More details on the truckers no one sees

By Advance Business Capital

Max Galvan is a drayage driver at Southern California’s seaports. His employer calls him an independent contractor. Because of that, he is paid by the load, not hourly. He’s also responsible for all the costs of the truck he drives, including leasing, fuel, taxes, maintenance, and repairs. Legally, Max works for himself. In actuality, he is a fulltime employee who is paid as an independent contractor. 

“That’s Just How Things Are Done Here” 

But when asked about his relationship with the only company he has worked for over the last 13 years, Max replies: “What independence? They don’t let us haul for anyone else. They’ll fire you. Most companies make you sign a contract saying that you’ll only work for them. I went along with it because that’s just how things are done here at the ports.” 

On the other side of the desk is Fred Johring, or someone like him. Johring runs a trucking company that serves the Port of Los Angeles. He also heads a group which promotes the port trucking industry: the International Warehouse and Logistic Association. When testifying recently before Congress, he described the relationship between trucking firms and drivers like Max differently: “We support the independent business owners who move the cargo of our customers. We create opportunities for full-time work that produces middle-class earnings, and we help them build their small businesses.” 

Is Max really a small business? Or is he actually an employee? 

Duct Tape and Bungee Cords 

Last year, Max and about 110,000 other port truck drivers moved millions of cargo containers between the marine terminals, railheads and warehouses that sit in our country’s port complexes and the cities that surround them. 

Due to truck operational costs, Max reports net earnings between $24 and $40 for each haul, a tiny fraction of the $70,000 worth of goods in the typical freight container. At the end of the year, he will net $28,000 to $30,000. At the industry average of 59 hours per week, Max’s hourly pay works out to around $10 an hour. 

This level of wages means that Max and drivers like him cannot afford decent trucks or even maintain the ones they have. As a result, port trucking is full of old, poorly maintained diesel big rigs. Duct tape and bungee cords literally hold some together. 

Squeezed Out of the Middle Class 

The Environmental Protection Agency and virtually all other industry observers agree on the consequences: port trucking is a major source of deadly diesel pollution. The EPA itself has granted over $40 million to replace old, diesel-spewing port trucks. Tens of millions more for replacement programs have come from state and local agencies. 

The employment classification of port drivers has become a core issue in determining how these programs should operate. An industry group, the Coalition for Responsible Transportation, is advocating for publicly-financed, voluntary loan programs that will keep the independent contracting system in place. 

On the other side, the Coalition for Clean & Safe Ports – an alliance of environmental, community, public health, civic, and labor organizations – advocates for mandatory policies which require use of employee drivers in order to make companies responsible for truck replacement and maintenance. 

Independent or Indentured? 

Self-employment in the form of entrepreneurship is perhaps the most glittering facet in the jewel work of the American Dream. But in the ongoing controversy of port drivers, “independent” truckers have become in many ways the modern equivalent of indentured servants. Instead of economically rising, each year sees them a little more in debt and more beholden to the drayage companies that hire them. Their jobs are at risk because an increasing number of them can’t pay the fees and maintenance for their trucks. 

The drayage companies, themselves squeezed by the flat rates negotiated by behemoth shippers such as Wal-Mart or Home Depot, have belatedly realized that low wages and strict terms are depriving them of a cheap work force. Their response is to advocate for government-funded loan guarantees that will allow O-Os to keep their vehicles while maintaining their status as contractors. 

On the other side, the Coalition for Clean & Safe Ports—an unlikely association of such groups as the Sierra Club, the American Lung Association of California, the League of Conservation Voters in New York, and the Church Council of Greater Seattle—wants to end port drivers’ status as independent operators. Instead, they seek to shift the cost burden to drayage companies, requiring them to hire operators as employees. 

“Take It Or Leave It” 

Back to Max, our port trucker. Max receives a “take-it-or-leave-it” rate for each container he hauls. “I’ve never negotiated the price of a single cargo load. Ever. It’s not something we port drivers can do. We don’t even know how much the retailer is paying for that load, so how can we negotiate? The company just tells us how much they are going to pay us, period.” 

Max’s situation raises an important question: Is he being properly treated as an independent business when he receives an IRS 1099 form each year? Or is he a disguised employee? And what of the tens of thousands of other hard-working drivers who are designated as independent contractors? 

Compare Max to the local plumber called in to fix a leaky toilet in the corporate bathroom or to a computer technician on retainer with several businesses to trouble-shoot their software glitches. These are true independent contractors. They have freedom to determine when, where and how they work. They determine whether they will negotiate, or unilaterally set, their prices. 

Why Businesses Misclassify 

Such genuine independent contractors form a small proportion of the American workforce. However, increasing numbers of companies are treating their employees as independent contractors. The U.S. Department of Labor recently found that up to 30% of businesses misclassify their employees as independent contractors. 

Misclassification can save businesses as much as 30% of payroll costs. Max’s mid-size employer pays zero payroll taxes for its contracted workforce, roughly 150 drivers. A competitor that relies on employees to do the same work would be continually undercut on labor costs and eventually fold, which explains why misclassification is the norm for port trucking firms. Even businesses that want to fairly compensate their drivers can’t afford to do so.

 Misclassification also denies workers a host of important benefits and protections. Max is ineligible for unemployment insurance if he loses his job. Without workers’ compensation insurance, a job injury could leave him with huge medical bills and no way to earn a living. He lacks a guaranteed minimum wage, health care, and other employee benefits. 

Getting By on $550 a Week 

As we saw earlier, Max nets roughly $24-$40 for each container he hauls. After his typical 10-12 hours a day, five-day workweek, Max generally takes in $550, although that number fluctuates. One week he brought home $700. “But I’ve taken home only $56, it all depends.” Often what it depends on is how many loads his dispatcher assigns him. 

Each week, Max must divide this income between providing for his family and tending to his truck. He estimates that routine maintenance and repair cost him $5,000 a year, a figure consistent with academic studies. 

With such low take-home pay, drivers naturally buy older trucks that are the least expensive. The average rig at port terminals burns diesel and is 10-15 years old, earning America’s ports the reputation as “the place where old trucks go to die.” 

Next Month 

Driver misclassification is a practice that impacts more than the drivers. Their wheezy, improperly maintained vehicles affect the health of everyone who lives in or near a port city. Next month, in the third part of this series, we’ll examine the environmental costs of misclassification. 

Sources for this article include The Big Rig: Sharecropping on Wheels, TheStreet.com, The Cunningham Report and PR Newswire