being misclassified as an independent contractor may contact the Labor and Workforce Development Agency; the notice shall include the mailing address, e-mail address, and telephone number of the agency; and
• that the notice is being posted pursuant to a state order. (Lab. Code Sec. 226.8(e).)

Existing law authorizes the Labor Commissioner to issue a determination that a person or employer has misclassified an individual, and, if upon inspection or investigation, the Labor Commissioner determines that a person or employer has misclassified an individual, the Labor Commissioner is authorized to issue a citation to assess damages, as specified, in addition to any other penalties or damages that are otherwise available at law, and the Labor Commissioner may enforce the violation administratively or in a civil suit. (Lab. Code Sec. 226.8(g).)

Existing law mandates certain meal periods for employees based on the number of hours worked. (Lab. Code Sec. 512.) Existing law prohibits an employer from requiring an employee to work during a meal or rest or recovery period mandated by law. If an employer fails to provide such breaks in accordance with state law, the employer is required to pay the employee one additional hour of pay at the employee’s regular rate of compensation for each workday that the meal or rest or recovery period is not provided. (Lab. Code Sec. 226.7.)

Existing law requires that, if a final judgment against an employer for nonpayment of wages remains unsatisfied after a period of 30 days after the time to appeal has expired and no appeal is pending, the employer shall not continue to conduct business in this state, including conducting business using the labor of another business, contractor, or subcontractor instead of the labor of an employee, unless the employer has obtained a surety bond and has filed a copy of that bond with the Labor Commissioner. (Lab. Code Sec. 238.)

Existing law requires every private sector employer to maintain records of the wages and wage rates, job classifications, and other terms and conditions of employment of the persons employed, to be kept on file for three years. (Lab. Code Sec. 1197.5(e).)

Existing law provides that eight hours of labor constitutes a day’s work. Any work in excess of eight hours in one workday and any work in excess of 40 hours in any one workweek and the first eight hours worked on the seventh day of work in any one workweek shall be compensated at the rate of no less than one and one–half times the regular rate of pay for an employee. Any work in excess of 12 hours in one day shall be compensated at the rate of no less than twice the regular rate of pay for an employee. In addition, any work in excess of eight hours on any seventh day of a workweek shall be compensated at the rate of no less than twice the regular rate of pay of an employee. (Lab. Code Sec. 510.)

Existing law provides that an employer shall indemnify its employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of the employee’s duties, or of the employee’s obedience to the directions of the employer, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful. All awards made by a court or by the Division of Labor Standards Enforcement for reimbursement of necessary expenditures under this section shall carry interest at the same rate as judgments in civil actions. The term “necessary expenditures or losses” includes all reasonable costs, including, but not limited to, attorney’s fees incurred by the employee enforcing the rights granted by this section. In addition to recovery of penalties under this section in a court action or proceedings, the commissioner may issue a citation against an employer or other person acting on behalf of the employer who violates reimbursement obligations for an amount determined to be due to an employee under this section. (Lab. Code Sec. 2802.)

Existing law requires the Division of Labor Standards Enforcement to commence an action to collect a civil penalty, fee, or penalty fee within three years from the date the penalty or fee became final. Upon commencement of an action, the clerk of the superior court shall enter judgment immediately in conformity therewith. For purposes of this provision, “final” means the time to appeal has expired and there is no appeal pending. (Lab. Code Sec. 200.5.)

This bill would contain extensive intent language identifying the long history of workers’ rights violations in the port drayage industry and the role that some of the world’s largest retail and manufacturing companies should play in creating a solution by exerting their market power. The bill would provide a finding that holding customers of trucking companies jointly liable for future labor law violations by port drayage motor carriers who they engage, where the customer has received advance notice of their record of unsatisfied judgments for labor law violations, will exert pressure across the supply chain to protect drayage drivers from further exploitation.

This bill would provide the following definitions:

• “commercial driver” means a person who holds a valid commercial driver’s license who is hired or contracted to provide port drayage services either as a misclassified independent contractor or an employee driver;
• “customer” means a business entity, regardless of its form, that enters into an agreement, either directly or through an agent, with a port drayage motor carrier to transport freight containers or cargo to or from a port;
• “customer” does not include a business entity with a workforce of fewer than 25 workers, including those hired directly by the customer or through a temporary employer or labor contractor, nor the state or any political subdivision of the state, including any city, county, city and county, or special district;
• “labor” has the same meaning provided by Section 200 of the Labor Code, which defines the term to include labor, work, or service whether rendered or performed under contract, subcontract, partnership, station plan, or other agreement if the labor to be paid for is performed personally by the person demanding payment;
• “port drayage motor carrier” means an individual or entity that hires or engages commercial drivers in the port drayage industry. “Port drayage motor carrier” also means a registered owner, lessee, licensee, or bailee of a commercial motor vehicle, as defined in subdivision (b) of Section 15210 of the Vehicle Code, that operates or directs the operation of a commercial motor vehicle by a commercial driver on a for-hire or not-for-hire basis to perform port drayage services in the port drayage industry;
• “port” means any sea or river port located in this state;
• “port drayage industry,” “port trucking industry,” or “port drayage services” means the movement within California of freight containers or cargo by a commercial motor vehicle to or from the port terminals and intermodal terminals, railways, border points, warehouses, retail establishments, and other distribution centers. It shall not include employees performing the intra-port or inter-port movement of cargo or cargo handling equipment under the control of their employers; and
• “wages” has the same meaning provided by Section 200 of the Labor Code, which defines the term to include all amounts for labor performed by employees of every description, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation. It would also include all sums payable to an employee or the state based upon any failure to pay wages, as provided by law.

This bill would require the Division of Labor Standards Enforcement to post on its Internet Web site the names, addresses, and essential information for any port drayage motor carrier with any unsatisfied final court judgment, assessment of the Employment Development Department, or any order, decision, or award pursuant to Section 98.1 finding that a port drayage motor carrier has engaged in illegal conduct including, but not limited to, failure to pay wages, imposing unlawful expenses on employees, failure to remit payroll taxes, failure to provide workers’ compensation insurance, or misclassification of employees as independent contractors with regard to a port drayage commercial driver. Where an administrative determination has been appealed to a superior court pursuant to Section 98.2, the Division of Labor Standards Enforcement would not be required to place the information on the Internet Web site until the superior court has rendered its judgment.

This bill would require every port drayage motor carrier who enters into an agreement to provide port drayage services to a customer, prior to executing an agreement to provide transportation services, to furnish notice, on a form approved by the Division of Labor Standards Enforcement, to the customer concerning the Division of Labor Standards Enforcement list and the potential for joint and several liability.

This bill would provide that a customer that, as part of its business, obtains, either directly or indirectly, port drayage services with a port drayage motor carrier on the list shall be jointly and severally liable with the motor carrier for future unpaid wages, unreimbursed expenses, damages and penalties, including applicable interest, which are found due to any and all commercial drivers provided, directed, or used by the motor carrier to perform port drayage services for the customer, or that are found due as civil penalties to the state for all of the following:

• minimum, regular, or premium wages that are unpaid by the motor carrier, including any wages that are found due under Section 226.7;
• unlawful deductions by the motor carrier from wages pursuant to Section 2802;
• out-of-pocket business expenses incurred by the commercial driver that are not reimbursed by the motor carrier as required pursuant to Section 2802;
• civil penalties for the failure to secure valid workers’ compensation coverage as required by Section 3700;
• damages or penalties as provided for by law that are due to the commercial driver or the state based upon the failure of the motor carrier to pay wages owed, including those set forth under Sections 203, 226, 226.8, 558, 1194.2, and 1197.1; and
• applicable interest due for any sum described above.

This bill would provide that each and every customer that receives port drayage services from a motor carrier in a given workweek shall be jointly and severally liable with the motor carrier for the full amount of all wages, expenses, damages, and penalties which are found owed by the motor carrier for that workweek. A customer’s liability would be determined by either one of the following:

• the Labor Commissioner, in an administrative proceeding pursuant to Section 98, de novo appeal under Section 98.2, or pursuant to the Labor Commissioner’s citation authority under this code.
• by a court in a civil action brought by the Labor Commissioner, or by a commercial driver or his or her representative, where at least 30 days prior to filing the civil action, the Labor Commissioner, or commercial driver or representative, notifies the customer of its potential joint and several liability for any of the wages, expenses, damages, or penalties specified. No civil action for a violation or enforcement of this section could be brought pursuant to Part 13 (commencing with Section 2698) of Division 2 of the Labor Code.

This bill would not apply the joint and several liability provisions to employees covered by a bona fide collective bargaining agreement, if the agreement expressly provides for wages, hours of work, working conditions, a process to resolve disputes concerning nonpayment of wages, expenses, damages, and penalties specified, including applicable interest, and a waiver of the joint and several liability provided by this section.

This bill would require a port drayage motor carrier that provides port drayage services to a customer in the port drayage industry to, prior to providing these services to the customer, furnish written notice to the customer of any unsatisfied final judgments against the motor carrier for unpaid wages, damages, expenses and penalties, including applicable interest. The notice would be required to also provide the text of this section.  The failure of the motor carrier to provide such notice under this provision would not be a defense to the joint and several liability provided by this section. Similarly, a port drayage motor carrier that provides port drayage services to a customer in the port drayage industry would be required to provide, within 30 days of entry of the judgment, written notice of any unsatisfied final judgments against the motor carrier for unpaid wages, damages, expenses and penalties, including applicable interest, to any customer to which the motor carrier is presently providing port drayage services in the port drayage industry. The failure of the motor carrier to provide notice under this provision would not be a defense to the joint and several liability provided by this section.

This bill would prohibit a customer or port drayage motor carrier from taking any adverse action against any commercial driver for providing notification of violations or filing a claim or civil action pertaining to unpaid wages, unreimbursed expenses, or the recovery of damages and penalties, including applicable interest.

This bill would provide that the remedies provided are in addition to, and shall be supplemental of, any other theories of liability or requirement established by statute or common law. It would make a waiver of its provisions contrary to public policy, and therefore void and unenforceable.

This bill would provide that two or more parties who are held jointly and severally liable under this section after a final judgment is rendered by the court shall not be prohibited from establishing, exercising, or enforcing by contract or otherwise, any lawful or equitable remedies, including, but not limited to, a right of contribution and indemnity against each other for liability created by acts of a port drayage motor carrier.

This bill would require a customer or a port drayage motor carrier to provide to the Labor Commissioner any information within its possession, custody, or control required to verify compliance with applicable state laws. Upon request, the records that contain this information would need to be made available promptly for inspection, and the Labor Commissioner would be permitted to copy them.

This bill would authorize the Labor Commissioner and the Employment Development Department to adopt regulations and rules of practice and procedure necessary to administer and enforce specified provisions.

COMMENT

1. Stated need for the bill

According to the author:

California’s 11 ports are an economic engine driving the nation’s sixth largest economy. The estimated 25,000 truck drivers who move goods between California ports and inland distribution centers – also known as the port drayage industry –should be sharing the benefits of good jobs.

Yet the majority of port truck drivers are routinely misclassified as independent contractors when they in fact work as employees under California and federal labor laws (National Employment Law Project et al., “The Big Rig Overhaul,” February 2014, 31. http://www.justice4ladrivers.net/BigRigOverhaul2014Finalsm.pdf).

As a result of misclassification, many port truck drivers are held in debt servitude and work dangerously long hours for little pay. Trucking companies that misclassify workers also fail to withhold taxes and provide worker’s compensation insurance.

An investigation by USA Today found that “port trucking companies in Southern California have spent the past decade forcing drivers to finance their own trucks by taking on debt they could not afford.” The investigation found instances where drivers “end up owing money to their employers – essentially working for free” (Brett Murphy, “Rigged,” USA Today, June 16, 2017. https://www.usatoday.com /pages/interactives/news/rigged-forced-into-debt-worked-past-exhaustion-left-with-nothing/).

Port drayage customers are some of the nation’s largest businesses and have the market power to exert meaningful change in the port drayage industry that has eluded California port truck drivers for more than a decade.

2. Workers’ rights in the drayage industry

1. Classification of workers: employee versus independent contractor

Workers who provide their services to others fall, legally speaking, into one of two camps: independent contractors and employees. Those who operate as their own businesses, who set their own schedules, utilize their own tools, bring their own materials, have specialized skills, and are paid to produce a specified result, rather than for their time, are generally considered independent contractors. (Lab. Code Secs. 2750.5, 3353.) Those who are hired on a long-term or indefinite basis, who must appear at work when the boss says so, who are paid for their time rather than by the project, and to whom the tools and materials to accomplish the job are provided, are generally considered employees. (Borello v. Dept. of Indus. Relations (1989) 48 Cal.3d 341, 350.)

The line between who is an independent contractor and who is an employee is not always crystal clear, however. Frequently, jobs have some characteristics of independent contractor status and some characteristics of employee status. For example, controversy arose over how to categorize taxi drivers who leased their cabs, set their own hours, and paid for their own gas, but had to follow company rules regarding dress, annual classroom education, forms of payment, and advertising. (NLRB v. Friendly Cab Co. (9th Cir. 2008) 512 F.3d 1090.)

There is a lot at stake in these gray areas. Employees have long been entitled to certain workplace protections under California and federal law. For example, employees must be paid at least the minimum wage, they are due overtime wages for working long hours, they generally cannot be forced to pay for the equipment they need to do the job, they must be covered by workers’ compensation in the case they suffer injury in the workplace, and they are entitled to state unemployment and disability insurance coverage, for which employers must pay their share. It is also more difficult for independent contractors to organize for better terms and conditions. Independent contractors are not covered by the National Labor Relations Act (see 20 U.S.C. 152(3)) and, since they are what amount to individual small businesses, they could be seen as colluding in violation of anti-trust laws if they do try to organize.

Given what is at stake and the fact that the line between independent contractor and employee can be hazy, it is perhaps not surprising that employees frequently get misclassified as independent contractors. While California law presumes that workers are employees and places the burden on the hiring entity to show that they are not (Lab. Code Sec. 3357), the financial benefits to a company of a labor force consisting of independent contractors creates a strong incentive for companies to push the envelope and, in the case of bad actors, simply to cheat.

1. Misclassification of port truck drivers

As indicated, the misclassification of workers has been a well-documented problem in the trucking industry and ports have been a particular hotspot. (See, e.g., Peltz, Class-Action Suit Alleges Port Trucking Firm Exploits Drivers (Feb. 26, 2018) Los Angeles Times <http://www.latimes.com/business/la-fi-port-truckers-suit-20180226-story.html>.)

Since the 1970s, labor practices in the port truck industry have changed dramatically, leading to the development of an industry characterized by “fierce competition, ever-increasing service requirements, a contingent workforce, poverty level wages, no health care coverage, rampant safety violations, and ineffective or illusory enforcement.” (R. Smith, P. A. Marvy, J. Zerolnick, The Big Rig Overhaul – Restoring Middle-Class Jobs at America’s Ports Through Labor Law Enforcement (Feb. 2014) NELP <http://nelp.org/ content/uploads/2015/03/Big-Rig-Overhaul-Misclassification-Port-Truck-Drivers-Labor-Law-Enforcement.pdf>.) The NELP study found that dire working conditions of port truck drivers have flowed from the practice of treating employees as if they were independent contractors, rather than employees. (Id.) Using the employment status test of the Internal Revenue Service, the study found that the typical port driver is misclassified as an independent contractor because: (1) trucking companies impose strict controls on port drivers, determining how, when, where, and in what sequence drivers work; (2) port drivers are financially dependent on trucking companies, which unilaterally control the rates the drivers are paid; and (3) port drivers and their companies are tightly tied to each other because the drivers not only perform a function integral to the companies they serve, but the drivers’ function is the business of the companies. (Id.)

The NELP study estimated that 49,000 of the nation’s 75,000 port truck drivers are misclassified as independent contractors, and the total quantifiable costs of misclassification nationally runs $1.4 billion annually. (Id.) In California, there are 25,000 port drivers, and 16,400 of them are misclassified as independent contractors. (Id.)

In 2010, then-California Attorney General Jerry Brown prosecuted and prevailed in multiple employee misclassification cases. (See Office of the Attorney General, Brown Wins Fifth Suit Against Port Trucking Companies that Violated Workers’ Rights (Feb. 4, 2010) <http://oag.ca.gov/news/press-releases/brown-wins-fifth-suit-against-port-trucking-companies-violated-workers-rights>.) These cases primarily held that trucking businesses were misclassifying their workers to avoid paying state payroll taxes.

In 2014, California Labor Commissioner Julie A. Su won an action involving Port of Long Beach truck drivers working for Seacon Logix, Inc. who were ruled employees and not independent contractors. In that case, drivers had signed agreements labeling them independent contractors but the Court found that the company exerted sufficient control over the drivers such that the drivers were employees of the company and entitled to all basic labor law protections. (Cal. Dept. of Industrial Relations, IR #2013-11, California Labor Commissioner prevails in misclassification case against port trucking company (March 1, 2014) <https://www.dir.ca.gov/DIRNews/2013/IR2013-11.html>.)

In 2015, “[s]even Los Angeles-area truckers [] won a $2 million claim against an international shipping company accused of stealing their wages by improperly classifying them as independent contractors and charging them to lease its trucks to drive. In a decision with implications for hundreds of companies and thousands of truckers in Southern California alone, a San Diego County Superior Court judge held that the seven plaintiffs should have been defined as employees of Pacer Cartage under California’s labor law, not as independent owner-operators.” (S. Gorman, California Truckers Win $2 Million in Wage Theft Suit (Jan. 30, 2015) Reuters <http://www.reuters. com/article/2015/01/31/us-usa-truckers-california-idUSKBN0L404020150131>.)

However, the problem has not gone away. Earlier this year, Los Angeles City Attorney Mike Feuer filed suit against three major port drayage companies, alleging they have exploited their drivers through misclassification. (Andrew Khouri, Three port truck companies exploited drivers, L.A. city attorney says in lawsuits (Jan. 8, 2018) Los Angeles Times <http://www.latimes.com/business/la-fi-port-trucker-lawsuits-20180108-story.html>.) The complaint alleged the companies have engaged in schemes to avoid paying minimum wage and employee benefits.

Overall, since 2011, the California Labor Commissioner’s Office has awarded port truck drivers over $46 million in cases where they claimed they were misclassified.

However, enforcement of applicable labor laws in these victories has not always resulted in workers receiving what they are due.

1. Wage claim collections issues

When workers have been misclassified by their employers as independent contractors instead of employees, one of their potential remedies is to seek payment of all of the additional wages (regular, overtime, and double-time) to which they would have been entitled if properly classified. Misclassified workers can also seek penalties for the meal periods and rest breaks to which they were entitled as employees. (Lab. Code Secs. 226.7, 512.) It is these types of claims that have led to the victories listed in the previous section.

However, even if workers can successfully prove to the California Labor Commissioner or the courts that they have been misclassified, judgments for unpaid wages are notoriously difficult to collect. According to a 2013 study by NELP based on data from the California Labor Commission:

Although the [California Labor Commissioner] issued awards for unpaid wages of more than $282 million between 2008 and 2011, workers were able to collect a mere $42 million—roughly 15 percent—of those awards from their employers. Our research also finds that workers who try to enforce [California Labor Commission] judgments for unpaid wages often find that their employers have disappeared, hidden assets, or shut down operations and reorganized as a new entity.

Employers who did not pay their workers, refused to settle, were found by [the California Labor Commissioner] to owe wages, and then became subject to a court judgment were more likely than not to have suspended, forfeited, cancelled, or dissolved business status within a year of the wage claim.

(NELP, Hollow Victories: The Crisis in Collecting Unpaid Wages for California’s Workers (June 27, 2013) <http://www.nelp.org/publication/hollow-victories-the-crisis-in-collecting-unpaid-wages-for-californias-workers/>.)

A more recent investigation by USA Today Network found these issues continue:

The Network examined California labor commissioner and court cases filed by more than 1,100 port truck drivers and traced the outcomes for almost 60 companies found by the courts to have violated the law.

At least a dozen have so far avoided all or most of their labor judgments after shifting assets into new business names. Many delayed paying for two years or more, then filed for bankruptcy protection or pressured drivers to accept settlements that gave them a fraction of what the labor commissioner said they were owed.

The vast majority of the owners still operate today, moving goods out of California ports and on their way to major national retailers.

“The idea that companies are still around without paying the full boat is a point of outrage in and of itself,” said Jay Shin, directing attorney at the Wage Justice Center, a nonprofit that has provided legal help for drivers and contracted with the labor commissioner to collect judgments.

From 2012 to 2016, port truck drivers were awarded $37 million in back pay and penalties. It’s not clear how much has been paid out because state records don't show most private settlements or pending negotiations. But the labor commissioner has been able to track only $3 million that has gone to drivers.

(Brett Murphy, Shell games: How trucking companies that cheat drivers dodge penalties (Oct. 26, 2017) USA Today < https://www.usatoday.com/pages/interactives/news/rigged-shell-games-how-trucking-companies-that-cheat-drivers-dodge-penalties/>.)

As a practical matter, therefore, though the law prohibits misclassification of workers, many companies simply get away with it.

1. Protecting drivers through their customers

The concept behind this bill is to put financial pressure on trucking companies to pay outstanding wage claims, and other awards, to their workers or government entities quickly, thus holding companies that misclassify workers more accountable and ultimately reducing the financial incentive to misclassify in the first place.

This bill would require the Division of Labor Standards Enforcement to post on its Internet Web site the names, addresses, and essential information for any port drayage motor carrier, as defined, with any unsatisfied final court judgment, assessment of the Employment Development Department, or any order, decision, or award pursuant to Section 98.1 finding that a port drayage motor carrier has engaged in illegal conduct including, but not limited to, failure to pay wages, imposing unlawful expenses on employees, failure to remit payroll taxes, failure to provide workers’ compensation insurance, or misclassification of employees as independent contractors with regard to a port drayage commercial driver. Where an administrative determination has been appealed to a superior court, the Division of Labor Standards Enforcement shall not place the information on the Internet Web site until the superior court has rendered its judgment.

The bill would define “customer” to mean a business entity, regardless of its form, that enters into an agreement, either directly or through an agent, with a port drayage motor carrier to transport freight containers or cargo to or from a port. The bill would provide that a customer that obtains, either directly or indirectly, port drayage services with a listed port drayage motor carrier shall be jointly and severally liable with the motor carrier for future unpaid wages, unreimbursed expenses, damages and penalties, which are found due to any and all of the motor carrier’s commercial drivers who are used to perform port drayage services for the customer, or that are found due as civil penalties to the state for the following:

• minimum, regular, or premium wages that are unpaid by the motor carrier, including any wages that are found due under Section 226.7;
• unlawful deductions by the motor carrier from wages pursuant to Section 2802;
• out-of-pocket business expenses incurred by the commercial driver that are not reimbursed by the motor carrier as required pursuant to Section 2802;
• civil penalties for the failure to secure valid workers’ compensation coverage as required by Section 3700;
• damages or penalties as provided for by law that are due to the commercial driver or the state based upon the failure of the motor carrier to pay wages owed, including those set forth under Sections 203, 226, 226.8, 558, 1194.2, and 1197.1; and
• applicable interest due for any sum described above.

Essentially, this bill would create liability for businesses that make the decision to contract with port drayage carriers that have violated their own workers’ rights. Businesses would be hesitant to contract with such companies and take on this increased risk. For those offending port drayage carriers that have thus far avoided their obligations to workers, this would severely impede their ability to do business until they make good on their debts to their drivers. The bill would also provide protections from retaliation for drivers who provide notice of violations or file claims or civil actions. In operation, this would likely effectuate the stated intent of the bill:

Holding customers of trucking companies jointly liable for future labor law violations by port drayage motor carriers who they engage, where the customer has received advance notice of their record of unsatisfied judgments for labor law violations, will exert pressure across the supply chain to protect drayage drivers from further exploitation.

As stated above, “[t]he vast majority of [offending carriers] still operate today, moving goods out of California ports and on their way to major national retailers.” This bill would involve some of those major retailers in creating a solution.

3. Process for determining joint and several liability

Before entering into any contracts with customers, the port drayage carriers would be required to notify customers of the Division of Labor Standards Enforcement list and the liability that would be established should the customer obtain services from listed carriers.

The carrier would also be required to provide written notice to customers of any unsatisfied final judgments against it and provide the text of this provision prior to providing services. A carrier would thereafter be required to provide such notice within 30 days of a judgment to customers it is presently providing services. However, the failure of the carrier to provide notice in either of these two contexts does not relieve the customer of the joint and several liability that otherwise attaches. It should be noted that this same provision, indicating failure to provide notice on the part of the carrier does not relieve the customer of liability, found in subdivisions (e) and (f) of Section 2810.4, is not included in the provision requiring the pre-contract formation notice, found in subdivision (b)(2) of Section 2810.4.

As for the calculation of a customer’s liability, each and every customer that receives port drayage services from a motor carrier in a given workweek would be jointly and severally liable with the motor carrier for the full amount of all wages, expenses, damages, and penalties which are found owed by the motor carrier for that workweek. Liability would ultimately be determined by the Labor Commissioner in specified proceedings or a court in a civil action brought by either the Labor Commissioner or a commercial driver. However, the Labor Commissioner or driver would be required to notify the customer of its potential liability for any of the wages, expenses, damages, or penalties at least 30 days prior to filing the civil action.

The full extent of the customer’s joint and several liability pursuant to this bill is not completely clear. The relevant clause in Section 2810.4(b)(3) states that customers “shall be jointly and severally liable with the motor carrier for future unpaid wages, unreimbursed expenses, damages and penalties, including applicable interest, which are found due to any and all commercial drivers provided, directed, or used by the motor carrier to perform port drayage services for the customer, or that are found due as civil penalties to the state for” specified misconduct.

First, this language indicates that a customer would only be liable for violations of the rights of workers who are actually “used by the motor carrier to perform port drayage services for the customer,” not violations of the rights of the carrier’s other drivers. However, the language regarding “unpaid wages, unreimbursed expenses, damages and penalties, including applicable interest, which . . . are found due as civil penalties to the state . . . .” does not have a similar limitation. As written, a customer could be liable for any civil penalties due the state regardless of whether there is any connection to services actually provided to the customer. In addition, Section 2810.4(b)(4) states that all customers are liable for “the full amount of all wages, expenses, damages, and penalties which are found owed by the motor carrier for that workweek.” This liability is much broader than the language in paragraph (3), as it does not require any nexus.

In response to these concerns, the author has indicated an intention to require a nexus between the services provided to the customer and the losses for which the customer assumes liability. The author has committed to harmonizing these provisions to provide such a nexus and to ensure clarity in interpretation.

Another issue is the timing of placement on the list. The bill would provide that a carrier is placed on the list when it has an unsatisfied final court judgment, assessment, or any order, decision, or award. However, there is no definition or guidance for what final court judgment or the other decisions mean, especially with respect to the timing of when such decisions trigger placement. For instance, other statutes that use the term “final court judgment” provide various definitions. Section 1197.2 of the Labor Code provides: “‘final court judgment or final order’ means a court judgment or order as to which the time to appeal has expired and there is no appeal pending.” Section 1235.120 of the Code of Civil Procedure provides the following definition: “‘Final judgment’ means a judgment with respect to which all possibility of direct attack by way of appeal, motion for a new trial, or motion under Section 663 to vacate the judgment has been exhausted.” However, in other contexts, final judgment is what is required before an appeal can even be taken. (See Code Civ. Proc. Sec. 904.1.)

The author has committed to incorporating definitions into this provision to ensure clarity.

4. Support and Opposition

The Our People Our Port Coalition, made up of the Southern California Coalition for Occupational Safety and Health, Los Angeles Alliance for a New Economy, East Area Progressive Democrats, Warehouse Worker Resource Center, South Bay 350 Los Angeles, Clergy and Laity United for Economic Justice, Historic Highland Park Neighborhood Council, and Central American Resource Center, writes in support:

SB 1402 is an important piece of legislation that addresses the root cause of persistent law-breaking in California’s port trucking industry. The widespread labor violations not only exploit port drivers but have also harmed our families and impoverished our communities. These trucking companies also contribute to toxic pollution that sickens our children with asthma and cancer. SB 1402 holds the owners of the cargo – companies like Amazon, Walmart, and Sony –accountable for freely contracting with trucking companies that have been found guilty of illegally classifying drivers as independent contractors. This well-documented behavior includes consistently subjecting port drivers to wage theft, unsafe work conditions, and fraud. The $40 million ordered in Labor Commissioner decisions against port trucking companies at [] America’s largest port complex speak to the magnitude of this problem.

The Western States Trucking Association writes in opposition:

In one fell swoop, SB 1402 would decimate this industry by imposing potential liability on customers utilizing owner-operators, which would certainly have the effect of discouraging the use of owner-operators. This is unwise on a policy level as the independent contractor model provides many unique advantages to Californians in the workplace. . . .

It points to “being your own boss,” “earning more money,” and “maintaining a flexible schedule” as the unique advantages of such a model.

The California Trucking Association (CTA) also writes in opposition. It argues the Division of Labor Standards Enforcement has systematically abused its authority in the misclassification determinations discussed above. As for the provisions of the bill, CTA requests that the bill “should outline a process for being removed from the DLSE list” and that proposed Section 2810(d), which precludes the application of joint and several liability to employees covered by a bona fide collective bargaining agreement, as specified, should be struck from the bill. On the latter request, CTA argues “there is no sound policy purpose for including a collective bargaining exclusion.”

Support: Eco Flow Transportation; Eric Garcetti, Mayor of Los Angeles; Natural Resources Defense Council; Our People Our Port Coalition; Shippers Transport Express; Toll Global Forwarding

Opposition: California Trucking Association; Western States Trucking Association

HISTORY

Source: California Labor Federation; Teamsters Public Affairs Council

Related Pending Legislation: None Known

Prior Legislation:

AB 621 (Roger Hernández, Ch. 741, Stats. 2015) relieves a motor carrier performing drayage services at one or more ports in California from liability for statutory or civil penalties associated with misclassification of commercial drivers as independent contractors if the motor carrier enters into a settlement agreement before January 1, 2017, with the Labor Commissioner whereby the motor carrier agrees to convert all of its commercial drivers to employees.

AB 1897 (Roger Hernández, Ch. 728, Stats. 2014) requires a client employer, as defined, to share with a labor contractor, as defined, all civil legal responsibility and civil liability for: (1) payment of wages to workers provided by a labor contractor; (2) failure to report and pay all required employer contributions, worker contributions, and personal income tax withholdings as required by the Unemployment Insurance Code; and (3) failure to secure valid workers’ compensation coverage.

SB 459 (Corbett, Ch. 706, Stats. 2011) prohibits willful misclassification of individuals as independent contractors, prohibits charging individuals who have been mischaracterized as independent contractors a fee or making deductions from compensation, where those acts would have violated the law if the individuals had not been mischaracterized; authorizes the Labor and Workforce Development Agency to assess specified civil damages against, and requires the Agency to take other specified disciplinary actions against, persons or employers violating these prohibitions; provides that a person who, for money or other valuable consideration, knowingly advises an employer to treat an individual as an independent contractor to avoid employee status for the individual shall be jointly and severally liable with the employer if the individual is not found to be an independent contractor; and other provisions.

SB 459 (Corbett, Ch. 706, Stats. 2011) prohibited any person or employer from engaging in willful misclassification of an employee as an independent contractor and provided for civil penalties.

AB 950 (Pérez, Swanson, 2011) would have deemed a drayage truck operator an employee of the entity or person who arranges for or engages the services of the operator for purposes of all of the provisions of state law that govern employment, as specified. AB 950 died on the Assembly Inactive File.

SB 1583 (Corbett, 2008) would have provided employment consultant liability for advising unlawful conduct through employee misclassification but was vetoed by Governor Schwarzenegger who argued that the liability created under the bill would discourage consultants from giving employment advice.

SB 1490 (Padilla, 2008) would have required the Employment Development Department (EDD) to create a form, including factors used by EDD in determining independent contractor status, to be distributed by employers to workers. SB 1490 was held in the Senate Committee on Appropriations.

SB 622 (Padilla, 2007) would have made it unlawful for employers to willfully misclassify an employee as an independent contractor. The bill was vetoed by Governor Schwarzenegger because he believed sufficient remedies for employer misconduct already existed and the bill could cause businesses to avoid using independent contractors even where appropriately utilized.

SB 1213 (Dunn, 2006) would have provided port owner-operator drivers the right to organize collectively to better their economic conditions through joint negotiations with port motor carriers concerning their compensation, benefits, and terms and conditions of engagement. SB 1213 was vetoed by Governor Schwarzenegger, who believed the provisions of the bill offered a legally doubtful attempt at an antitrust exemption, expanding state regulation in a manner never tried before that would undoubtedly set off legal battles that will take years to resolve. Governor Schwarzenegger further stated the litigation that would result from this bill is counter-productive to the cooperative work necessary to capture the economic potential afforded by the growth of California’s ports.

SB 848 (Dunn, 2005) was similar to SB 1213 and was vetoed by Governor Schwarzenegger who believed the bill would create a litigious firestorm that would be counterproductive to the cooperative work that must be accomplished to capture the economic potential afforded by the growth in international trade.

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