Given the regional nature of most U.S. labor disputes, you may not have heard about the mounting legal turmoil between truckers who make short runs between ports and distribution centers and trucking companies over whether they should be classified as employees or independent contractors. Depending on how the saga plays out, it could have significant implications for the global supply chain, as a new report in the Wall Street Journal suggests:
Several trucking companies operating at the ports of Long Beach and Los Angeles have filed for bankruptcy protection in recent months, citing mounting costs to settle hundreds of legal claims. These operators haul containers from the docks to rail yards and freight depots, a key journey of just a few miles that allows major retailers and manufacturers to quickly move their imported goods to stores and factories across the country.
The bankruptcies in the trucking sector come as some higher-profile cases in the debate over employee status are paying out hefty settlements. Ride-hailing service Uber Technologies Inc. agreed to pay as much as $100 million to drivers last month, and delivery company FedEx Corp. reached a $228 million settlement last year. But in the $12 billion-a-year port-trucking business, known as drayage, where hundreds of small operators compete on thin margins, the cost to settle similar claims can be overwhelming, analysts say.
The turmoil raises questions about the future of short-haul trucking at the nation’s ports. Litigation with drivers and the higher cost of full-time labor could force drayage operators to charge more for their services or it could put them out of business entirely, reducing the overall number of carriers and raising costs for shippers, analysts say.
The trucking industry is bracing for the classification fight to spread to other ports. “As most things go in trucking...California leads the way,” said Curtis Whalen of the American Trucking Associations, an industry group. “Having this hanging over your head is obviously not good.”
Truck drivers that have joined the lawsuits say companies unfairly make them shoulder the burden of fuel cost and don't pay them fairly for time spent waiting, among other complaints, the WSJ notes.
Analysis: Every Link In the Supply Chain Counts Dearly
The port-trucking dispute is an indication that even when the smaller aspects of the global supply chain face turmoil, it can have a drastic impact, says Constellation Research VP and principal analyst Guy-Frederic Courtin.
"Could it grind things down to a halt, probably not, but it could make a mess," he says. "It's another reminder of the sensitivity supply chains have to distruptions that can come from anywhere. The reality is these things aren't easy to solve by waving a magic wand."
Another point the dispute underscores is the fact that human labor will remain a crucial component within the supply chain for a long time to come, Courtin adds. "People say oh, we won't have these kinds of problems with driverless trucks," he says. "But that's not a panacea. We have a whole host of issues to deal with regarding autonomous vehicles before we get to that."
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